Created on December 30, 2024

My previous GBP/USD signal on 16^th December produced a losing short trade from the rejection of the resistance level at $1.2667.

Today’s GBP/USD Signals

• Risk 0.75%.
• Trades must be entered prior to 5pm London time today.

Long Trade Ideas

• Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 timeframe immediately upon the next touch of $1.2555or $1.2502. 
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

Short Trade Ideas

• Short entry following a bearish price action reversal on the 1H1 time frame H1H1H1 timeframe immediately upon the next touch of $1.2589 or $1.2609.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 25 pips in profit.
• Remove 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

GBP/USD Analysis

I wrote in my previous GBP/USD forecast two weeks ago that price was likely to range between nearby support and resistance levels. I was wrong about that.

The technical picture now is more bearish in the sense that the price is lower, but the key takeaway about this currency pair is that both the British Pound and the US Dollar are showing relative strength, with the US Dollar taking the lead.

As both are strong currencies, and as markets are quiet on this year-end Monday without any obvious rally going on, we are likely to see very limited price movement today.

Limited movement means that if you must trade this currency pair, the best strategy to adopt today will likely be to scalp bounces off the nearest support and resistance levels.

The resistance level at $1.2589 looks likely to be strong, so that might be the best scalping opportunity that could set up today.

There is nothing of high importance due today concerning either the GBP or the USD.

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Created on December 30, 2024

• You can see that the Euro has gone back and forth during the trading session on Friday, as we continue to hang around the 1.04 level.
• All things being equal though, this is a market that is probably going to struggle to continue any type of momentum between now and possibly as long as the non-farm payroll announcement in January.
• The holiday season, the New Year’s, Christmas, etc. are all coming in and taking out some of the liquidity.

It might be the thing that saved the euro. Interest rates in America continue to climb and I think that does end up being a thorn in the side of the euro as the US dollar will remain very strong. But ultimately this is a situation where traders will have to look at this as a market I believe that consolidates between the 1.03 level on the bottom and the 1.06 level on the top.

The market trading back and forth in this 300 point range is very choppy and very difficult to get aggressive in. If we do get the occasional rally, and I think we probably will, the 50 day EMA is near that crucial 1.06 level. And of course, the 1.06 level has been important multiple times.

Still Fading Rallies

So, I think this remains very much a fade the rally type of scenario if we were to break down below the 1.03 level. And I’m not surprised if we do, we go looking to parity sometime in 2025 and that actually is my forecast. I just see no reason for the Euro to gain any real strength. At best, you’re looking at sideways action for the foreseeable future. In fact, I don’t really have a scenario in which I’m willing to buy the euro against almost anything, perhaps with the exception of the Japanese yen. Even then, there are a handful of other currencies I’d rather run to.

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December 22, 2024 – Written by David Woodsmith

STORY LINK Pound to Euro Rate End-of-Year Forecast: Steady Path to 1.25 in 2025

Foreign exchange strategists at HSBC forecast that the Pound to Euro (GBP/EUR) exchange rate will strengthen steadily to 1.25 at the end of 2025.

Nordea, however, expects that GBP/EUR will slide to 1.1365 at the end of next year.

GBP/EUR fleetingly hit a 33-month best at 1.2160 during the week before a sharp retreat to around 1.2060 following the Bank of England (BoE) policy meeting.

The BoE held interest rates at 4.75% at the latest policy meeting which was in line with strong consensus forecasts.

There was, however, an unexpected 6-3 vote for unchanged rates as Dhingra, Ramsden and Taylor voted for a cut.

The bank also expressed some reservations over the economic outlook and stagnation risk.

The vote plot and statement triggered stronger expectations of a cut in February and the Pound lost ground.

Danske Bank still expects a cautious BoE stance; “The still cautious guidance highlights the more gradual approach of the BoE compared to European peers. We think this supports our case of a continued move lower in EUR/GBP.”

Credit Agricole added; “All in all, it would require a shockingly fast deterioration in the UK jobs market to eventually revive the prospects of more frontloaded monetary easing than the quarterly cut being priced in by UK money markets. In the meantime, the GBP could continue to make the most of its status as a higher-yielding safe-haven proxy for the EUR.”

ING, however, expects that the BoE will be much more dovish; “The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts, against market expectations for around 55bp.”

At this stage, Nordea expects the ECB will cut rates to 2.25% by April and then turn more cautious; “After this, we do not have any rate changes in our baseline until the end of 2026. The rebound in the services PMI number earlier this week kept alive the prospect of the economy gradually recovering.”

HSBC, however, expects that the central bank will be more aggressive; “we think there is a growing risk that the ECB cuts interest rates below the perceived neutral rate to stimulate the economy, possibly even to as low as 1.00%. In doing so, this would widen the interest differential between the eurozone and UK, sending EUR-GBP lower.”

Nomura took a similar view; “We expect GBP to continue to gain ground gradually against other currencies where their respective central banks are more concerned about the downside risks to growth rather than sticky price pressures.”

HSBC also considers that the Pound structural position has improved; “Although still plagued by numerous headwinds to growth, we think the UK is better positioned to face the current set of global challenges than the eurozone.”

Bank of America noted some positioning concerns, but suggests buying on dips; “Heading into 2025, we think the case for further GBP gains are likely.”

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TAGS: Currency Predictions Pound Euro Forecasts

Created on December 30, 2024

• Recent attempts by the GBP/USD currency pair to rebound have not moved far from the vicinity of the 1.2500 support level, which we have often noted as the most important for maintaining bearish dominance over the GBP/USD trend.
• Technically, breaking this support would drive the pair towards its seven-month low.
• According to the forex market, the GBP has declined by 1.5% in 2024 so far, after maintaining its position against the US dollar for most of 2024.

GBP/USD Forecast for 2025

In this regard, Scotiabank expects a strong US economy and high yields to push the US dollar to its highest levels in two years as the EUR/USD slides to parity. In this environment, the GBP/USD is expected to decline to 1.22 support by the end of 2025. Scotiabank also expects the Trump administration to enact tax cuts and regulatory rollbacks that will support the US economy. The bank also sees the potential for another positive wealth effect from the strength of US equities, which would also help support consumer spending and investment.

In this context, the bank has revised its 2025 GDP growth forecast to 2.1% from 1.8%. With concerns about inflation, it also expects a significant impact on the US Federal Reserve’s policy. It now expects the Fed to be able to cut US interest rates only twice in 2025 to 4.00%, which will keep rates higher than the Eurozone. Moreover, Scotiabank expects the strength of equities and high yields to continue to support the US dollar over the year. However, it expects a reversal in 2026 as the US economy slows, with the GBP/USD pair recovering to 1.30 by the end of 2026.

Trading Tips:

The GBP/USD pair may remain in a narrow move with a downward bias until the markets’ vision of the future of Trump’s policies becomes clear

Bank of England policies affect the pound

One of the factors that pressured the performance of the GBP was the Bank of England’s slow pace of interest rate cuts during 2024, which reduced borrowing costs by only half a percentage point. This has supported much of the strength of the GBP. However, changing expectations for further cuts in UK interest rates in the future have put pressure on the GBP in recent weeks. In general, the markets expect interest rate cuts of 51.5 basis points in 2025 by the Bank of England, compared to 46 basis points in the cuts that were priced in before the latest monetary policy meeting of the year, when it kept interest rates unchanged but was more divided on the decision than markets expected.

Technical Analysis for the GBP/USD pair today:

According to the performance on the daily chart above, the overall trend of the GBP/USD remains downward. Meanwhile, the 1.2500 support level still solidifies the bears’ dominance and thus the readiness for a stronger downward move that could take the pair towards the following more important support levels of 1.2445, 1.2380, and 1.2300. technically, that in turn could move technical indicators towards oversold levels, led by the Relative Strength Index and the Stochastic oscillator. Furthermore, we still prefer selling the GBP/USD from every upward level without taking risks and activating take-profit and stop-loss levels to ensure the safety of the investment account from any sudden price reversals.

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Created on December 30, 2024

• For eight consecutive trading sessions, the USD/JPY pair has been steadily rising, approaching the resistance level of 158.00, the highest level for the currency pair in five months.
• This stability has formed a bullish flag on the daily chart, confirming the bulls’ control over the direction of the USD/JPY pair.
• Also, bringing it closer to the next psychological resistance target of 160.00, which would increase talk of imminent Japanese intervention in the currency markets.

The Japanese Yen continues to be affected by the course of the Bank of Japan’s policy

The selling pressures on the Japanese yen against the rest of the other major currencies, led by the US dollar, continue as investors continue to assess the expectations of interest rates at the Bank of Japan. The summary of the Bank of Japan’s meeting in the last meeting of 2024 revealed that policymakers discussed the possibility of raising interest rates in the near term, as some bank officials suggested that the conditions were favourable for such a move. For its part, the Bank of Japan kept interest rates unchanged at 0.25%, with Governor Kazuo Ueda indicating the need to evaluate more data on wage growth next year and to gain more clarity on the economic policies of the incoming US administration. In general, investors are closely watching any potential intervention by the Japanese, especially after the Japanese Finance Minister reiterated concerns about the decline in the Japanese yen and repeated his warning against taking action against excessive movements in the currency.

At the same time, the performance of the Japanese yen faced additional pressure from rising US Treasury yields, despite recent US interest rate cuts.

Trading Tips:

The dollar/Japanese yen price will remain in an upward trend until the vision of Trump’s policies becomes clear and until there is Japanese intervention in the currency markets to stop the collapse of the yen against other currencies

Asian stock indices decline

According to today’s trading through stock trading company platforms, we have noticed a decline in Asian stock market indices today, Monday, as was the performance of US stock indices. Selling came amid uncertainty ahead of the end of 2024 and the inauguration of Trump as US President. According to trading, the MSCI Asia Pacific Index halted its five-day gain as shares in Australian and Japanese markets fell, while Chinese shares rose. At the same time, US 10-year Treasury yields remained near their highest levels since May after rising last week, which could affect the performance of stock prices. Due to the holidays, trading remains limited and within narrow ranges.

Also, it was noticeable that trading volumes for Japanese stocks were about 17% below their 30-day average, and Monday is the last trading session for Japanese financial markets this year, with public holidays from Tuesday to January 6. Overall, while Asian stocks are at their lowest levels today, they are still heading towards a strong annual performance. The MSCI Asia Pacific Index advanced 7.5% in 2024 as global central banks eased monetary policy and technology stocks rose amid optimism about artificial intelligence.

USD/JPY Technical Analysis and Expectations Today:

The USD/JPY currency pair continues to trade at levels slightly above the 100-hour moving average, and despite the decline. The USD/JPY pair remains centrally anchored in the 14-hour Relative Strength Index, leaving enough room for both bulls and bears to move. In the near term, bears will seek to extend the current decline towards 156.89 or lower to the support at 155.98. On the other hand, bulls will seek to take advantage of rebounds at around 158.51 or higher at the resistance 159.32.

In the long term, based on the performance on the daily chart, the USD/JPY pair is trading within an ascending channel formation. Also, the 14-day RSI supports a long-term bullish bias as it approaches overbought levels. Therefore, bulls will seek to continue the current winning streak to around 161.73 or above the resistance of 166.50. On the other hand, bears will seek to take advantage of the selling operations to book profits at around 153.31 or below the resistance of 148.86.

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Created on December 30, 2024

• The US dollar pulled back just a bit during the early hours on Friday, as it looks like the 158 yen level continues to be a major barrier.
• This is an area where we’ve seen a lot of action in the past, so it does make a certain amount of sense that we would continue to look at this through the prism of a market that’s trying to bust through a major barrier.

I think it’s going to take some work, and I also think it is difficult to assume that the market is just going to be able to slice through there. Longer term, I do believe that the interest rate differential in the United States, in comparison to Japan will be a major factor. And we will eventually break out to the upside, but we may have to pull back a couple of times in order to build up pressure in a market that is a little extended. And of course, we also have the specter of illiquidity at the moment due to the fact that we are between two major holidays.

In Conclusion

So, in short, the way I look at this USD/JPY chart is I am trying to find a buying opportunity on pullbacks that show signs of a bounce. I would be very patient at this point in time, there’s no need to rush this because once traders come back after New Year’s Day, it is likely to be very volatile and very noisy. Therefore, you have to keep in mind that you’ve got a situation where traders will probably have to deal with a lot of back and forth chops.

The 155 yen level at the moment for me at least is going to be the floor in the market. If we were to break down below there, then we may have to rethink some things. But as things stand right now, I just think you don’t have enough volume in the market to finally break out above the 158 yen level, at least not right now.

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