Created on December 16, 2024

• This week’s central bank announcements, led by the Fed and Bank of England announcements, will shape the future of GBP/USD’s 2024 close and give a glimpse into what 2025 will look like.
• Especially, with Trump taking over the US economy. Ahead of this week’s key events, GBP/USD is trading lower around the 1.2615 support level, near its lowest in over two weeks.

The Bank of England Faces Rising Inflation Expectations

Although the Bank of England wants to combat the slowdown of the British economy by cutting interest rates, rising inflation will prevent it from doing so. In this regard, the latest Bank of England/Ipsos inflation expectations survey reveals a rise in UK public inflation expectations, with average expectations for the coming year rising to 3%, up from 2.7% in August 2024. It also shows an increase in inflation expectations over the next 12 months to 2.8% from 2.6%. According to the announcement, long-term inflation expectations, measured over a five-year horizon, have risen to an average of 3.4%, compared to 3.2% in the previous survey. Consequently, these results reflect growing public concerns about inflationary pressures in Britain.

What to Expect from the Bank of England Announcement?

Overall, this is a significant development for policymakers at the Bank of England, ahead of its decision this week. Accordingly, inflation expectations are of paramount importance in driving actual inflation outcomes: If people expect inflation to rise in the future, they may accelerate their spending to avoid paying higher prices later. This increased demand could in turn lead to higher prices, creating a vicious cycle of inflation. The inflation expectations data comes on the day that the UK economy was announced to have contracted by 0.1% for the second consecutive month, confirming that the economy has lost momentum rapidly from the growth mentioned above in the first half of the year. This confirms market expectations that the bank will proceed cautiously in 2025, cutting interest rates on three to four occasions.

Trading Tips:

The price of the pound against the dollar may stabilize around its current path until the reaction to the results of important economic data and announcements from global central banks, so caution is required

The Pound is Affected by the Contraction of the British Economy

According to the platforms of licensed trading companies. The price of the pound has been subjected to selling pressure against the rest of the other major currencies following the announcement of the contraction of the British economy for the second month in a row. According to the Office for National Statistics, the UK’s gross domestic product fell by 0.1%, and according to the announcement, British industrial production and construction output fell by 0.6% and 0.4%, respectively, while the services sector failed to grow.

On a quarterly basis, UK GDP grew slightly by 0.1% compared to the previous 3-month period. GDP increased by 1.3% over the year compared to market expectations of 1.6%. Economists commented on the announced figures that budget uncertainty has weighed on demand and sentiment. Furthermore, the survey data paints a more pessimistic picture for the fourth quarter than growth models from the Office for Budget Responsibility and the Bank of England suggest. At the same time, the fourth quarter could see a weaker pace of growth, as companies deal with the higher tax burden announced in the budget as well as heightened geopolitical uncertainty.

Technical Analysis for the GBP/USD pair today:

According to the performance of the GBP/USD price on the daily chart, the general trend is down and is getting stronger. Concurrently, Forex traders are looking forward to moving towards the psychological support level of 1.2500 now. Technically, the direction of the Relative Strength Index is still down and has room to move before reaching oversold levels. Moreover, the MACD is turning higher and will not lack strength. In contrast, and in the same time frame, there will be no initial break of the current downtrend without returning to the resistance level of 1.2830 first.

Decisively, the GBP/USD pair will be affected this week by the announcement of both the Bank of England and the US Federal Reserve on the scheduled interest rates and the banks’ policy statement will be of interest to investors and analysts. However, the interaction will be with the readings of the manufacturing and services purchasing managers’ indices. Also, the British inflation and employment figures. In addition to the announcement of the US retail sales figures and the GDP growth readings, then the US inflation reading preferred by the Federal Reserve – the Personal Consumption Expenditures Price Index – it is truly a trading and fateful week for the GBP/USD pair.

Ready to trade our daily GBP/USD Forex analysis? We’ve made this UK forex brokers list for you to check out. 

Created on December 16, 2024

• For two consecutive weeks, the USD/JPY pair has been moving within a prominent upward channel on the daily chart, culminating in a move towards the resistance level of 153.80, the pair’s highest level in more than two weeks.
• Obviously, this is before closing the week’s trading stable around the 153.60 level.
• Moreover, this performance will be on an important date with the last global central bank announcements this year and before the Christmas holidays.
• Therefore, strong fluctuations in the performance of the currency pair are expected this week.

The US Federal Reserve May Cut Interest Rates

 This week, Federal Reserve officials will conclude a two-day meeting and issue an update on US interest rate policy. At their meeting last month, Fed officials cut the US interest rate by a quarter point. This came after a larger half-point cut in the September meeting. The biggest expectation is that the US Federal Reserve will announce another interest rate cut, although some Fed officials have recently indicated that they have not yet made a final decision on whether they will support a rate cut this month.

Trading Tips:

I still recommend buying the US dollar against the Japanese yen from every downward level, but without risk, while monitoring the strong factors influencing the trend this week

Reasons for Selling Pressure on the Japanese Yen

Since the beginning of this month, the Japanese yen has been under selling pressure against other major currencies. Clearly, the most prominent was against the US dollar. According to reliable trading company platforms, the Japanese yen has recorded its longest losing streak against the US dollar since last June, as traders bet that the Bank of Japan will refrain from raising interest rates.

On the policy front, Bloomberg recently reported that Bank of Japan policymakers see little cost in waiting until January 2025 or later to raise interest rates because there is a limited risk that inflation will exceed the cap. Also, the report added that they are open to raising interest rates depending on economic data and market developments. Overall, financial markets have reduced their bets on a rate hike by the Bank of Japan this month after the report, now setting a 16% probability for this outcome. A week ago, the chance of a Japanese rate hike was 64%. The Bank of Japan’s decision comes a day after the US Federal Reserve cut interest rates by a quarter of a percentage point, although the longer-term outlook is gloomier.

Affected by the bank’s decisions, the Bank of Japan’s quarterly Tankan survey released on Friday showed that confidence among major Japanese companies remains optimistic, but the data did not move interest rate expectations. Also, hedge funds have recently increased their bets against the yen, according to Commodity Futures Trading Commission data for the week ended December 10.

USD/JPY Technical Analysis and Expectations Today:

Based on recent performance, the USD/JPY has now risen to trade slightly above its 100-hour moving average. As a result, the currency pair is about to enter the overbought levels of the 14-hour RSI. Therefore, bulls will look to extend the current rally towards 154.71 or higher to the resistance of 155.61. On the other hand, bears will seek to benefit from a correction downwards around 152.68 or lower at the support of 151.80. In the long term, according to the performance on the daily chart, the USD/JPY currency pair has completed an upward breakout from a descending channel formation. Also, the 14-day RSI has bounced back to approach the overbought levels. Therefore, bulls will seek to continue moving within an upward channel towards the resistance levels of 157.65 or higher to the resistance of 161.75. As for the MACD indicator, it is trying to move away from the oversold levels. On the other hand, bears may benefit from selling to take profits from moving towards the support levels around 149.60 or lower at the support of 145.00.

Want to trade our USD/JPY Forex analysis and predictions? Here’s a list of forex brokers in Japan to check out. 

• The euro dropped on Monday due to dovish comments from a top ECB official.

• Eurozone business activity improved in December.

• The dollar extended its gains as markets anticipated a more cautious Fed.

The EUR/USD forecast shows a surge in European Central Bank rate cut bets after dovish policymaker remarks. Meanwhile, PMI data showed a slight rebound in the Eurozone economy. However, business activity remained in contraction, showing a frail economy. 

–Are you interested to learn more about forex options trading? Check our detailed guide-

The euro dropped on Monday due to dovish comments from a top ECB official. ECB Vice President Luis De Guindos said that inflation in the Eurozone bloc would likely hold at the 2% target in 2025. Moreover, he noted that the central bank will continue cutting rates if inflation meets forecasts. 

The European Central Bank lowered borrowing costs by 25-bps on Thursday. At the same time, policymakers remained dovish, forecasting more cuts due to the weak economy and uncertainty about likely tariffs in the US. Such an outlook will likely weigh on the euro, especially since it diverges with the US outlook. 

Furthermore, data on Monday revealed that business activity in the Eurozone improved in December due to growth in the services sector. Notably, the flash composite PMI increased from 48.3 in November to 49.5 in December. Meanwhile, economists had expected a drop to 48.2. However, business activity remains in contraction below 50.

Elsewhere, the dollar extended its gains as markets anticipated a more cautious Fed in the coming year. Nevertheless, traders have fully priced a rate cut this week. Meanwhile, the likelihood of a January cut remains low at 24%. 

EUR/USD key events today

• US flash manufacturing PMI
• US flash services PMI

EUR/USD technical forecast: Bears make another attempt at 1.0475 support

On the technical side, the EUR/USD price is bouncing lower after finding a strong barrier at the 30-SMA. Meanwhile, the RSI trades below 50, suggesting solid bearish momentum. However, bears have found it difficult to break below the 1.0475 support, which coincides with the 0.5 Fib retracement level. 

–Are you interested to learn more about forex tools? Check our detailed guide-

A break below this zone would allow the price to make lower lows and reach the 1.0400 key support level. Such an outcome would signal a new downtrend. On the other hand, if the support zone holds firm, the price might break above the SMA to retest the 1.0601 resistance level. However, bulls would have to break above this resistance to confirm a new bullish trend.

Looking to trade forex now? Invest at eToro!

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Created on December 16, 2024

• The Euro has rallied rather significantly during the trading session on Friday as we continue to see the Japanese Yen itself get eviscerated.
• Keep in mind, the Bank of Japan just simply cannot tighten interest rates, and this shows just how weak the Yen is because the Euro is very weak as well.
• All things being equal, this is a market that I think will continue to go back and forth, perhaps trying to reach the top of the range above at the 165 yen level.

This is an area that will be somewhat difficult to break above, but I think we would have to pay very close attention to the market if we get anywhere near it.

Just Below Current Levels

Underneath, we have the 155 yen level as a floor. As we are basically in the middle of this, it makes quite a bit of sense that we see a lot of volatility here. The size of the candlestick is something worth paying close attention to as it does say that there’s alert into the euro against the yen or maybe a better way to put it is money’s just leaving Japan.

Either way EUR/JPY is a market that looks positive, and we have just formed a massive triple bottom so I do think we will probably turn things around. Again, while I don’t like the euro, I really don’t like the yen and therefore this is a battle of two very weak currencies although obviously, Europe is in better shape than Japan is, as the Japanese economy is crushed under the weight of debt and higher interest rates in that country would just wipe out economic progress. So, with all that being said, I think this remains a buy on the dip market, albeit probably not my favorite yen related pair.

Want to trade our daily forex analysis and predictions? Here’s a list of forex brokers in Japan to check out. 

The GBP/USD is trading at $1.26396, up 0.24%, as it gains strength near the pivotal $1.26663 level, supported by an upward trendline on the 4-hour chart. This level is crucial for maintaining the bullish momentum, with immediate resistance at $1.27194 and a stronger hurdle at $1.27966.

On the downside, support is observed at $1.26046, followed by $1.25255, offering a safety net for the pair.

The 50 EMA at $1.26884 and the 200 EMA at $1.27083 highlight a mixed sentiment, with sellers likely to challenge gains near resistance levels. For now, the bullish trend remains intact, but a break below $1.26663 could invite sharp selling pressure, pushing prices toward lower supports.

Euro Outlook: German Trade Data Disappoints, PMIs Ahead

The euro faced pressure following disappointing German trade balance data, which fell to €13.4B against a forecast of €15.7B. Weakness in wholesale prices (0.0%) and stagnant French CPI (-0.1%) underscored economic challenges.

Looking ahead, Monday’s key flash PMIs will shape sentiment. French Manufacturing PMI is expected at 43.2, signaling contraction, while Services PMI holds steady at 46.9. German PMIs are marginally better but still sluggish, with Services forecasted at 49.5.

ECB President Lagarde’s speeches will be closely monitored for policy signals, especially as inflation and growth concerns persist in the eurozone. The euro remains vulnerable to further downside.

EUR/USD Technical Forecast

On Wednesday, the Fed will deliver its interest rate decision. Economists expect a 25-basis point interest rate cut, placing market focus on the economic projections and press conference.

Projections for a more hawkish Fed rate path may drive the USD/JPY toward 160 on interest rate differentials. Conversely, signals for multiple Fed rate cuts may pull the USD/JPY below 150.

On Friday, the US Personal Income and Outlays Report will wrap up an important week for the USD/JPY pair. Core PCE Price Index and personal income/spending trends could influence sentiment toward a Q1 2025 Fed rate cut.

In summary, a December and a potential Q1 2025 rate cut could drag the USD/JPY toward 140. Conversely, a hawkish Fed rate cut may drive the pair toward 160.

Short-term Forecast:

Near-term USD/JPY trends will hinge on the looming Fed and Bank of Japan interest rate decisions. A narrowing in the US-Japan interest rate differential in favor of the Yen could pull the USD/JPY pair toward 140. Conversely, a BoJ hold and hawkish Fed rate cut may drive the pair toward 160.

Investors should monitor real-time data, central bank decisions, and expert commentary to adapt trading strategies effectively. Don’t miss crucial market movements. Follow our real-time FX updates and stay ahead in the markets here!

USD/JPY Price Action

Daily Chart

After last week’s rebound, the USD/JPY sits above the 50-day and 200-day EMAs, signaling bullish momentum tied to BoJ and Fed policy expectations.

A USD/JPY return to 155 would support a move toward the 156.884 resistance level. Furthermore, a break above the 156.884 resistance level could enable the bulls to target the crucial 160 level.

Investors should consider the economic indicators and central bank policy decisions, potentially affecting USD/JPY price trends.

Conversely, a drop below the 50-day EMA could bring the 200-day EMA and 149.358 support level into play. A fall through the 149.358 support level may signal a drop to the 140.309 support level.

The 14-day RSI at 58.33 indicates a USD/JPY climb to the 156.884 resistance level before entering overbought territory (RSI above 70).