Outlook for euro-yen and pound-yen next week. French government bond credit concerns are expected to weigh on euro-yen, while pound-yen is expected to test around ¥210 amid expectations of a UK rate hike.
Euro-yen is expected to trade in a ¥175.50–¥179.50 range, with the euro likely to remain heavy on rallies. After falling to ¥176.219, euro-yen may continue to struggle to extend its decline. The France-Germany yield spread and French fiscal concerns will influence the market.
The base case for pound-yen is a ¥207.50–¥211.00 range, with elevated UK 30-year gilt yields and expectations of a BoE rate hike expected to provide support. ¥210.00–¥210.20 is the key level; a break above it would open the way toward the top of the range, while a break below it would put the downside to the test.
Next week's events to watch include the start of plenary debate on France's budget bill on the 13th and Moody's scheduled rating review on the 23rd. These developments could move CDS and yield spreads and affect the direction of euro-yen and pound-yen.
In technical analysis of euro-yen, the 25-day moving average at ¥178.75, the 50-day line at ¥181.40 and the 200-day line at ¥183.82 are all trending downward. Pound-yen is trading above its 25-day line at ¥208.96, with ¥210.00–¥210.20 an important threshold.