• Business activity in the US services sector improved more than expected.

• The US economy added 256,000 jobs in December.

• US unemployment dropped to 4.1%, below estimates of 4.2%.

The GBP/USD weekly forecast suggests further weakness as the US dollar picks momentum after robust jobs data. 

Ups and downs of GBP/USD 

The GBP/USD pair had a bearish week as the dollar rallied amid upbeat US economic data. Figures revealed that business activity in the services sector improved more than expected. Meanwhile, employment numbers were mostly better than expected.

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Notably, the nonfarm payrolls report on Friday showed an unexpected surge in job growth and a drop in the unemployment rate. The US economy added 256,000 jobs in December, compared to forecasts of 164,000. Meanwhile, unemployment dropped to 4.1%, below estimates of 4.2%. Consequently, Fed rate cut bets plunged, boosting the dollar.

Next week’s key events for GBP/USD

Next week, market participants will focus on inflation and retail sales data from the US and the UK. At the same time, the UK will release figures on manufacturing production and GDP. The US wholesale and consumer inflation numbers will shape the outlook for future Fed rate cuts. Recent reports have shown that inflation has paused its decline to the 2% target. Another upbeat report will lower expectations for rate cuts, boosting the greenback. 

Similarly, UK inflation and retail sales will guide the outlook for Bank of England rate cuts. Upbeat reports will lower bets for rate cuts, while downbeat numbers will further hurt the pound.

GBP/USD weekly technical forecast: Bears eye new lows below 1.2250

On the technical side, the GBP/USD price has punctured the 1.2250 support level to make a new swing low in the downtrend. The price trades well below the 22-SMA, showing bears are holding the reigns. Meanwhile, the RSI has entered the oversold region, suggesting solid bearish momentum.

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GBP/USD has maintained a solid downtrend since the price broke below the 22-SMA. In all this time, the RSI has stayed in bearish territory but has failed to dip into the oversold region. This shows that bears still have more room to push the prices lower. Therefore, the break below the 1.2250 support will allow the price to reach lower support levels. 

Moreover, the trend will only reverse if the RSI shows fading momentum and the price breaks above the 22-SMA.

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• The Pound Sterling returns to the red against the US Dollar, hitting 14-month lows.
• GBP/USD licks wounds heading into the UK/US inflation showdown.
• Pound Sterling remains vulnerable below the key 21-day SMA at 1.2530.

The Pound Sterling (GBP) resumed its bearish momentum against the US Dollar (USD), pushing GBP/USD to the lowest level in 14 months below 1.2200.

Pound Sterling kept falling

Nothing could stop Pound Sterling sellers as the GBP/USD pair faced a double whammy in the first full week of 2025. The week began on an upbeat note as risk appetite returned on China’s stimulus optimism and strong Caixin Services PMI data. The People’s Bank of China (PBOC) pledged over the weekend that it will step up financial support for technology innovation and consumption stimulation as part of a continued effort to boost economic growth, per Bloomberg. 

Positive risk sentiment weighed on the safe-haven USD, while helping the higher-yielding British Pound extend its previous week’s late rebound. However, the tide turned against the pair as inflation fears resurfaced on increased concerns over the potential impact of US President-elect Donald Trump’s immigration and trade policies, reviving the safe-haven demand for the US Dollar.  

Expectations of fewer interest rate cuts by the US Federal Reserve (Fed) this year, fanned by encouraging US Job Openings and Labor Turnover Survey and ISM Manufacturing and Services PMI data, drove US Treasury bond yields higher across the curve, adding to the upside in the Greenback.

The decline in the GBP/USD pair gathered traction midweek after the Pound Sterling came under intense pressure due to a sharp sell-off in the British government bond market, fuelled by investors’ anxiety about UK assets and the economic outlook.

The bond market rout extended on Thursday, with the yield on benchmark 10-year UK Gilts rising by as much as 0.12 percentage points to 4.921%, the highest since 2008. This smashed the pair to its lowest level since November 2023 at 1.2239 before it recovered some ground to near 1.2300.

GBP/USD licked its wound near multi-month troughs heading into Friday’s US Nonfarm Payrolls (NFP) data release. Investors remained wary of the sell-off in the global bond market and growing Chinese economic worries.

In the American session on Friday, the USD gathered strength against its rivals after the December jobs report showed that NFP rose by 256,000, beating the market expectation of 160,000 by a wide margin. Additionally, the Unemployment Rate edged lower to 4.1%, while the Labor Force Participation Rate remained unchanged at 62.5%. Pressured by the USD rally, GBP/USD declined sharply with the immediate reaction and declined below 1.2200.

Inflation data remain the central focus

After a week dominated by US economic events, attention also turns to the UK macro data amid a quiet start to a busy week.

The early part of the week lacks any top-tier UK data releases but the Producer Price Index (PPI) data from the US will grab some eyeballs on Tuesday.

The high-impact Consumer Price Index (CPI) inflation data from both sides of the Atlantic will stand out on Wednesday.

The UK monthly Gross Domestic Product (GDP) report and Industrial Production will be published on Thursday ahead of the US Retail Sales and Jobless Claims data.

Friday will feature the Chinese fourth-quarter GDP and December activity data, which could significantly impact risk sentiment and higher-yielding assets such as the British Pound.

The UK Retail Sales and the mid-tier US housing data will be published on the same day.

Apart from the data publication and speeches from Fed policymakers, Trump’s policy speculations and geopolitical developments will also emerge as potential market drivers.

GBP/USD: Technical Outlook

GBP/USD confirmed a downside break from the six-week-long falling wedge formation after closing Thursday below the lower boundary of the wedge at 1.2330.

The 14-day Relative Strength Index (RSI) languishes in negative territory near 30, indicating more scope for the downside.

Further, the 50-day Simple Moving Average (SMA) and the 200-day SMA Death Cross, confirmed last month, remains in play and acts as a headwind to the pair.

If sellers flex their muscles and keep the pair below the previous 14-month low of 1.2239, the next downside target is November 10 2023 low of 1.2187.

Further south, the 1.2100 demand area could offer some respite to buyers. If that support caves in, the 1.2050 psychological level will be tested.

Conversely, any recovery will need acceptance above 1.2511 to sustain. That level is the confluence of the 21-day SMA and the upper boundary of the wedge.

The pair will then challenge the 50-day SMA at 1.2639 toward the 200-day SMA at 1.2803.

Created on January 10, 2025

• US dollar finds buyers on dips against the Japanese yen.
• The US dollar plunged early during the trading session on Thursday but has turned around to show signs of life as it looks like the 158 yen level is going to continue to attract some buying pressure.
• In general, this is a market that has been very bullish for a while, and should continue to be, mainly due to the interest rate differential between the two economies with the United States seeing interest rates rise and Japan still being almost nothing.

So, it makes sense as you will see traders hang on and get paid at the end of every day just to simply hold on to this USD/JPY pair. Furthermore, with the jobs number coming out on Friday, that could add more fuel to the fire, mainly due to the idea that perhaps the job market in America is still rather strong and if that’s the case then inflation is going nowhere and then by extension the federal reserve isn’t going to be cutting anytime soon. With this being said I think you’ve got a situation where people will continue to see a lot of noisy behavior but even if we were to pull back on Friday it would take something pretty drastic for me to believe that the uptrend is over. I think it would just be a simple hiccup along the way, and you could pick up cheap US dollars in that environment.

The 158 Yen Level

The 158 yen level has been important, but I think there’s also the 156 yen level as a floor and then again, the 155 yen level. Both of these could be areas where buyers come in. If the US dollar breaks out and clears the 159 yen level than 160 yen followed by 162 yen will be targeted. There really isn’t much the Bank of Japan can do other than try to bluff the market, which only works so long. So, I remain bullish of this market.

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• GBP/USD fluctuates near 1.2300 in the European morning on Friday.
• The 10-year UK gilt yield stays above 4.8%.
• December labor market data from the US will be watched closely by market participants.

After dipping to its weakest level since November 2023 below 1.2250 in the European session on Thursday, GBP/USD erased a portion of its losses in the second half of the day. The pair trades in a narrow channel at around 1.2300 on Friday as investors keep a close eye on the action in the UK gilt markets while waiting for December labor market data from the US.

The selloff in the UK gilts continued early Thursday, causing Pound Sterling to weaken against its major rivals. In the European morning on Friday, the yield on the 10-year UK gilt stays in positive territory at around 4.85%. Another leg higher in this yield could trigger a new bout of selloff in GBP. On the other hand, a downward correction could help GBP/USD hold its ground.

The US Bureau of Labor Statistics will publish the December employment data in the early American session on Friday. The market expectation is for Nonfarm Payrolls to rise by 160,000 following the 227,000 increase reported in November. In the same period, the Unemployment Rate is seen holding steady at 4.2%.

A positive surprise in NFP, with a reading above 200,000, could help the USD gather strength and force GBP/USD to stay on the back foot heading into the weekend. On the flip side, the USD could come under pressure if the NFP arrives below 150,000. In this scenario, GBP/USD could stage a rebound later in the American session. Investors, however, could refrain from betting on a steady recovery until the UK gilt market settles down.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 40 and GBP/USD remains in the lower half of the one-month-old descending regression channel, highlighting the bearish bias.

On the downside, first support is located at 1.2250 (lower limit of the descending channel) before 1.2200 (static level, round level) and 1.2140 (static level from November 2023).  Looking north, first resistance could be spotted at 1.2360 (mid-point of the descending channel) ahead of 1.2400 (round level, static level) and 1.2440 (50-period Simple Moving Average).

• EUR/USD trades in a tight range at around 1.0300 in the European morning.
• The cautious market stance doesn’t allow the pair to stage a rebound.
• December employment data from the US could trigger the next big action in the pair.

EUR/USD holds steady near 1.0300 in the early European session on Friday after closing in negative territory for the third consecutive day on Thursday. The pair remains technically bearish in the near term as focus shifts to labor market data from the US.

With US stock markets remaining closed and bond markets closing early in observance of a national day of mourning to honor the death of former President Jimmy Carter, the market action turned subdued on Thursday. Early Friday, US stock index futures lose between 0.1% and 0.4%, reflecting a cautious market stance, which makes it difficult for EUR/USD to stage a rebound.

Later in the day, the US Bureau of Labor Statistics will publish the December employment report. Markets expect Nonfarm Payrolls to rise by 160,000 following November’s 227,000 increase. The Unemployment Rate is forecast to remain unchanged at 4.2%.

An NFP reading above 200,000 could boost the USD heading into the weekend and force EUR/USD to stretch lower. On the other hand, a disappointing print below 150,000 could have the opposite impact on the pair’s action. In case the headline NFP arrives near the market consensus, the change in the Unemployment Rate could drive the USD’s valuation, with an unexpected rise hurting the currency and vice versa.

EUR/USD Technical Analysis

The Relative Strength Index moves sideways below 50 and EUR/USD remains below the 20 and the 50-period Simple Moving Averages (SMA) on the 4-hour chart, highlighting buyers’ hesitancy.

In case EUR/USD confirms 1.0300 (static level, round level) as resistance, 1.0240 (static level, end point of the latest downtrend) could be seen as next support before 1.0200 (static level, round level). If the pair manages to stabilize above 1.0300, 1.0325 (Fibonacci 23.6% retracement of the latest downtrend, 20-period SMA) and 1.0375 (100-period SMA, Fibonacci 38.2% retracement) could be seen as next resistance levels.

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Created on January 09, 2025

• As predicted, with the purchase of the US dollar against the Japanese yen from every downward level, the currency pair is moving steadily near the psychological resistance of 160.00, above which there is increasing talk of imminent Japanese intervention in the forex markets to prevent further collapse of the Japanese yen.
• The bulls had driven the dollar/yen pair towards the resistance level of 158.55, the highest level for the currency pair in more than five months.

Japan’s Plans to Prevent Further Collapse of the Yen

In this regard, the Japanese Finance Minister has recently reiterated his warning against one-sided speculative moves in the forex market, noting the government’s readiness to intervene if excessive volatility persists. According to trades, the Japanese yen has come under pressure amid growing uncertainty about the timing of interest rate hikes by the Bank of Japan. Bank of Japan Governor Kazuo Ueda has confirmed that any policy adjustments will depend on economic, price, and financial conditions, emphasizing the importance of sustainable wage growth. Also, the Bank of Japan has highlighted the need for caution in light of domestic and global uncertainties.

Trading Tips:

The dollar/yen will remain on its upward trajectory until Japanese intervention, considering that Trump is not very fond of market intervention.

Has the US Dollar Reached its Peak Gains?

According to a new analysis from Bank of America, the US dollar is “perfectly priced.” If true, this means the current strength trend is nearing its limits, which could ease pressure on global currencies. Athanasios Vamvakidis, an analyst at Bank of America, says, “Much of the US dollar’s price is in this context. The US dollar has reached a historically extreme valuation.”

Looking at the Bank for International Settlements’ real effective exchange rate index, the US dollar is the strongest it has been in 30 years. Estimates from the International Monetary Fund’s real effective exchange rate equilibrium model lead foreign exchange analysts at Bank of America to a similar conclusion. The analysts there stated, “The US dollar appears to be overvalued by 18.5%, the highest in the past 30 years, except when it was overvalued by 19% during the energy shocks of the war in Ukraine in 2022.”

According to forex market trades, the US dollar was the best-performing currency in 2024, topping the leaderboard after rising from October amid signs of a rebound in US economic growth and inflationary pressures. These expectations only accumulated following Donald Trump’s victory in the November elections. This has prompted the Federal Reserve to warn that it is likely to significantly slow the pace of US interest rate cuts. In fact, after strong US data releases on Tuesday, the market does not expect another cut in the first half of the year.

USD/JPY Technical Analysis and Expectations Today:

Dear reader, as previously predicted, the overall trend of the USD/JPY pair will remain bullish. Technically, the bulls may quickly reach the psychological resistance of 160.00 as long as the US dollar is strong and as long as there is no Japanese intervention in the currency markets. Stronger-than-expected US jobs numbers may give the bulls that opportunity. Meanwhile, the currency pair is on track for a new weekly bullish close and may remain so until Trump’s inauguration this month. Volatility indicators, the Relative Strength Index, and the MACD are on their way to overbought levels. To break the upward trend of the USD/JPY pair, bears must first move towards the support level of 155.50. finally, we still prefer buying the USD/JPY from any downward level.

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January 9, 2025 – Written by David Woodsmith

STORY LINK Pound Sterling Slumps vs euro and Dollar on Truss 2.0 Sell-off

The Pound to Euro (GBP/EUR) and Pound to Dollar (GBP/USD) exchange rates posted sharp losses on Wednesday and there was further selling pressure in Asia on Thursday.

The Pound to Dollar rate dipped sharply to 13-month lows at 1.2240 before a recovery to near 1.2300.

MUFG commented; “Overall, the unfavourable market developments have increased downside risks for the pound at the start of this year and increase the likelihood of cable falling back below 1.2000.”

ING sees vulnerability and added; “GBP/USD downside does look vulnerable to positioning and the incoming Trump agenda. 1.2250 is very possible.”

It did, however, add; “1.20 looks a bit of a stretch.”

The Pound to Euro (GBP/EUR) exchange rate also dipped sharply to 2-month lows at 1.1900 before a recovery to 1.1925.

ING expects GBP/EUR will find support on any further sharp dips to 1.1765.

The UK bond market has come under further selling pressure over the past 24 hours. The 10-year yield increased to near 4.90%, the highest level since October 2008 while the 30-year yield increased to the highest level since August 1998 at above 5.40%.

Markets remain very sensitive to any sell-off in the gilt market, especially after the 2022 Truss fiscal event.

ING commented; “Our best understanding of yesterday’s sterling sell-off is that the global bond market sell-off touched a raw nerve in the gilt market and that then the gilt spread widening prompted investors to cut back on overweight sterling positioning.”

The Pound has tended to draw support from hopes that the UK economy would be relatively insulated from the threat of increased tariffs by the incoming Trump Administration.

The Sterling sell-off has tended to puncture these hopes.

ING added; “In a way, today’s sterling sell-off can be seen as a mini-capitulation of the overriding theme of a Trump-inspired strong dollar in 2025.”

Higher yields can offer support to currencies, but this is not always the case, especially if there is a slide in confidence and stagflation fears.

MUFG commented; “Recent price action highlights though that higher yields are not always positive for a currency if they are driven by unease over the public finances and inflation in the UK.”

Higher bond yields will also put significant upward pressure on debt-interest payments while higher mortgage rates will dampen activity in the economy which hurts tax revenue.

In this context, there is the risk that the government will have to tighten fiscal policy which would further undermine growth conditions and have potential implications for monetary policy.

MUFG noted that Treasury sources have reportedly acknowledged that the government could be forced to act as soon as March in response to higher borrowing costs.

Kyle Chapman, FX markets analyst at Ballinger Group was more sanguine over the outlook; “The moves are related to an ongoing concern about UK borrowing levels but I don’t see enough of a reason for such a rapid market move.”

He added; “I think that we are going to see some recovery quite quickly once the market calms.”

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TAGS: Pound Sterling Forecasts

Created on January 09, 2025

• The US dollar gained against other major currencies after signals from the minutes of the latest Federal Reserve meeting hinted at the future pace of US interest rate cuts in the new year, along with anticipation of the reaction to Trump’s policies.
• As a result, the GBP/USD pair plummeted rapidly to the support level of 1.2320, near its 8-month low.
• In the same session yesterday, the pound dollar attempted to rebound upwards, but its gains did not exceed the resistance level of 1.2494.

Factors Pressuring the Pound

According to forex market trades and reliable trading platforms, selling pressure on the pound dollar increased as the stronger US dollar overshadowed high borrowing costs in the UK, which are nearing their 27-year high. In addition, concerns about US trade policies added to the pressure, as CNN reported that US President Donald Trump may declare a national economic emergency to justify imposing comprehensive tariffs on allies and adversaries.

Previously, Trump has rejected suggestions of more moderate tariffs and has insisted he will not scale back his trade policy.

On the British side, investors expect the Bank of England to cut interest rates by around 50 basis points this year, despite inflation remaining above its 2% target. Even as UK bond yields have risen, outpacing gains in US Treasury yields, the pound has struggled to find support against a stronger dollar, according to market trading.

Trading Tips:

The US dollar remains stronger and may remain so for a while, so be ready to sell the pound dollar from any upward level without risk.

UK Government Plans Weaken Sentiment Towards the Pound

Financial markets will be awaiting an important speech by the British government’s finance minister in the coming period, and as expected, it may focus on new cuts to public spending instead of tax increases. The minister plans to emphasize its financial rules in order to reassure investors and companies about its dealings with the British economy, in addition to that, it will confirm that the new British government will prioritize stability and will not consider any easing of budget guidelines. In general, Britain was among the most affected by the defeat in global bond markets due to investor concerns about public debt levels. As is known, the sudden rise in government bond yields threatens to absorb the small margin of 9.9 billion pounds ($ 12.2 billion) that Reeves left after announcing her first budget as Chancellor last October.

Technical Analysis for the GBP/USD pair today:

According to recent trades, the GBP/USD pair seems poised to resume its downward trend, as the pair finds resistance at a downward trendline that has connected its highest levels since mid-November of last year. According to the performance, the 100-day simple moving average is below the 200-day simple moving average, confirming that the stronger path is the downward trend or that selling is likely to gain more strength than a reversal. Also, the 100-day simple moving average coincides with the trendline to add more strength as a ceiling.

In this case, the GBP/USD price may decline to the downward targets specified by the Fibonacci correction tool. Meanwhile, the 38.2% level is located at 1.2416, then the 50% level is in line with its recent lows at 1.2370. Stronger selling pressure could drag the pair to the 61.8% level at 1.2323 or the 76.4% level at 1.2266. technically, the full extension is located at 1.2174. Meanwhile, the Stochastic indicator is trending lower to show that there is bearish pressure, and the oscillator has plenty of room to fall before reaching the oversold zone to signal exhaustion. Also, the RSI is trending lower without reaching the overbought zone, suggesting that sellers are keen to take over.

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Created on January 09, 2025

• The US dollar has rallied again during the trading session on Wednesday, as the Japanese yen has finally given away to the ¥158 level and the pressures being brought upon it.
• Because of this, the market is likely to continue to see a lot of upward momentum, but you should also keep in mind that Friday is a Non-Farm Payroll announcement, which obviously has a major influence on the bond market’s reaction to this.

After all, the interest rates in America are one of the biggest things pushing this market, as we have seen a massive amount of money flying into the US dollar as rates in America continue to climb quite drastically. With this, it’s worth noting that the market participants continue to look to America as one of the only places to put money to work, as the US dollar seems like an unstoppable force. Furthermore, it’s probably worth noting that we are in a major uptrend anyway.

Technical Analysis

The most obvious part of technical analysis worth paying attention to is the fact that the ¥158 level has finally been broken, which has been an area of major resistance previously. By breaking above that comment springboard’s this pair to higher levels from what I can see, but with the Non-Farm Payroll announcement coming out on Friday, it’s likely that we will continue to see a little bit of volatility. If those jobs numbers end up being higher than anticipated, we could see the US dollar really fly from here.

Even if we break down below the ¥158 level, it’s very likely that we could see the ¥157 level offer significant support. This is a market that has been very noisy as of late, but most certainly has an upward slant to it, and I think that continues to be the way you have to look at it, more of a grinding uptrend than anything else. In fact, I don’t have any interest in shorting this pair, at least not until we break down below the ¥154 level, something that isn’t going to happen anytime soon.

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