Created on January 14, 2025

• In my daily analysis of major currency pairs, the GBP/USD pair has caught my attention as we fell yet again during the Monday session.
• In fact, we slammed into the crucial 1.21 level, an area that was a major swing low previously, and therefore could be an area of interest.
• After all, a certain amount of “market memory” should be found here, and so far, the reaction has been rather strong.

Technical Analysis

The technical analysis for this GBP/USD pair is obviously horrible, but I think you’ve got a situation where you have to look at this through the prism of whether or not we are oversold at the moment. I think that’s probably the case, and therefore this bounce will make a certain amount of sense, however, I do not like the idea of “fishing for a bottom” here, despite the fact that most technical analyst would suggest this is a real possibility.

This is mainly due to the fact that the market is driven by questions about the British ability to get a reasonable budget past, and of course the whole idea that the Federal Reserve is light years away from doing anything remotely close to loosening monetary policy. After all, traders had initially thought that the Federal Reserve is going to cut multiple times in 2025, but the reality is that they will not be able to, and therefore I think you’ve got to look at this as a market that is pricing that in. However, we had gotten to far to the downside and I think it’s only a matter of time before we get a bit of a bounce. That bounce should end up being thought of as a “buying opportunity for US dollars.” The 1.2350 level is an area that I would love to start shorting from, but we will have to wait and see if we can even get that far to the upside.

The alternative is that we break down below the 1.21 level and then go looking to the 1.20 level after that. The 1.20 level is obviously a large, round, psychologically significant figure, and I do think it’s an area that we will eventually try to get to. That being said, over the last 4 sessions, we have dropped roughly 400 pips, and a bounce would make a certain amount of sense. Look for exhaustion to take advantage of.

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The EURUSD price couldn’t manage to hold for long time below 1.0220$, to trade positively and attempts to recover, noticing that the EMA50 forms negative pressure that prevents the price from achieving more rise, while stochastic loses its positive momentum clearly.

Therefore, these factors encourage us to suggest the return to decline in the upcoming sessions, waiting to confirm breaking 1.0220$ to open the way to head towards 1.0100$ as a next main target, noting that breaching 1.0325$ will stop the bearish wave and lead the price to start bullish correction on the intraday basis.

The expected trading range for today is between 1.0165$ support and 1.0320$ resistance

Trend forecast: Bearish

The EURUSD price fluctuates around 1.0265$ level, noticing that stochastic reaches the overbought areas, waiting to motivate the price to decline again, to keep the bearish trend suggested for today unless breaching 1.0325$ and holding above it, noting that our targets begin by breaking 1.0220$ to open the way to head towards 1.0100$ as a next negative station.

The expected trading range for today is between 1.0165$ support and 1.0320$ resistance

Trend forecast: Bearish

Created on January 14, 2025

• During my daily analysis of the major currency pairs, the first thing that I look to is the EUR/USD pair, as we have plunged below the 1.02 level during the trading session.
• That being said, I do think that a bounce is very likely, just due to the fact that we are oversold.
• However, I do not expect this to be a situation where you can just simply short the market and forget about it, because I believe that the volatility will probably only pick up, and therefore it makes the ability to be nimble crucial when it comes to this currency pair.

Technical Analysis

The technical analysis for this EUR/USD pair is extraordinarily dour, but the word “oversold” cannot be ignored. Ultimately, I think that the euro continues to fall in probably goes looking to the parity level given enough time, but it’s a bit difficult to jump into this market and start shorting heavily. Any bounce at this point in time would look very much like a selling opportunity at the first signs of exhaustion. This is a market that I have no interest in buying, and with that being the case I think you have to look at this as a scenario where we are looking at the 1.03 level as a potential ceiling, and then after that the 1.0450 level. Either one of those areas could be excellent shorting opportunities if we show signs of exhaustion.

On the other hand, if we simply fall from here, then I think it’s probably going to be a move to the parity level rather quickly. The parity level obviously will attract a lot of attention, but at the end of the day we had been there before, and therefore I think you’ve got a situation where a lot of people will simply take profit in that area as well. I have no scenario in which I’m willing to buy the euro at this point, at least not with the 10 year yield in America being as high as it is.

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• Risk appetite increased after China announced more stimulus measures.

• All eyes are now on US inflation figures.

• The pound remained fragile due to the recent bond market rout.

The GBP/USD price analysis shows some relief for the pound as market participants await crucial US inflation data. Nevertheless, the long-term outlook remains clouded as traders worry about UK finances amid turmoil in the bond market.

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The dollar eased slightly at the start of a new week. Risk appetite increased after China announced more measures to support its weak economy and the yuan. However, dollar bulls remain strong after the recent upbeat jobs report. Market participants expect the Fed to lower borrowing costs by 30-bps this year. This is a drop from the 50-bps expected at the start of the year. 

All eyes are now on US inflation figures, which will continue shaping the outlook for rate cuts. Economists expect consumer inflation to increase by 0.3%, similar to the previous reading. At the same time, they expect the annual figure to hold at 2.6%. A bigger-than-expected figure will lower the likelihood of a Fed rate cut this year. On the other hand, a downbeat report might bring back bets for two rate cuts this year. However, before the CPI report, traders will focus on wholesale inflation.

Elsewhere, the pound remained fragile due to the recent bond market rout. Market participants worry that the yield rally will force the government to adjust fiscal policy, hurting the economy.

GBP/USD key events today

GBP/USD technical price analysis: Bears aim for a new low in the downtrend

On the technical side, the GBP/USD price is dropping after retesting the 1.2250 key level. Bears have maintained a solid decline since the price broke below the 1.2400 support level. However, the downtrend paused at the 1.2102 level. Nevertheless, the bearish bias remains strong since the price still trades below the 30-SMA with the RSI in bearish territory. 

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Furthermore, if bears are ready to resume the downtrend, the price will soon break below the 1.2102 level to make a lower low. However, if the level holds firm, GBP/USD will make a double bottom, which could lead to a bullish reversal. The trend will only change when the price breaks above the SMA and the RSI above 50.

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Created on January 14, 2025

My previous GBP/USD signal on 6^th January was not triggered as there was no bearish price action when the two nearest resistance levels were first reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be entered prior to 5pm London time today.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2188 or $1.2166 or $1.2096.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2245 or $1.2270 or $1.2324.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

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 last week that the price was likely to respect the new support level at $1.2435 as the day’s pivotal point.

This was a good call as the price did rise fairly strongly once it broke above that level, and it reached $1.2500 (and quite far beyond) just as I forecasted.

The technical and fundamental/sentimental pictures have become more bearish over the past week, although that may have changed over the last day or so.

Until yesterday, the price fell quite strongly, within the bearish price channel represented by the linear regression analysis shows within the price chart below. The price reached a new 1-year low below $1.2100, partly on US Dollar strength (the US Dollar index was making a new 2-year high at the time), and partly on bets against the British Pound which have emerged in the markets as the new British government’s fiscal projections are regarded with some incredulity by the capital markets, and the government plunges rapidly to very unpopular ratings in opinion polls.

Despite this bearish picture, we see a rebound from yesterday, partly due to the news that the incoming Trump administration may be prepared to implement tariffs on US important gradually rather than all at once, which weakened the Dollar a bit.

The price has made a weak bullish breakout beyond the top of the descending price channel and now faces what looks likely to be a very pivotal resistance zone centred on $1.2250. If the price can get established above $1.2265 today, it will probably rise to $1.2324. However, so far we are seeing a bearish double top at $1.2265, so the price might remain below this level.

There is nothing of high importance due today concerning the GBP. Regarding the USD, there will be a release of PPI data today at 1:30pm London time.

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• USD/JPY hovers at the mid-range of the 157.00-158.00, set to finish in the red.
• Uptrend’s extension lies above 158.00 and 158.88, but BoJ intervention fears loom.
• A drop below the Tenkan-sen, opens the door towards 157.00.

The US Dollar losses some ground against the Japanese Yen on Monday amid a bank holiday in Japan as the USD/JPY shrugged off a rise in the US 10-year T-note yield. At the time of writing, the pair trades at 157.54, down by 0.11%.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart remains upward biased, but faces strong resistance at 158.00, amid fears that the Bank of Japan (BoJ) might intervene in the Forex markets. Momentum favors further upside, after the 50-day Simple Moving Average (SMA) at 154.58 crossed above the 200-day SMA, forming a ‘golden cross,’ implying that further upside is seen.

For a bullish continuation, the USD/JPY first ceiling level would be the 158.00 figure followed by the January 10 peak hit following US NFP data on Friday at 158.88. A breach of the latter will expose 159.00.

If USD/JPY tumbles below Tenkan-sen, the next support would be the January 6 low of 156.24, followed by the December 31 pivot low of 156.02.

USD/JPY Price Chart – Daily

• EUR/USD forecast remains bearish ahead of US CPI and Chinese GDP data
• Market Sentiment: Strengthening bond yields keeps EUR/USD, stocks under bearish pressure
• Economic Concerns: Weak Eurozone and Chinese growth add to Euro weakness

The EUR/USD has been struggling to find its footing, slipping to a new multi-year low today of just below the 1.0200 handle. The pair remains on a downward trajectory, now eyeing a potential fourth consecutive monthly decline. The bearish momentum has been fuelled by a surging US dollar, which has been supported on the back of stronger labour market data and expectations inflationary pressures will return under Trump. Combined with weak economic data from the Eurozone and China, this is all helping to keep the EUR/USD forecast and trend bearish.

EUR/USD forecast: How high will the dollar rise?

The greenback continues to dominate, supported by rising US bond yields and robust economic data. Investors have been repricing US interest rates higher, driven by persistent inflation concerns and unexpectedly strong labour market data. December’s non-farm payrolls report showed remarkable resilience, with job gains significantly outpacing expectations. While revisions shaved 8,000 jobs off previous months’ totals, the unemployment rate dipped to 4.1% from 4.2%, reinforcing the case for a prolonged pause in Federal Reserve policy shifts. Wage growth, although steady, underscores a resilient labour market, adding to the dollar’s appeal.

As a result, US bond yields have climbed further, with the benchmark 10-year yield nearing its October highs of 5.02%. This upward trajectory in yields continues to attract capital into the US dollar, keeping the EUR/USD forecast under bearish pressure.

Rising yields also hurting risk appetite

Of course, it is not just the euro that the dollar is rising against. Rising bond yields and diminishing hopes for further US rate cuts have given the Dollar Index a solid boost, pushing it higher for the seventh straight week and setting it up for a fourth consecutive monthly gain. On Friday, US 30-year bond yields hit 5%, inching closer to October’s peak of 5.178%, while the 10-year yields aren’t far behind, hovering near 4.80%.

It’s not just the US seeing this trend. In Europe, bond yields are climbing steadily, with German, French, Spanish, and Italian yields all extending their upward momentum. Over in the UK, the 10-year yield has surged past last year’s high of 4.755%, touching levels not seen since the 2008 financial crisis at nearly 5%. Even Japan has joined the mix, with its 10-year yields hitting 1.20%, their highest level since May 2011, although still relatively modest.

The takeaway? Bond yields are rising across the board, fuelled by resilient US economic data and persistent global inflation—except for China. With higher yields offering attractive returns, investors may hesitate to buy overbought growth stocks and government debt is proving a tempting alternative. This is an additional bearish factor for risk-sensitive currencies like the euro.

US CPI and Chinese GDP among this week’s highlights

All eyes will be on the US Consumer Price Index (CPI) release this Wednesday. Any indication of stubborn inflation could dash any remaining hopes of a Fed rate cut in the first half of the year, further bolstering the dollar. Conversely, a surprisingly weak CPI print could offer the Euro some breathing room, although a significant shift in market sentiment seems unlikely without a major downside surprise.

Later in the week, Friday’s Chinese GDP release, along with retail sales and industrial production data, will also be in the spotlight. The Chinese economy’s sluggish performance has already impacted global markets, with weaker growth dampening demand for European exports. Any further signs of economic slowdown in China could exacerbate concerns about the Eurozone’s growth prospects, amplifying the bearish EUR/USD forecast.

Where is EUR/USD headed?

Source: TradingView.com

The near-term outlook for EUR/USD remains tilted to the downside, with the pair likely to test and possibly break below the parity (1.000) level if data this week favours the dollar, or we see further rising in US yields. Persistent geopolitical tensions and weak economic performance in the Eurozone only add to the challenges for the Euro. Traders should stay cautious and watch for significant shifts in market sentiment, particularly around Wednesday’s CPI data. While the dollar’s bullish momentum shows no immediate signs of slowing, a potential inflection point could arise if inflation surprises to the downside or Chinese data beats expectations, offering a glimmer of hope for the Euro.

In terms of resistance levels to watch, 1.0300-1.0340 now marks a key resistance zone, having previously served as support. The bearish trend line comes in just above this zone, too. While below these levels, the path of least resistance on the EUR/USD is unambiguously bearish.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• EUR/USD forecast remains bearish ahead of US CPI and Chinese GDP data
• Market Sentiment: Strengthening bond yields keeps EUR/USD, stocks under bearish pressure
• Economic Concerns: Weak Eurozone and Chinese growth add to Euro weakness

The EUR/USD has been struggling to find its footing, slipping to a new multi-year low today of just below the 1.0200 handle. The pair remains on a downward trajectory, now eyeing a potential fourth consecutive monthly decline. The bearish momentum has been fuelled by a surging US dollar, which has been supported on the back of stronger labour market data and expectations inflationary pressures will return under Trump. Combined with weak economic data from the Eurozone and China, this is all helping to keep the EUR/USD forecast and trend bearish.

EUR/USD forecast: How high will the dollar rise?

The greenback continues to dominate, supported by rising US bond yields and robust economic data. Investors have been repricing US interest rates higher, driven by persistent inflation concerns and unexpectedly strong labour market data. December’s non-farm payrolls report showed remarkable resilience, with job gains significantly outpacing expectations. While revisions shaved 8,000 jobs off previous months’ totals, the unemployment rate dipped to 4.1% from 4.2%, reinforcing the case for a prolonged pause in Federal Reserve policy shifts. Wage growth, although steady, underscores a resilient labour market, adding to the dollar’s appeal.

As a result, US bond yields have climbed further, with the benchmark 10-year yield nearing its October highs of 5.02%. This upward trajectory in yields continues to attract capital into the US dollar, keeping the EUR/USD forecast under bearish pressure.

Rising yields also hurting risk appetite

Of course, it is not just the euro that the dollar is rising against. Rising bond yields and diminishing hopes for further US rate cuts have given the Dollar Index a solid boost, pushing it higher for the seventh straight week and setting it up for a fourth consecutive monthly gain. On Friday, US 30-year bond yields hit 5%, inching closer to October’s peak of 5.178%, while the 10-year yields aren’t far behind, hovering near 4.80%.

It’s not just the US seeing this trend. In Europe, bond yields are climbing steadily, with German, French, Spanish, and Italian yields all extending their upward momentum. Over in the UK, the 10-year yield has surged past last year’s high of 4.755%, touching levels not seen since the 2008 financial crisis at nearly 5%. Even Japan has joined the mix, with its 10-year yields hitting 1.20%, their highest level since May 2011, although still relatively modest.

The takeaway? Bond yields are rising across the board, fuelled by resilient US economic data and persistent global inflation—except for China. With higher yields offering attractive returns, investors may hesitate to buy overbought growth stocks and government debt is proving a tempting alternative. This is an additional bearish factor for risk-sensitive currencies like the euro.

US CPI and Chinese GDP among this week’s highlights

All eyes will be on the US Consumer Price Index (CPI) release this Wednesday. Any indication of stubborn inflation could dash any remaining hopes of a Fed rate cut in the first half of the year, further bolstering the dollar. Conversely, a surprisingly weak CPI print could offer the Euro some breathing room, although a significant shift in market sentiment seems unlikely without a major downside surprise.

Later in the week, Friday’s Chinese GDP release, along with retail sales and industrial production data, will also be in the spotlight. The Chinese economy’s sluggish performance has already impacted global markets, with weaker growth dampening demand for European exports. Any further signs of economic slowdown in China could exacerbate concerns about the Eurozone’s growth prospects, amplifying the bearish EUR/USD forecast.

Where is EUR/USD headed?

Source: TradingView.com

The near-term outlook for EUR/USD remains tilted to the downside, with the pair likely to test and possibly break below the parity (1.000) level if data this week favours the dollar, or we see further rising in US yields. Persistent geopolitical tensions and weak economic performance in the Eurozone only add to the challenges for the Euro. Traders should stay cautious and watch for significant shifts in market sentiment, particularly around Wednesday’s CPI data. While the dollar’s bullish momentum shows no immediate signs of slowing, a potential inflection point could arise if inflation surprises to the downside or Chinese data beats expectations, offering a glimmer of hope for the Euro.

In terms of resistance levels to watch, 1.0300-1.0340 now marks a key resistance zone, having previously served as support. The bearish trend line comes in just above this zone, too. While below these levels, the path of least resistance on the EUR/USD is unambiguously bearish.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• Taking a look at the dollar against the Japanese yen and you can see it was an extraordinarily volatile session during the trading session on Friday after the jobs report came out stronger than anticipated, which naturally had people running to the Japanese yen.
• This was a very difficult trading session for anybody who was involved and therefore if you find yourself on the wrong side of the trade, don’t be too upset about it.

I think at this point, you have to look to the longer term outlook for both of these central banks. And the reality is, even though Japan’s getting a little better, the U.S. economy is still very strong. And as a result, you should continue to see the U.S. dollar strengthen against most currencies, including the Japanese yen, but I also recognize that with the sell-off that we had seen in the stock market, it does make a certain amount of sense that people might’ve been looking for the safety of the Japanese yen, specifically Japanese investors involved in America.

Long Term

But in the longer term, you do get paid to hang on to this USD/JPY pair. And I think that’s something that a lot of people ignore, at least in the retail space. If we can break above the 158 yen level, then I think you’ve got a situation where we could make another attempt to break out completely, but right now it looks like we’re going to bounce around a little bit and just panic.

That’s not that unusual for this pair, but it’s difficult to make an argument for anything other than an uptrend right now. So I wouldn’t read too much into this other than there might’ve been some liquidity issues. The Bank of Japan might’ve been involved. We just don’t know, and of course, there was a lot of repositioning after that non-farm payroll announcement. I remain bullish, but I recognize this is going to be a headache.

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