Two Trades to Watch: EUR/GBP, USD/JPY

EUR/GBP falls after UK jobs data

UK unemployment stays at 3,7%
Pay excluding bonuses cools to 6.5% from 6.7%
EURGBP falls for a 5^th day

EURGBP is falling for a fifth straight day as investors digest the latest UK jobs data and look ahead to the ECB meeting later in the week.

UK unemployment stayed steady at 3.7% defying expectations of a rise to 3.8%. Vacancies decreased for the eighth time in a row falling by 51,000 to 1.124 million. Pay excluding bonuses rose by 6.5% down from 6.7%,.

The slowing pay growth and falling vacancies suggest that tightness in the labour market could be easing slightly. That said, pay growth was still well below inflation, showing that the cost-of-living crisis is still alive and kicking

The easy being well announces an interest rate decision on Thursday and is widely expected to hike rates by 50 basis points taking the rate to 3.5%. in light of the SVB fallout, investors are less convinced now that the ECB will raise rates much further.

Where next for EUR/GBP?

The pair ran into resistance at 0.8920 and rebounded lower, falling below the 50 sma and is testing a multi-month rising trendline. The RSI suggests that there could be more downside to be had.

Sellers could look for a break below the 100 sma at 0.8767 to bring 0.8720, the 2023 low into focus. A move below here exposes the 200 sma.

On the flip side, if buyers successfully defend the rising trend line support, the 50 sma at 0.8840 could be the next hurdle. A move above 0.8920 is needed to create a higher high.

USD/JPY rises ahead of US inflation data

US CPI is expected to cool to 6%
Could hot inflation revive aggressive rate hike bets
US/JPY finds support on 50 sma

USD/JPY Found me yesterday dropping 2 and monthly low amid the ongoing fallout from the Silicon Valley bank. fears over crack in the financial system have seen investors rein in rate hike expectations.

The market is now expecting a 25 bps Like in March, down from 50 basis points previously there are some market participants who believed that the Fed might not hike at all this month.

The final piece to the puzzle will be today's inflation data. CPI is expected to cool to 6% YoY, down from 6.4% in January. Core inflation is expected to call Tim 5.5% down from 5.6%.

While inflation is expected to keep cooling the process could be long and slow.

A hotter-than-expected inflation print could raise bets of a larger rate hike, boosting the USD.

Where next for USD/JPY?

After failing to rise above the 200 sma, USD/JPY rebounded lower, breaking below the 100 sma and the multi-week rising channel before finding support on the 50 sma at 132.30 a monthly low. The RSI supports further downside.

Sellers could look for a break below 132.30 to extend the bearish trend, bringing 130.00 the psychological level into focus ahead of 129.80 the February 10 low.

Buyers could look for a rise above 134.80 the January high to expose the 100 sma at 135.75 bringing tge 200 sma at 137.40 back into target.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.