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• EUR/USD stays below 1.0400 to begin the new year.
• US economic calendar will feature weekly Jobless Claims data.
• A positive shift in risk sentiment can help the pair hold its ground.

After ending the year on the back foot, EUR/USD struggles to gain traction on the first trading day of 2025. The pair’s near-term technical outlook suggests that the bearish bias stays intact but an improving risk mood could help the pair limit its losses.

The US Dollar (USD) benefited from the risk-averse market atmosphere and weighed on EUR/USD heading into the New Year break. Early Thursday, US stock index futures rise between 0.4% and 0.8%. In case risk flows dominate the action after Wall Street’s opening bell, the USD could have a hard time preserving its strength.

The US economic calendar will feature weekly Initial Jobless Claims data. Markets expect the number of first-time applications for unemployment benefits to rise to 224,000 from 219,000 in the previous week. A bigger-than-forecast increase in this data could hurt the USD in the second half of the day.

Meanwhile, European Central Bank (ECB) President Christine Lagarde reiterated that they have made significant progress in 2024 in bringing down inflation. “Hopefully, 2025 is the year when we are on target as expected and as planned in our strategy,” Lagarde added. These comments, however, failed to trigger a market reaction.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD continues to trade below the 20-period and the 50-period Simple Moving Averages (SMA), reflecting the bearish bias.

On the upside, 1.0400 (20-period SMA, 50-period SMA, static level) aligns as first resistance level before 1.0440-1.0450 (static level, 100-period SMA) and 1.0490 (200-period SMA). Looking south, supports could be spotted at 1.0350 (static level), 1.0300 (static level, round level) and 1.0250 (static level).

Gold (XAU/USD) trades at $2,633.83, up 0.36%, showing steady buying interest. Immediate resistance lies at $2,652.90, with support at $2,628.47. Gold remains above its 50 EMA of $2,620.80, signaling bullish momentum, but testing the 200 EMA at $2,632.78 may cap gains. A sustained break above $2,652.90 could extend the rally, while a drop below $2,628.47 may turn sentiment bearish. Traders should monitor $2,628 for directional clarity.

Sterling Holds Steady as Manufacturing PMI Matches Forecast

The British Pound (GBP) remained stable as the Nationwide HPI m/m surged by 0.7%, exceeding the 0.1% forecast but below the prior 1.2%. Meanwhile, the Final Manufacturing PMI met expectations at 47.3, reflecting ongoing sectoral challenges.

The mixed data highlights limited upward momentum for the Pound as investors eye upcoming economic indicators to assess the broader recovery path for the UK economy.

GBP/USD Technical Analysis

Created on January 01, 2025

• The GBP/USD pair struggled to withstand the strength of the US dollar throughout 2024.
• However, the sterling’s resilience crumbled rapidly following the announcement of Trump’s victory in the US presidential election.
• As a result, the GBP/USD pair plummeted towards the support level of 1.2475, its lowest level in seven months, before stabilizing around 1.2510 in the final hours of trading in 2024.
• The highest level for the GBP/USD pair throughout the year was the resistance level of 1.3434, recorded at the beginning of trading in September 2024, which was the highest level for the pair in two years.

GBP Forecast for 2025

According to licensed trading platforms, despite the recent selling pressure on the pound, Goldman Sachs remains optimistic about the fundamentals of the pound. However, RBC Capital Markets expects the strength of the pound to fade quickly if it happens. Many investment banks expect the pound to perform strongly in early 2025, but it faces increasing difficulties and may be more vulnerable later in the year. However, Forex analysts at Danske Bank believe that in the long term, some of these favourable winds for the pound appear to be fading and we expect a more accommodative Bank of England to weigh on the pound eventually.

The future of Bank of England policies in 2025

You should note that monetary policy will remain a major focus in 2025. In this regard, the Bank of England has cut interest rates only twice in 2024 amid ongoing uncertainty surrounding inflation trends. Obviously, this shift in yields has been crucial in supporting the pound. At this stage, markets are expecting only two rate cuts by the BoE in 2025, but most investment banks are expecting a more dovish stance.

At the last meeting in 2024, there was a 6-3 vote to keep UK interest rates at 4.75% and ING is expecting a significant shift in this regard in Q1 2025; the growing dovish front evident within the Monetary Policy Committee despite the latest hawkish wage data suggests a greater focus on the slowdown in activity. This reinforces our dovish view on the BoE in 2025 – we expect 150bp cuts, versus market expectations of around 55bp.

But what about the US Federal Reserve?

Expectations about US monetary policy have changed significantly in the past few weeks of 2024. In its latest meeting of 2024, the Federal Reserve suggested that it would only cut US interest rates twice in 2025. In the updated economic projections for September, the Federal Reserve showed the possibility of making four cuts in US interest rates.

Analysts note that the Fed’s shift in monetary policy, which would see a slower easing cycle, makes sense as the U.S. economy is expected to remain relatively healthy at least through the first half of 2025. Overall, most major banks have trimmed their interest rate forecasts. Furthermore, Bank of America analysts were expecting only two U.S. rate cuts next year. Wells Fargo appears to be a bit more hawkish, seeing just one rate cut in 2025.

However, not all financial market analysts are convinced that the U.S. economy will be able to withstand the geopolitical uncertainty and unintended consequences of President Donald Trump’s proposed policies.

GBP/USD May See a Volatile Trading Year

The pound is likely to see a volatile year, with initial weakness followed by a potential recovery. This is according to Corbyn, the global payments company, which has released its 2025 outlook for major currencies. The firm sees the pound set for a turbulent 2025 due to a combination of domestic economic challenges, a potential interest rate cut. International factors, including changes in US policy. Meanwhile, the start of the year could be tough, there are factors that could support a recovery later in the year and the GBP/USD pair could break the 1.30 threshold by the end of 2025.

The firm sees the pound as likely to see a turbulent start to 2025, with weakness likely against the US dollar amid a loss of economic momentum. According to the economic calendar data, the UK economy slowed sharply during the second half of 2024, leading to weaker labour markets, wage pressures, and lower inflation expectations. The Bank of England is expected to cut interest rates more aggressively than the markets expect. Consequently, this will limit the extent to which interest differentials can support the currency against the euro.

The company’s forecast for the GBP/USD pair is 1.27 in the first quarter, 1.28 in the second quarter, 1.29 in the third quarter, and 1.30 in the fourth quarter.

Trading Tips:

The performance of the GBP/USD in the new year will not be stable as it awaits the reaction to factors that move prices strongly. Therefore, caution and good observation of what Trump decides in the US and globally are necessary.

Technical Analysis for the GBP/USD pair today:

According to recent trades, the movements of the GBP/USD pair support the psychological support level of 1.25 as a temporary floor for the GBP/USD pair, and while it is now in the process of breaking above the nine-day exponential moving average (EMA). Therefore, a successful close above this technical indicator – currently at 1.2579 – would strengthen the improved tone in the near term and open the door to further gains in the first part of January 2025.

However, it should be considered that the US dollar has risen for most of December after the Federal Reserve cut US interest rates but indicated that it has become more cautious about cutting interest rates, which will help maintain US bond yields afloat. For the dollar, this means a stronger trade for a longer period that could extend into 2025. Given the underlying background, GBP/USD gains are likely to be temporary, and the first quarter of 2025 may bring new declines with the minimum of 1.2330. And from there, all technical indicators move towards oversold levels.

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Created on December 31, 2024

• Bulls failed again to push the EUR/USD price higher in the last trading of 2024 as it tried to rebound towards the resistance level of 1.0458.
• With no strength factors, the EUR/USD price returned in its broader downward path, settling down around the support level of 1.0372, near its lowest in two years.
• Furthermore, the recent gains of the euro came with temporary momentum after the announcement of stronger-than-expected Spanish inflation figures. But why Spain?

According to economists, the inflation process is moving faster in Spain compared to other Eurozone countries. Therefore, this data will confirm the assessment of a member of the European Central Bank’s Governing Council who confirmed that the next interest rate cut by the ECB may take longer after the recent rise in inflation.

Euro Dollar losses may continue in 2025

Forecasts from forex market analysts indicate that the performance of the EUR/USD pair during January 2025 will continue the current downward trend. Experts believe that January is historically negative for the performance of the euro against the US dollar. In addition, the US dollar finds strength factors at the same time, which ensures stronger downward breakouts for the euro dollar in the coming days.

Trading Tips:

The recent performance confirms the strength of our technical view of the Euro that it will remain under downward pressure and any attempts to rebound upwards may be temporary

US Stock Markets May Close for an Exceptional Event

The US stock markets have been officially announced to close on January 9, 2025, in celebration of a National Day of Mourning for former US President Jimmy Carter. In this regard, the companies listed on the market said that the New York Stock Exchange and the US stock exchanges of Nasdaq and CBOE Global Markets will be closed. For its part, CME Group, the operator of stock markets and interest rates in the United States, has not yet commented on its plans. Meanwhile, the US bond market will close at 2pm New York time, as recommended by the Securities Industry and Financial Markets Association. Generally, the closures are part of a long-standing US tradition where financial institutions cease operations after the death of a US president.

EUR/USD Analysis Today:

The broader trend of the EUR/USD pair remains downward. Clearly, the chances of the EUR/USD moving towards parity are strong if the factors of euro weakness persist. Meanwhile, the US dollar price remains supported by Trump’s trade and the demand for it as a safe haven. Technically, the gains made by the EUR/USD pair raised the exchange rate above its nine-day exponential moving average (EMA), which represents the first truly positive technical development in some time. If the EUR/USD pair closes above this indicator – which is currently at 1.0432 – further gains could take it into the first week of January 2025. However, this will not be until next Friday when the first real test of important economic data for 2025 comes in the form of the first US non-farm payrolls report for the year.

The broader expectation is that the report will show continued strength in the US labour market, justifying the Federal Reserve’s decision to pause US interest rate hikes. However, the biggest surprise would be a weaker-than-expected US jobs number, which could lead to a decline in the US dollar. Moreover, given all the survey evidence we see, this is unlikely, and the US dollar’s ​​superiority could extend.

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