EUR/USD rises despite French government collapse

• PM Barnier loses a vote of no-confidence, as expected
• Eurozone retail sales fall -0.5% MoM
• EUR/USD trades caught between 1.0450 and 1.06

EUR/USD is rising despite the collapse of the French government. French lawmakers passed a no-confidence vote against PM Michel Barnier on Wednesday evening, throwing the country into more political uncertainty and a deeper crisis.

However, both the euro and the French CAC managed to move higher because the collapse of the French government was already priced in. Furthermore, contagion outside of French markets is fairly limited. The risk premium on holding French debt over German debt has risen to its highest level since 2012.

On the data front, eurozone retail sales were weaker than expected, falling -0.5% MoM in October after falling -0.3% in September. The data comes after weak PMI data yesterday showed the eurozone composite PMI fell to a 10-month low.

The ECB is expected to cut interest rates by 25 basis points next week, and the markets are also pricing in around 157 basis points worth of easing by the end of next year, significantly more than the level of easing expected from the Federal Reserve.

The US dollar is trading slightly lower versus its major peers after Federal Reserve chair Jerome Powell’s speech yesterday, where he continued support for a slower pace of rate reductions ahead but did nothing to deter from expectations of a December cut.

Attention now turns to US initial jobless claims and comments from fed Barkin.

EUR/USD forecast- technical analysis

After recovering from a low of 1.0330 EUR/USD is consolidating between 1.06 and 1.0450. To extend the bearish trend that has been in place since the end of September, sellers will look to break below 1.0450 to test 1.04 and 1.0330.

Meanwhile, a rise above 1.06 creates a higher high and support the pair towards 1.07

USD/JPY falls with BoJ rate hike bets in focus & ahead of jobless claims data

• BoJ chatter & safe haven flows support the yen
• US eases after post-Powell gains; jobless claims are up next
• USD/JPY falls towards 150.00

USD/JPY resumed its downtrend after rising in the previous session. It is strengthening as traders assess whether the BoJ will hike interest rates again later this month. Known dove policy maker Nakamura said he wasn’t opposed to rate hikes, which has helped to strengthen the currency.

BoJ will announce its rate decision on December 19th, and expectations of a hike have been growing following recent comments from Ueda. However, media reports have raised questions over whether the hike will actually happen.

The yen is also benefiting from concerns surrounding South Korea, where the won continues to trade around a 2 year low following a short-lived martial law decree.

The U.S. dollar gained yesterday, but it’s inching lower against its major peers today after Federal Reserve Jerome Powell highlighted the strength of the U.S. economy and signaled support for slower rate reductions. However, a December rate cut is still expected, with the market pricing in a 74% chance of a 25 basis point reduction.

Attention is now on US jobless claims, which come ahead of Friday’s non-farm payroll report. Expectations are for 215k jobs added, up from 213k. Non-farm payrolls are expected to show 200,000 jobs were added in November up from just 12,000 in October.

USD/JPY forecast – technical analysis

After falling from a peak of 156.75, USD/JPY fell below the 200 SMA before finding support at the 100 SMA at 148.65. The recovery failed to rise above 150.8, the 0.5% Fib retracement of the 162 high and 139 low.

Sellers supported by the RSI below 50 will look to extend the bearish trend below 148.65 towards 148.15 the 38.2% level and towards 145.00.

Should buyers retake 150.80 a move towards 153.85 and 157.10 could be on the cards.

All week, traders were waiting for the release of the November jobs report to see whether it will confirm market pricing of a 25 basis point rate cut in December. In short, it may well have. Although wages remained strong and the headline nonfarm payrolls data beat expectations, it was the reports other metrics that caused the dollar to wobble. Traders saw rising unemployment rate, falling participation rate and the weak household survey – with the latter showing a big drop – as reasons to sell the USD/JPY. But with the EUR/USD dropping as well, it wasn’t just a clean dollar reaction you would have expected. The USD/JPY forecast is subject to change greatly in the coming weeks with US CPI due next week followed by FOMC and BoJ decisions the following week.

NFP fails to impress

The non-farm payrolls data was stronger and there were positive revisions to prior two months data, increasing employment by 56K. However, the household survey revealed a big 355K drop, and participation rate fell to a 6-month low of 62.5%. The unemployment rate also ticked higher to 4.2%.

Average earnings came in stronger, rising 0.4% on a month-over-month basis compared to 0.3% expected, keeping the year-over-year rate to 4.0%.  This was overshowed however by the mostly negative news from the jobs front.

US CPI among next week’s data highlights

US inflation data (CPI and PPI) will be released next week, the last set of key data before the Fed meets the following week. CPI will be published on Wednesday, December 11 at 13:30 GMT. Following Trump’s victory in the presidential election race, investors have sharply reduced their expectations about further US interest rate cuts in 2025. The upcoming December rate decision is unlikely to be impacted by this CPI report, unless we see a super-hot print. But whether the Fed will go ahead with a cut at its initial 2025 meetings will be influenced, among other key data highlights, by this CPI report, although it is employment that the Fed is now more focused on.

But after today’s NFP report, a 25-bps rate cut is now more likely than not. Indeed, market pricing of a December rate cut rose to around 87% from 70%, and USD/JPY dipped back to 150.00 handle – will it break lower now?

Yen strengthens again ahead of BoJ decision 

The EUR/JPY fell along with the USD/JPY, suggesting a broad-based yen rally following the US nonfarm payrolls report. In recent weeks, the yen has strengthened against most major currencies, particularly commodity dollars, the euro, and to a lesser extent, the US dollar. This surge has been driven by investor speculation that the Bank of Japan might raise interest rates at its final meeting of 2024, scheduled for later this month. 

However, a couple of days ago comments from BoJ board member Toyoaki Nakamura tempered this momentum. Nakamura struck a dovish tone, urging a cautious approach to policy tightening and raising concerns about the sustainability of wage growth. 

Technical USD/JPY forecast: Key levels to watch

Source: TradingView.com

The USD/JPY has again dropped to test the key 149.40-150.00 support zone where it was residing at the time of writing. A close below this zone could potentially pave the way for this week’s earlier of 148.65 and then 146.50 – the next potential support level. A daily close above or within this zone 149.40-150.00 support zone will keep the bulls interested and we may then see a potential recovery towards the 151.20-152.00 resistance range. All told, the odds of a breakdown look the more likely scenario, owing to the drop in bond yields and expectations about a potential BoJ rate hike in two weeks’ time.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• The Pound Sterling hit three-week highs against the US Dollar above 1.2750.
• GBP/USD awaits US inflation data amid a relatively data-light week ahead.
• Bearish bias intact while the Pound Sterling holds below the key 200-day SMA.

The Pound Sterling (GBP) held on to the corrective upside against the US Dollar (USD), fuelling a brief GBP/USD recovery above the 1.2750 barrier.

Pound Sterling stood resilient to persistent USD demand

Political turbulence in South Korea and France, US President-elect Donald Trump’s tariff threats, and the diverging monetary policy outlooks between the US Federal Reserve (Fed) and the Bank of England (BoE) emerged as the main drivers for the GBP/USD price action.

On Monday, the pair started the week negatively, tumbling over a big figure to hit weekly lows at 1.2617. Since then, Pound Sterling buyers fought back control and resumed the previous week’s recovery to reach the highest level in three weeks above 1.2750.

Trump threatened on Saturday that he would impose 100% tariffs on BRICS nations if they tried to replace the USD with their own. Mounting tariff war fears fuelled risk-aversion across the financial markets, reviving the demand for the Greenback as a safe-haven asset while weighing on risk currencies such as the British Pound.

However, sustained bets for a 25 basis points (bps) Fed interest rate cut in December remained a drag on the US Dollar despite Chairman Jerome Powell’s prudent remarks. Markets price in a 70% chance of such a move later this month, the CME Group’s FedWatch Tool shows, at the press time.

Powell said in his speech at the New York Times’ DealBook Summit, “growth is definitely stronger than we thought, and inflation is coming a little higher. The good news is that we can afford to be a little more cautious as we try to find neutral,” he added, referring to the neutral interest rate.

A series of US economic data releases, including the ISM surveys, JOLTS Job Openings and the ADP Employment Change, came in mixed and failed to alter the market’s expectations of a rate cut this month, limiting the Greenback’s upside attempts.

That said, the USD stayed underpinned by the market’s nervousness amid looming geopolitical and trade war risks and ahead of the all-important US Nonfarm Payrolls data release.

On the other side, the Pound Sterling regained traction, paying little heed to the dovish comments from BoE Governor Andrew Bailey on Wednesday. In a pre-recorded interview with the Financial Times (FT), Bailey said that “he expects four UK rate cuts next year as inflation eases.”

Heading into the weekend, GBP/USD consolidated at multi-week highs, anticipating the key US labor data for a fresh directional impetus.

Following the 36,000 increase recorded in October, the US Bureau of Labor Statistics announced on Friday that Nonfarm Payrolls (NFP) rose by 227,000 in November. This print came in above the market expectation of 200,000 but failed to boost the USD, helping GBP/USD cling to its weekly gains. Other details of the jobs report showed that the Unemployment Rate edged higher to 4.2%, while the annual wage inflation held steady at 4%. 

The week ahead: All eyes on US CPI inflation

It’s a mediocre week from the point of view of macroeconomic news, with the US Consumer Price Index (CPI) data likely to stand out. 

The first two trading days of the week have little to no top-tier economic publications from both sides of the Atlantic until the US inflation report drops on Wednesday.

However, China’s inflation data could stir markets amid mounting concerns about an economic slowdown, impacting risk sentiment and high-beta currencies such as the British Pound.

Thursday will feature the US Producer Price Index (PPI) data, while the UK monthly Gross Domestic Product (GDP) and industrial figures will feature on Friday.

It will be dry in terms of Fedspeak as the Fed enters its  ‘blackout period’ on Saturday ahead of the December 17-18 policy meeting.

That said, geopolitical developments and US-Sino trade updates will be closely followed.

GBP/USD: Technical Outlook

From a short-term technical outlook, sellers will likely retain control if GBP/USD holds below the 200-day Simple Moving Average (SMA) at 1.2821.

Adding credence to the negative outlook, the pair charted dual Bear Crosses a week ago.

However, the 14-day Relative Strength Index (RSI) has recovered to the 50 level from the negative territory, suggesting that the rebound could extend before the next leg down.  

The Pound Sterling needs a sustained break above the 200-day SMA at 1.2821 to sustain the recovery.

The next substantial contention area aligns near 1.2900, the confluence of the round figure and the 50-day SMA.

Further up, the 100-day SMA at 1.2967 could challenge the bearish commitments.

On the downside, the immediate support aligns at the 21-day SMA at 1.2685, below which the week low of 1.2617 will be tested.

Additional declines will threaten the six-month low of 1.2488.

Key Events:

• USDJPY is consolidating near the 150-mark
• Silver is rebounding from one-year support
• The US Dollar index is holding above its one-year resistance ahead of today’s NFP data
• Key market catalyst next week: US CPI data release on Wednesday

The Dollar’s pullback below the 108 zone, coupled with rising inflation figures in Japan, is shifting market sentiment. The latest Tokyo Core CPI has risen from 1.8% to 2.2%, boosting expectations for a potential BOJ rate hike on December 19th, just after the anticipated Fed rate cut on December 18th.

Another crucial factor is the “Trump effect” on the US Dollar, which is countering the bearish pressure from priced-in Fed rate cuts as we head into the December holidays. Demand for the US Dollar may increase alongside interest in precious metals, including silver. This dynamic is likely to keep a relatively bullish foundation for both assets unless key support levels are breached.

Technical Analysis: Quantifying Uncertainties

USDJPY Forecast: 3Day Time Frame – Log Scale

Source: Tradingview

USDJPY is currently testing key support at 148.60, with the next level to watch at 146.80 in the event of further downside. Deeper declines could retest levels 144 and 140.
The current technical setup, however, leans bullish:

• The 3-day RSI has rebounded from the neutral zone
• Price action is holding above the 20-period SMA following the November drop
• The 150-mark continues to serve as psychological support

If the 148.60 low holds firm, the next resistance is at 153.30, aligning with the lower boundary of the long-term trendline connecting consecutive lows from January 2023 to 2024. Longer-term resistance levels include 157 and 160, reflecting significant Yen weakness and potential BOJ intervention risks.

Silver Forecast: 3Day Time Frame – Log Scale

Source: Tradingview

Silver is in rebound mode, trading above the $29.80 support, which aligns with the trendline connecting consecutive higher lows over the past year. Resistance remains strong at $31.50.
Key technical indicators signal that the primary uptrend is intact:

• Silver continues to respect the lower channel boundary and May-November support levels
• The 3-day RSI is rebounding from the neutral zone

While gold has broken below the lower boundary of its primary uptrend following the US presidential election, silver remains resilient. Critical support levels are intact until convincingly breached.

Upside potential: Above $31.50, resistance levels to watch include $32.50, $35, $37, and $40

Downside Potential: Below $29.60, support levels lie at $27.80, $26.80, and $26.00

— Written by Razan Hilal, CMT – on X: @Rh_waves and Forex.com Youtube Channel

• EUR/USD fluctuates above 1.0550 after posting strong gains on Thursday.
• Investors await November Nonfarm Payrolls data from the US.
• Near-term technical outlook remains bullish, with next resistance aligning at 1.0600.

EUR/USD gathered bullish momentum and gained more than 0.7% on Thursday. Before testing 1.0600, however, the pair went into a consolidation phase and was last seen fluctuating at around 1.0570.

The US Dollar (USD) came under bearish pressure and helped EUR/USD push higher on Thursday after the US Department of Labor reported that the number of first-time applications for unemployment benefits rose to 224,000 in the week ending November 30 from 215,000 in the previous week.

Later in the day, November labor market data from the US will be scrutinized by investors. Following the 12,000 increase recorded in October, because of hurricanes and strikes, Nonfarm Payrolls (NFP) are forecast to rise by 200,000 in November.

According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability of a 25 basis points (bps) Federal Reserve (Fed) rate cut in December. A disappointing NFP print of 150,000 or lower could confirm a rate reduction and further weigh on the USD. On the flip side, a reading above 200,000 could cause markets to refrain from pricing in a December cut and trigger a leg lower in EUR/USD.

Later in the American session, several Fed policymakers will be delivering speeches. Since the Fed’s blackout period will start on Saturday, these comments could also drive the USD’s valuation heading into the weekend.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart retreated toward 60 early Friday, suggesting that the bullish bias remains intact, while EUR/USD stages a technical correction. On the upside, 1.0600 (Fibonacci 38.2% retracement of the latest downtrend) aligns as immediate resistance before 1.0650-1.0660 (200-period Simple Moving Average (SMA), Fibonacci 50% retracement) and 1.0730 (Fibonacci 61.8% retracement).

Looking south, first support could be spotted at 1.0520-1.0530 (100-period SMA, 50-period SMA, 20-period SMA, Fibonacci 23.6% retracement) ahead of 1.0500 (psychological level, static level) and 1.0440 (static level).