Lack of Bearish Confidence Will Drive Markets Back to Uptrend

Forex

Central Bank

Summary:

In May, Japan's CGPI decreased to 3.2%, while food inflation persisted. Bank of Japan Governor Kazuo Ueda reiterated a gradual tightening approach, indicating limited scope for interest rate cuts.

BUY USDJPY

Close Time

CLOSED

145.239

Entry Price

149.500

142.300

155.133 -0.681 -0.44%

217.0

Pips

Profit

142.300

147.409

Exit Price

145.239

Entry Price

149.500

Fundamentals

During Wednesday's European session, the Japanese yen continued its consolidation, currently hovering near a two-week low against the U.S. dollar. Data released earlier today indicated a slowdown in Japan's May annual wholesale inflation, easing pressure on the Bank of Japan to tighten monetary policy.

The May Corporate Goods Price Index revealed a sharper-than-anticipated deceleration, dropping from 4.1% to 3.2%, below the forecasted 3.5%. This decline reflects a broad deflationary trend in upstream prices, supported by the recent yen rebound. Import prices, denominated in yen, experienced a significant year-over-year plunge of 10.3%, exceeding the 7.3% drop in April.

Raw material costs across various sectors decreased notably, with steel prices falling by 4.8% year-over-year, chemical product prices by 3.1%, and non-ferrous metal prices by 2.1%.

However, inflation within consumption-related categories exhibited greater persistence. Food and beverage prices increased by 4.2% year-over-year, up from 4.0% in April, indicating that inflationary stickiness in essential goods remains a challenge despite the overall economic cooling on the production side.

Bank of Japan Governor Kazuo Ueda stated that Japan is "still some distance away" from achieving its 2% inflation target, which led to a weakening of the yen. Although he denied the possibility of a rate cut and emphasized that current interest rates are low and should be raised appropriately in the future to preserve stimulus space, his mention of potentially needing to support the economy was interpreted by the market as a possible delay in interest rate hikes, thereby weakening the yen. However, the depreciation of the yen was also influenced by the overall strengthening of the U.S. dollar.

Lack of Bearish Confidence Will Drive Markets Back to Uptrend_1

Technical Analysis

The USDJPY maintained its bullish trajectory on Wednesday, trading around 145.00 during the European session, nearing a two-week high. The yen continued to experience downward pressure due to diminished demand for safe-haven assets, fueled by positive sentiment surrounding China-U.S. trade negotiations.

On the upside, a breach of the 146.27 resistance level would signal the completion of a corrective phase from the 148.64 level.

The intraday outlook remains bullish, with a break above the 148.64 resistance level and beyond, resuming the upward momentum from the 139.87 low.

However, a sustained hold above 142.10 would lead to a retest of 139.87.

Trading Recommendations

Trading Direction: Buy

Entry Price: 144.50

Target Price: 149.50

Stop Loss: 142.30

Valid Until: June 26, 2025 23:55:00

Support: 144.46, 143.97, 142.96

Resistance: 145.91, 146.27, 148.66

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Eva Chen

Central Bank

Economic

Summary:

The primary focus today is the upcoming release of the U.S. May Consumer Price Index, which could validate the impact of Trump's tariffs on inflation. The risk lies in whether the price increases are transitory, potentially reigniting inflation concerns and increasing bearish pressure on gold.

SELL XAUUSD

Close Time

CLOSED

3341.69

Entry Price

3250.00

3372.00

4343.27 +43.88 +1.02%

303.1

Pips

Loss

3250.00

3372.00

Exit Price

3341.69

Entry Price

3372.00

Fundamentals

The U.S. Bureau of Labor Statistics will release the highly anticipated May Consumer Price Index (CPI) report this Wednesday, Eastern Time. Market participants will be closely monitoring whether the tariffs implemented by U.S. President Trump since April 2 have begun to impact consumer prices.

Institutional forecasts suggest that the overall U.S. CPI will maintain a 0.2% month-over-month increase in May, with the year-over-year rate rising from a four-year low of 2.3% last month to 2.5%. Core CPI, excluding volatile food and energy categories, may increase from 0.2% to 0.3% month-over-month, with the year-over-year rate expected to rise from 2.8% to 2.9%, reversing the downward trend seen this year.

Analysts indicate that U.S. core inflation may rebound in May as businesses gradually pass on increased tariff costs to core goods and food prices, while prices for some services, such as airfare, will see a narrowing of gains or outright declines

The central debate in the market currently revolves around whether the price increases resulting from tariffs are transitory. The potential impact of a one-time price surge on the Federal Reserve's policy trajectory is also under scrutiny, with implications for market volatility.

Gold prices are struggling to capitalize on modest intraday gains, remaining below the previous day's highs, as investors await the release of the U.S. CPI. The forthcoming CPI data will be pivotal in shaping market expectations regarding the Federal Reserve's interest rate cut path, thereby providing fresh directional impetus for the non-yielding gold.

Upward Structure Remains Intact, but Momentum Is Beginning to Wane_1

Technical Analysis

The technical outlook for gold remains neutral. While the bullish structure is still intact, a correction appears imminent. On the upside, a sustained move above Tuesday's high of US$3,349 would reinforce the bullish outlook, potentially targeting the intermediate resistance at US$3,360-US$3,375, and subsequently challenging the US$3,400 psychological level.

Conversely, a break below the US$3,323-US$3322 support range could invite further selling pressure, with initial support expected near US$3,300. Increased selling could drive prices down to the US$3,288-US$3,278 range, shifting the market bias to bearish and potentially leading to a test of the US$3,246 level, which marks the beginning of the upward structure. Further corrective declines could extend towards US$3,200.

Overall, despite the intact bullish structure, gold's momentum is waning. The path of least resistance appears to be downward.

Trading Recommendations

Trading Direction: Buy

Entry Price: 3340

Target Price: 3250

Stop Loss: 3372

Valid Until: June 26, 2025 23:55:00

Support: 3323, 3316, 3301

Resistance: 3349, 3355, 3360

Risk Warnings and Disclaimers

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Manuel

Cryptocurrency

Summary:

Following a sharp rebound from near the 100,000 mark, the recent rally of nearly 10% has shown signs of losing momentum, raising the probability of a short-term correction.

SELL BTC-USDT

Close Time

CLOSED

109681.3

Entry Price

105000.0

112500.0

89623.0 +595.3 +0.67%

931.0

Pips

Profit

105000.0

108750.3

Exit Price

109681.3

Entry Price

112500.0

The core software of the Bitcoin network—widely known as Bitcoin Core—is on track to undergo a significant upgrade that could redefine both the technical framework and the community dynamics of the ecosystem.

The upcoming release of Bitcoin Core version 30, scheduled for October 2025, introduces a landmark change: it will lift the long-standing data restriction on transactions using the OP_RETURN function. This change will increase the data limit from the current 80 bytes to nearly 4 megabytes per transaction—the maximum capacity permitted within a Bitcoin block.

This development, confirmed via GitHub and first reported by CoinDesk, is the result of extended and highly public deliberations among developers, cryptographic researchers, and Bitcoin users. While many view this as a step forward in enhancing internal efficiency and offering greater flexibility, others warn that it could open the floodgates to previously unseen vulnerabilities, such as a sharp increase in network spam.

Skeptics argue that enabling transactions to include such large amounts of arbitrary data runs contrary to the original intent of the Bitcoin blockchain as outlined by its pseudonymous creator, Satoshi Nakamoto. They caution that this move could distort the chain’s primary function as a decentralized ledger for peer-to-peer value transfer.

Nevertheless, there is general consensus within the community that expanding OP_RETURN’s capacity could significantly amplify the network’s ability to store non-financial data directly on the blockchain. While this opens the door to innovative use cases—such as digital archiving and timestamping—it also revives old concerns about potential misuse, network congestion, and the ongoing debate over what Bitcoin’s core utility should be.

On the geopolitical front, optimism is stirring across the crypto market as the United States and China prepare to resume high-level trade negotiations in London this Monday. The diplomatic effort is already helping to support risk sentiment, which has, in turn, lifted interest in digital assets.

Top U.S. trade officials from President Donald Trump’s administration are set to meet with their Chinese counterparts for direct discussions over tariffs, amid lingering fears of a prolonged trade war between the world’s two largest economies. The talks aim to re-establish lines of cooperation and defuse economic tensions that have weighed on global markets for months.

Speaking on CNBC’s “Squawk Box,” Kevin Hassett, Director of the U.S. National Economic Council, described the meeting as likely to be “brief but significant,” noting the expectation of a firm handshake and a potential breakthrough. Hassett emphasized that the primary goal is to ensure China is serious about reopening the flow of critical minerals—materials essential to advanced technology, defense systems, and clean energy infrastructure.

The U.S. delegation will be led by Treasury Secretary Scott Bessent, while China’s team will be headed by Vice Premier He Lifeng, signaling the importance both sides attach to the encounter. A Failed High Could Trigger a Bitcoin Correction_1

A Failed High Could Trigger a Bitcoin Correction_1

Technical Analysis

Bitcoin (BTC/USD) has begun to encounter resistance as it approaches the psychologically significant 111,000 level—a zone that may serve as a profit-taking area for short-term traders. Following a sharp rebound from near the 100,000 mark, the recent rally of nearly 10% has shown signs of losing momentum, raising the probability of a short-term correction.

Should selling pressure intensify, the price could retreat toward the next major support around 104,600. Further below, the 100- and 200-period moving averages on the 12-hour chart—currently located at 102,259 and 93,165, respectively—offer substantial downside room for a healthy pullback before the broader uptrend potentially resumes.

Notably, the price action has failed to produce a new local high, and buyers were unable to break through the 110,935 resistance level. This hesitation could be interpreted as a bearish signal, suggesting that the bulls may be losing strength and that a downside correction may accelerate if the price continues to stall.

The Relative Strength Index (RSI) currently reads at 63, signaling that the market is not yet overbought, which leaves the door open for another upward push—especially if Bitcoin manages to reclaim its bullish momentum and print a new high in upcoming sessions. However, until that happens, the lack of upward follow-through could be an early sign of a shift in short-term market sentiment.

Trading Recommendations

Trading direction: Sell

Entry price: 109650

Target price: 105000

Stop loss: 112500

Validity: Jun 20, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Forex

Economic

Summary:

Should the price fail to reclaim higher levels, this could solidify bearish dominance in the short term.

SELL NZDUSD

Close Time

CLOSED

0.60402

Entry Price

0.59700

0.60800

0.57847 -0.00193 -0.33%

24.8

Pips

Profit

0.59700

0.60154

Exit Price

0.60402

Entry Price

0.60800

U.S. Non-Farm Payrolls (NFP) data for May revealed the addition of 139,000 jobs in the non-agricultural sector, surpassing market expectations of 130,000. Alongside this solid print, the Unemployment Rate remained unchanged at 4.2%, and Average Hourly Earnings held steady at 3.9% year-over-year—both readings coming in stronger than anticipated, reinforcing the view of a labor market that, while moderating, still shows underlying resilience.

Adding to the list of upbeat surprises, the latest NFIB Small Business Optimism Index posted its first month-on-month improvement since December, marking a potential turning point after several months of deterioration. This uptick could reflect an early sign of stabilization in small business sentiment—a key component of the broader U.S. economy.

Meanwhile, the New York Fed’s Survey of Consumer Expectations (SCE) indicated a decline in inflation expectations across the one-, three-, and five-year timeframes. Although this cooling trend is generally positive, especially from a monetary policy standpoint, the survey also revealed a notable dip in household sentiment. Consumers reported a weaker perception of both current and future financial conditions, suggesting that confidence remains fragile amid mixed economic signals.

This uncertainty was further highlighted by the ISM Services PMI for May, which slipped to 49.9—falling below the neutral 50 level for the first time since December and missing consensus estimates of 52. The reading points to a slight contraction in the services sector, which comprises the majority of U.S. economic activity.

A breakdown of the report revealed persistent inflationary pressures, with the Prices Paid Index jumping from 65.1 to 68.7, signaling elevated input costs. However, the Employment Index rose from 49 to 50.7, hinting at modest recovery in service-sector hiring and offering a counterbalance to the otherwise soft print.

In light of these developments, Chicago Fed President Austan Goolsbee adopted a cautious tone, flagging downside risks stemming from potential trade friction under former President Donald Trump’s proposed tariff agenda. These policy shifts, he warned, are being increasingly considered within the Fed's broader risk framework due to their potential to disrupt the economic recovery.

Further geopolitical nuance emerged as U.S. officials hinted at the possible easing of restrictions on certain high-tech exports in exchange for China lifting curbs on rare earth shipments—materials vital to the energy, defense, and technology industries. This more constructive tone in U.S.-China trade talks provided a lift to the New Zealand dollar, often viewed as a China-sensitive proxy due to New Zealand’s close trade ties with the Asian giant.

Additionally, growing speculation that the Reserve Bank of New Zealand (RBNZ) may slow the pace of interest rate cuts added to the NZD’s positive momentum. While the RBNZ revised its economic forecasts downward compared to its February statement and acknowledged significant global uncertainties, Westpac Senior Economist Michael Gordon noted the central bank’s surprisingly cautious stance on the timing and magnitude of future OCR reductions—further supporting the currency. A Potential Bearish Pullback Could Target Key Moving Averages_1

A Potential Bearish Pullback Could Target Key Moving Averages_1

Technical Analysis

NZD/USD has encountered strong resistance around the 0.6055 level, with multiple bearish rejections observed in this zone. The failure to establish a clear break above has triggered a series of bearish closes, suggesting the potential for a corrective move toward the 100- and 200-period moving averages on the 4-hour chart, located at 0.5958 and 0.5934, respectively. Additionally, the 0.5970 region, which previously acted as resistance, may now serve as short-term support, making it a likely target for any pullback.

From a momentum standpoint, the Relative Strength Index (RSI) currently stands at 52, signaling neutrality but also hinting at a possible shift in control toward bearish sentiment. Should the price fail to reclaim higher levels, this could solidify bearish dominance in the short term. Conversely, a decisive break above resistance may reignite bullish momentum, especially considering the lack of recent lower lows, which continues to support the broader uptrend.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6040

Target price: 0.5970

Stop loss: 0.6080

Validity: Jun 20, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

EUR/USD rose above 1.1420 as positive U.S.-China trade talk remarks and strong Eurozone data, including a surging Sentix Confidence Index and Italian industrial output, supported the Euro.

BUY EURUSD

Close Time

CLOSED

1.14401

Entry Price

1.16000

1.13600

1.17323 -0.00071 -0.06%

159.9

Pips

Profit

1.13600

1.16037

Exit Price

1.14401

Entry Price

1.16000

The EUR/USD pair clawed back earlier losses during Tuesday’s European session, climbing above 1.1420 as markets digested ongoing U.S.-China trade negotiations and a batch of upbeat Eurozone economic indicators. Trading near 1.1425 by mid-afternoon, the pair remains confined within its recent range, with investors hesitant to commit to bold directional moves amid uncertainty over trade deal progress. Positive remarks from U.S. President Donald Trump and a hawkish tone from European Central Bank (ECB) officials have lent support to both currencies, but the lack of concrete trade breakthroughs keeps the market on edge, setting the stage for choppy price action in the near term.

The world’s two economic powerhouses, the U.S. and China, are locked in high-stakes trade discussions, with officials aiming to build on last month’s Switzerland meeting that slashed reciprocal tariffs. Trump’s upbeat comment on Tuesday, noting “good reports” from the talks, has buoyed market sentiment, providing a modest lift to the U.S. Dollar. However, traders remain cautious, awaiting tangible progress on contentious issues like rare earth mineral trade, U.S. chip export restrictions, and visa policies for Chinese students. “The constructive tone is encouraging, but these are thorny issues requiring significant concessions,” said one X post, reflecting the market’s guarded optimism.

The talks’ outcome could have far-reaching implications for global markets, including EUR/USD. A breakthrough could strengthen the Dollar by easing trade tensions, while prolonged uncertainty might bolster the Euro as a safe-haven alternative. For now, the pair’s range-bound behavior suggests investors are staying on the sidelines, unwilling to place big bets until clearer signals emerge.

In the Eurozone, a slew of positive economic data has provided a tailwind for the Euro. The Sentix Investors’ Confidence Index for June surged into positive territory for the first time in a year, climbing to 0.3 from -3.6 in May, signaling growing optimism among investors. “This is a significant milestone, reflecting improving sentiment despite global trade uncertainties,” noted a Reuters analyst. Meanwhile, Italian Industrial Output unexpectedly rose 0.5% month-on-month in April, defying forecasts for a 0.2% decline, underscoring resilience in the Eurozone’s third-largest economy.

Adding to the Euro’s strength, ECB policymakers Olli Rehn and François Villeroy de Galhau doubled down on the bank’s hawkish stance. Rehn emphasized the need to keep rates restrictive to tame inflation, projected at 2.4% for 2025, while Villeroy hinted at a gradual approach to easing only if inflation sustainably nears the 2% target. These comments contrast with market expectations for 42 basis points of ECB rate cuts by year-end, per OIS pricing, and have kept the Euro supported against the Dollar.

The Eurozone’s improving fundamentals stand in contrast to recent U.S. data, where a cooling labor market and revised-down GDP forecasts have tempered Dollar strength. The World Bank’s downgrade of U.S. growth to 1.4% for 2025, citing trade barriers, has further clouded the Dollar’s outlook, giving the Euro a relative edge.

Technical Analysis

From a technical perspective, EUR/USD is showing signs of resilience despite its range-bound trading. The pair found support near its 50-day Exponential Moving Average (EMA) at 1.1380 during early Tuesday trading, generating positive momentum that fueled a rebound.The bounce off the EMA50 has given EUR/USD a bullish push, with eyes on the key resistance at 1.1440.The pair is trading along a short-term bullish trendline, bolstered by positive signals from the Relative Strength Index (RSI), which is hovering near 55, indicating room for further upside.

A break above 1.1440 could open the door to the next resistance at 1.1600, a level tested in late May. However, failure to clear this hurdle might see the pair retreat toward the 1.1400 support or the 50-day EMA. The current range between 1.1380 and 1.1440 reflects the market’s indecision, with trade talk developments likely to dictate the next move.

TRADE RECOMMENDATION

BUY EURUSD

ENTRY PRICE: 1.1440

STOP LOSS: 1.1360

TAKE PROFIT: 1.1600

Risk Warnings and Disclaimers

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Eva Chen

Cryptocurrency

Summary:

The sustained incremental trading activity within the cryptocurrency market has catalyzed a fresh surge in Ethereum's valuation, resulting in its third breach of the US$2,700 threshold this year.

BUY ETH-USDT

Close Time

CLOSED

2659.88

Entry Price

3302.00

2319.00

3130.49 +45.93 +1.49%

3408.8

Pips

Loss

2319.00

2318.45

Exit Price

2659.88

Entry Price

3302.00

Fundamentals

The price of Ethereum is currently stable around US$2,692, attracting consistent capital inflows in recent weeks. Notably, ETH-related ETFs have experienced net inflows for the fourth consecutive week, indicating institutional investors' positive outlook on Ethereum's mid-to-long-term prospects. Such sustained capital injections typically provide price support and bolster market risk appetite.

In the early morning hours of Tuesday, June 10, 2025, Ethereum's price surged by 8%, briefly surpassing the US$2,700 threshold. This increase marks ETH's highest point since May 29, recovering a 12-day high and representing an approximate 13.3% increase from the weekly low near US$2,399.

The recent surge in ETH is primarily fueled by the preceding day's modest rebound led by Bitcoin, aligning with the broader positive trends within the Ethereum ecosystem, which may sustain its upward trajectory.

A key driver is the record-breaking ETH staking volume, which recently reached a new high of 34.65 million, according to Beaconcha.in, representing approximately 28.7% of the current ETH circulating supply (120.8 million).

Furthermore, ETH's recent gains have been bolstered by consistent inflows into Ethereum-related ETFs. Ethereum ETFs have recorded nearly US$900 million in inflows for 16 consecutive days. These funds have cumulatively attracted US$3.38 billion, holding 3.77 million ETH, with a net asset value of US$9.8 billion.

Incremental Capital Continues to Propel the Crypto Market Upward, Reinforcing Risk Appetite_1

Technical Analysis

Despite the robust performance of ETH, it remains approximately 40.9% below its all-time high of US$4,600. Technically, the US$2,700 level has served as a significant resistance in recent months. For ETH to continue its upward trajectory, a breach of US$2,737 is required, with a successful breakout potentially initiating a challenge of the key resistance at US$2,795. Further gains are plausible if institutional buying persists and the overall market sentiment remains bullish.

Momentum indicators also signal a bullish outlook, with the Relative Strength Index rebounding from oversold territory to a neutral level. The MACD line is positioned above the signal line, and the histogram continues to expand, indicating increasing momentum and the continuation of the upward trend.

However, a breach of the current support level could trigger downward pressure. A breakdown below the US$2,386 support level for ETH could invalidate the short-term bullish structure and potentially initiate a more significant decline.

From a short-term perspective, technical indicators lean bullish, suggesting a potential test of the US$2,750-US$2,800 resistance range. Short-term traders might consider entering long positions on pullbacks, with a stop-loss order placed below US$2,500.

In the medium term, a sustained hold above US$2,800 could unlock further upside potential, with the target zone ranging from US$3,000 to US$3,200.

Trading Recommendations

Trading Direction: Buy

Entry Price: 2675, 2660

Target Price: 3302

Stop Loss: 2319

Valid Until: June 25, 2025 23:55:00

Support: 2681, 2630, 2551

Resistance: 2788, 2864, 2923

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

GBP/JPY fell to 195.10 after weak UK jobs data, with unemployment rising to 4.6% and jobless claims surging 33,100 in May, fueling BoE rate cut bets.

SELL GBPJPY

Close Time

CLOSED

195.400

Entry Price

193.000

196.600

207.315 -1.008 -0.48%

25.3

Pips

Profit

193.000

195.147

Exit Price

195.400

Entry Price

196.600

The British Pound took a hit against the Japanese Yen on Tuesday, with GBP/JPY tumbling after a disappointing UK employment report fueled speculation that the Bank of England (BoE) may be forced to cut interest rates sooner than anticipated. The pair, which had flirted with the 196.00 psychological level before the data release, erased recent gains and was trading near 195.10 by mid-afternoon, aligning with the 78.6% Fibonacci retracement of its January-to-April decline. The weakening UK labor market, coupled with a strengthening Yen amid cautious optimism from the Bank of Japan (BoJ), has tilted the scales in favor of sellers, raising questions about the Pound’s resilience in an increasingly uncertain economic climate.

The Office for National Statistics (ONS) released its latest labor market report, painting a picture of a UK economy grappling with softening conditions. The International Labour Organization (ILO) unemployment rate ticked up to 4.6% in the three months to April 2025, up from 4.5% in the prior quarter, marking the highest level since summer 2021. While the figure met economists’ expectations, it underscored a gradual loss of momentum in the labor market, a critical driver of economic activity.

More concerning was the Claimant Count Change, which revealed a sharp rise in jobless benefit claims. In May, claims surged by 33,100, reversing April’s revised decline of 21,200 and overshooting forecasts for a modest increase of 9,500. This spike suggests that businesses, battered by rising costs, are scaling back hiring or shedding jobs altogether. The employment change data further darkened the outlook, with only 89,000 jobs added in the three months to April, down from 112,000 in March, signaling a slowdown in job growth as economic activity cools.

Adding to the gloom, payroll data showed a steep drop of 109,000 employees in May, the largest monthly decline since May 2020, bringing the total to 30.2 million. The ONS also reported a 63,000 fall in job vacancies to 736,000 in the March-to-May period, marking the 35th consecutive quarterly decline. These figures reflect a labor market under strain, with firms hesitant to hire amid rising employer costs, including a recent hike in National Insurance contributions to 15% on salaries above £5,000 (up from 13.8% on salaries above £9,100) and a 6.7% increase in the minimum wage for workers over 21.

Liz McKeown, ONS director of economic statistics, noted, “There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing those who leave.” This cautious approach, driven by higher payroll taxes and global economic uncertainty, is stifling job creation and weighing on consumer confidence.

The softening labor market has intensified scrutiny on the BoE’s monetary policy stance. With wage growth easing to 5.2% (down from 5.6%) in the three months to April, inflationary pressures from salaries are moderating, potentially giving the BoE room to lower rates. UK inflation, revised to 3.4% in April after an ONS data correction, remains above the BoE’s 2% target, but the cooling jobs market could tip the balance toward dovish policy.

Market sentiment shifted decisively after the jobs report, with the OIS curve repricing in a dovish direction. Traders now see a 73% chance of a 25-basis-point rate cut in August, up from 66% before the data, and expect 46 basis points of easing by year-end, compared to 41 basis points previously. “The employment drop was much deeper than forecasts, and markets are reacting with GBP softness as traders price in a possible BoE pivot,” said one X post, capturing the mood.

Richard Carter, head of fixed interest research at Quilter Cheviot, warned, “With increased National Insurance contributions now bedded in, the employment picture is deteriorating as companies scale back hiring, and in some cases cut their UK workforce significantly. This complicates the BoE’s task, as slowing wage growth is offset by rising inflation risks.” The BoE’s next meeting, scheduled for next week, is unlikely to yield a rate cut, but analysts like Danni Hewson of AJ Bell suggest a summer cut is increasingly likely if labor market weakness persists.

On the other side of the GBP/JPY pair, the Japanese Yen is finding support as the BoJ signals a potential shift toward tighter policy. BoJ Governor Kazuo Ueda reiterated on Tuesday that the central bank would consider raising interest rates if inflation approaches or stabilizes around the 2% target. “We will raise rates if we have enough confidence that underlying inflation nears 2%,” Ueda said, tempering expectations but keeping the door open for a hike.

Japan’s Producer Price Index (PPI) for May, due Wednesday, is forecast to rise 0.3% month-on-month, up from 0.2%, which could further bolster the Yen if it signals rising cost pressures. With Japan’s economy contracting in Q1 2025 and the BoJ maintaining ultra-low rates, the narrowing interest rate differential with the UK is putting downward pressure on GBP/JPY.

Technical Analysis

From a technical perspective, GBP/JPY is flashing warning signs for bulls. The pair has respected a key resistance zone near 196.00, formed by a bearish engulfing pattern on the daily chart on May 14. On the 4-hour timeframe, a fresh bearish engulfing candle has emerged at this resistance, suggesting sellers are seizing control.Price is now at the highest point of this resistance, and the strong bearish engulfing indicates sellers are taking charge.

The 78.6% Fibonacci retracement level at 195.29 is providing temporary support, but a break below could see the pair target the 194.00 region or the 61.8% Fibonacci level near 193.50. Conversely, a reclaim of 196.00 would signal renewed bullish momentum, though the fundamental backdrop makes this less likely in the near term.