USD/JPY, FTSE 100 Forecast: Two trades to watch

USD/JPY falls to a 2-week low on US debt concerns

USD/JPY has fallen to a 2-week low amid safe haven gains for the yen and broad weakness in the US dollar.

The yen is also benefiting from upbeat machinery orders data, which have overshadowed recession fears and boosted hopes of an economic recovery. This supports the case for further interest rate hikes by the BoJ. This along with sustained safe-haven buying, keeps the yen buoyant.

Optimism surrounding Japan-U.S. trade talks is also underpinning JPY.

Meanwhile, the US dollar has fallen against its major peers on concerns surrounding the US government's fiscal health. The focus is on US President Trump's sweeping tax cut bill, which is expected to be voted on this week. Kid, add to do you ask that pile. This comes after Moody's cut the US rating outlook owing to its $36 trillion debt.

So far this week, the US economic calendar has been quiet with Federal Reserve speakers in focus. Fed officials have expressed concerns over economic and business sentiment in the wake of Trump's trade policies.

Weak demand for the 20-year treasury bond sale has supported the view that investors are shying away from US assets, which is also keeping the dollar depressed.

US PMI data is due later today and is expected to show that manufacturing PMI was at 50.1, down from 50.2. The services PMI is expected to hold steady at 50.8. Weaker-than-expected data could drag the USD lower.

USD/JPY forecasts – technical analysis

After running into resistance at 148.65, USD/JPY has rebounded lower, below the 145.00 level and is testing the support of the upper band of the falling channel. The RSI is below 50, supporting further declines.

A break below the trendline support takes the price back into the falling channel that has been in play since the start of the year. From here the 140.00 low comes into play.

Should the support hold, buyers could look to test 145.00 resistance on the upside, followed by 146.00. It would take a rise above 148.60 to create a higher high.

FTSE 100 falls amid souring risk sentiment & disappointing earnings

The FTSE, along with its European peers, is falling on Thursday, following a weaker close in the US. The broad market mood is downbeat after a sharp sell-off triggered by concerns over the US fiscal deficit and volatility in treasury yields.

The UK index is being dragged lower by weakness in energy and telecom stocks as oil prices fall and corporate earnings disappoint.

Oil majors Shell and BP are trading just shy of 2% lower oil prices for 1% on news that the US and Iran will hold nuclear talks, offsetting a risk premium that had been in place.

Meanwhile, BT is falling 5% despite posting an improvement in earnings and raising its target for rolling out full-fiber broadband. The group posted a 1% rise in adjusted EBIDA to £8.2 billion, as cost savings helped offset a 2% fall in revenue to £20.4 billion.

easyJet is falling after showing larger losses than this time last year. However, the budget airline did say that bookings are on course to hit full-year forecasts. Pre-tax losses came in at £394 million, 9% larger than the year ago.

On the data front, PMI figures showed that services returned to growth, albeit just at 50.2, up from 49 in April, whilst manufacturing contracted at a faster pace at 45.1, down from 45.4 in April.

FTSE 100 forecast – technical analysis

The FTSE extended its recovery from the 7535 low, rising above the 200 SMA to a peak of 8800 before easing lower. However, there are no signs of reversal, so the uptrend remains intact.

Buyers will look to rise above 8800 to bring 8910 and fresh all-time highs into focus.

Support can be seen at 8640 and around 8520, last week’s low and the 100 SMA. A break below here creates a lower low.

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