• GBP/USD trades at its highest level in nearly two weeks above 1.3350.
• The selling pressure surrounding the USD fuels the pair’s leg higher.
• The technical outlook points to a bullish tilt in the near term.

GBP/USD gathers bullish momentum in the European session and trades at its highest level in nearly two weeks above 1.3350. The technical outlook suggests that the pair has more room on the upside before turning technically overbought.

The broad-based US Dollar (USD) weakness fuels GBP/USD’s rally at the beginning of the week as markets react to Moody’s downgrade of the United States’ credit rating late Friday.

Moody’s announced that it downgraded the US’ credit rating to ‘AA1’ from ‘AAA’, citing concerns about the growing $36 trillion debt pile. Moody’s explained that the fiscal proposals under considerations were unlikely to lead to a sustained, multi-year reduction in deficits, and added that it forecasts the federal debt burden to rise to about 134% of Gross Domestic Product by 2035, compared with 98% in 2024, per Reuters.

The US economic calendar will not feature any high-impact data releases in the second half of the day. Hence, investors will pay close attention to comments from Federal Reserve (Fed) officials.

The University of Michigan’s preliminary Consumer Sentiment Survey for May showed that consumers’ one-year inflation expectation jumped to 7.3% from 6.5% in April. In case Fed officials hint that they could refrain from lowering the policy rate multiple times, citing heightened concerns about the inflation outlook, the USD could gather strength against its peers and make it difficult for GBP/USD to extend its rally.

Atlanta Fed President Raphael Bostic said last Friday that he expects the Fed to lower the policy rate once this year. According to the CME FedWatch Tool, markets are currently pricing in about a 70% chance of the Fed cutting the policy rate at least twice this year.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60, pointing to a buildup of bullish momentum. On the upside, 1.3380 (static level) aligns as immediate resistance before 1.3440 (upper limit of the latest uptrend) and 1.3500 (static level, round level).

Looking south, supports could be seen at 1.3300 (100-period Simple Moving Average (SMA), static level), 1.3270 (Fibonacci 23.6% retracement of the latest uptrend) and 1.3220 (200-period SMA).

• The USD/JPY forecast shows further dollar weakness.

• US consumer sentiment came in at 50.8 compared to expectations of 53.1.

• Trump’s tariff threats caused some uncertainty in the market.

The USD/JPY forecast shows further dollar weakness after a downgrade to the US government’s credit rating. At the same time, market participants were worried about progress on trade negotiations between the US and its trading partners. 

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The dollar fell on Friday after data revealed weak consumer sentiment. According to the report, consumer sentiment came in at 50.8 compared to expectations of 53.1. The unexpected drop revealed that consumers were still not confident in the economy. 

Moreover, the greenback started the week down against most of its peers, including the yen. This happened after Moody’s downgraded the US government’s credit rating, citing its growing debt size. This was another reason for traders to dump the dollar and buy the yen.

Furthermore, demand for the safe-haven yen increased after reports that Trump was threatening tariffs on countries that are not negotiating in good faith. The US has announced trade deals with the UK and China, which boosted sentiment. However, talks with India, Japan, and South Korea seem to have stalled. As a result, Trump’s tariff threats caused some uncertainty in the market. 

Meanwhile, BoJ policymakers are ready to keep hiking interest rates as long as the economy pushes past Trump’s tariff impacts. 

USD/JPY key events today

Market participants do not expect any key economic releases from the US and Japan.

USD/JPY technical forecast: Bears reach a pivotal support zone

On the technical side, the USD/JPY price has pulled back and is approaching its support trendline. The price trades below the 30-SMA, with the RSI under 50, indicating a bearish bias. At the same time, the price has reached the 0.618 Fib retracement level that might act as a support. 

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Therefore, USD/JPY might soon bounce higher. The price has maintained a shallow uptrend that chops through the SMA but respects the trendline. Consequently, the uptrend will continue if bulls return near the trendline support. Such an outcome would allow the price to break above the 146.02 resistance level and the 30-SMA. Bulls would likely break above the 148.51 resistance level to make a new high. 

On the other hand, a break below the trendline would signal a shift in sentiment. It would allow bears to retest the 142.55 support level.

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• EUR/USD trades in positive territory above 1.1200 on Monday.
• Fed policymakers will be delivering speeches later in the day.
• The pair could face strong resistance at 1.1270.

EUR/USD gains traction and trades in positive territory above 1.1200 to begin the new week. The pair could face a strong resistance level at 1.1270.

The selling pressure surrounding the US Dollar (USD) following Moody’s downgrade of the United States’ credit rating helps EUR/USD push higher in the European morning on Monday. The USD Index, which tracks the USD’s performance against a basket of six major currencies, was last seen losing 0.6% on the day below 100.50, pointing to a broad-based USD weakness.

Moody’s announced late Friday that it downgraded the US’ credit rating to ‘AA1’ from ‘AAA’, citing concerns about the growing $36 trillion debt pile. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s explained, per Reuters.

In the second half of the day, several Federal Reserve (Fed) policymakers will be delivering speeches.

Late last week, Atlanta Fed President Raphael Bostic said that he expects just one rate cuts this year amid uncertainty. In case Fed officials adopt a similar tone, the USD could stage a rebound and limit EUR/USD’s upside. According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability of the Fed cutting the policy rate at least twice this year.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60, reflecting a buildup of bullish momentum.

On the upside, 1.1270 (Fibonacci 38.2% retracement of the latest uptrend, 100-period Simple Moving Average (SMA), 200-period SMA) aligns as a key resistance level before 1.1300 (static level) and 1.1380 (Fibonacci 23.6% retracement).

Looking south, the first support level could be spotted at 1.1200 (static level, round level) ahead of 1.1170 (Fibonacci 50% retracement) and 1.1080 (Fibonacci 61.8% retracement).

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

May 18, 2025 – Written by Frank Davies

STORY LINK Euro to Dollar Forecast for Next Week: EUR to Extend 1.12 Consolidation

Nordea forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.20 by the end of 2026 and would not be surprised if this level was reached much earlier than this.

ING is far from bullish on the dollar, but expects EURUSD will be held to 1.13 at the end of this year.

The EUR/USD recovered strongly from initial lows near 1.1050 during the week, but there was a fresh retreat to 1.1150 as the dollar found fresh energy.

The dollar bounced strongly following the US-China deal to lower tariffs by 115% points for the next 90 days.

Fears over dollar selling abated and defensive Euro demand also faded.

There are still important underlying concerns surrounding the dollar outlook and whether there has been long-term damage to the outlook.

According to Deutsche Bank; “The fact that China retaliated strongly to US tariffs and made no publicly known concessions to effect the reduction, highlights that we are in very different times.”

It added; “A backtracking on tariffs does not mean the importance of underlying issues has changed, merely that the approach or timing of dealing with them may have. The fundamental overproduction-overconsumption imbalance between China and the US remains large, striking and unsustainable.”

The bank considers that this has important implications; “The significance of this conclusion cannot be over-estimated. We have been arguing over the last few months that the market is reducing its willingness to fund US twin deficits,” Saravelos writes. “We worry this is brewing a major problem for the dollar and potentially the US bond market too.”

Nordea maintains a bearish dollar stance; “We think the USD will weaken even more. It is facing a trifecta of headwinds: domestic economic slowdown, political uncertainty undermining global trust and upside growth potential in Europe beyond the short term uncertainties.”

It added; “Trump’s public challenges to the Fed’s independence could undermine trust and confidence that the Fed will do its job. If investors begin to doubt the Fed’s commitment or ability to control inflation, they are likely to demand a higher risk premium to hold US assets – adding further pressure on the dollar.”

According to Berenberg; “The extremely uncertain macroeconomic environment is causing companies to postpone recruitment and investment plans. This could drive the economy into stagnation.”

The bank, however, sees little scope for rate cuts; “we believe that the interest rate cuts currently being priced in are somewhat exaggerated.”

At this stage it has a longer-term target of 1.13 for EUR/USD.

It did, however, add; “should the Fed fail to with-stand the attacks from Trump and his supporters, this would further call into question the safe-haven status of the US dollar. In combination with the risk of high US government debt and potential refinancing problems, the US dollar could continue to fall significantly in value in this scenario and reach price levels above 1.20.”

According to SocGen, there has been long-term damage to confidence; “In this instance, we know the U.S. Administration wants a weaker dollar in order to make U.S. manufacturing more competitive. We also know, and will not be able to forget, that foreign ownership of U.S. assets is excessive.

It added; “The world’s investors have too many under-hedged U.S. dollar assets in their portfolios for safety, especially given an Administration that would like to see the dollar weaker.”

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May 16, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast: Buy the Pullbacks “Below 1.32” say UBS

The Pound to Dollar exchange rate (GBP/USD) failed to hold above 1.3300 on Friday and settled just below this level.

The dollar was resilient despite another soft US data release and increased stagflation fears.

UK data next week will be important for Pound direction.

According to UBS, there is the risk of near-term weakness; “We think renewed pullbacks below 1.32 (1.30-1.32 range) are possible due to the de-escalation of the global tariff situation.

It added; “We like to use such moves to build up some GBPUSD long positions amid long-term USD concerns.”

The University of Michigan consumer confidence index retreated further to 50.8 for May from 52.2 previously and below consensus forecasts of 53.1 with current conditions and expectations components both losing ground.

According to Surveys of Consumers Director Joanne Hsu; “Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture – consumers continue to express somber views about the economy.”

The 1-year inflation expectations also jumped again to 7.3% from 6.5% and the highest reading since April 1981.

This combination will increase US stagflation fears and hurt dollar sentiment.

At this stage, markets are still pricing in less than a 40% chance of a July rate cut.

MUFG commented; “We still see July as quite plausible for a cut but labour market conditions will be key. We maintain that damage has been done from trade policy uncertainty already and while yesterday’s comments highlighted further the Fed’s caution in a new world of potentially frequent supply-side shocks, labour market weakness is still set to unfold which will see the Fed’s caution ease. That remains one of a number of factors that we believe will weaken the dollar further this year.”

Scotiabank noted the run of relatively weak data. It added; “This development does not bode well for the broader USD and may set the stage for renewed medium-term weakness following the countertrend recovery we’ve observed over the past few weeks.”

George Saravelos, head of forex research at Deutsche Bank expects structural vulnerability will undermine the dollar; “The U.S. cannot close its very large current account deficit unless it closes its fiscal deficit too which the U.S. appears unwilling to do.”

Hopes for stronger UK ties with the EU are providing net Pound support.

Matthew Ryan, strategist at global financial services firm Ebury commented; “Market participants will be hoping for a ‘reset’ of sorts in the relationship between Britain and the common bloc in the hope that an accord can be reached that reverses some of the damage done to trade relations.”

He added; “Signs of closer alignment between the UK and EU should be bullish for the pound.”

UBS expects the UK outlook will be crucial; “The CPI print for April and forward-looking activity indicators, such as the flash PMIs for May, will be more important. Solid wage growth could keep inflation on the elevated side, with positive activity spillover effects keeping PMIs stable, despite tariff concerns.”

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The forex market remains sideways, but the key levels are incredibly appealing. In today’s forecast, I’ll share the levels to watch and scenarios to be aware of for next week.

Watch the video below for key insights on the DXY, EURUSD, GBPUSD, USDJPY, and USDCHF. Don’t forget to scroll down to save the annotated charts before trading next week.

US Dollar Index (DXY) Forecast

The DXY remained mostly indecisive this week after testing the 101.80 confluence of resistance. The lack of movement made trading the major currency pairs less than exciting.

However, times like this often foreshadow aggressive moves. This week’s sideways movement is the market’s way of coiling before its next big move.

Although we don’t know the direction of the next move, the DXY key levels couldn’t be more straightforward. Key support is 100.20, and the February descending channel provides overhead resistance near 101.30.

For the US dollar to move higher next week, bulls must take out 101.30 and 101.80. A sustained break above these zones on the high time frames would open the door to the 103.40 pivot from March and April.

On the other hand, a sustained break below 100.20 next week would pave the way toward the recent 98.00 low. Notice how the DXY didn’t thoroughly retest the 97.70 level from March 2022. That could become a factor if 100.20 fails next week.

EURUSD Forecast

This week, EURUSD traders have been at a stalemate. On one hand, sellers are defending 1.1200, which failed on Monday, and on the other, buyers are protecting 1.1060 support.

As discussed in previous videos, I’m waiting for this week’s close. A weekly close below 1.1200 could signal weakness going into next week.

However, a weekly close above 1.1200 would keep buyers in the game. EURUSD would need to reclaim 1.1200 and 1.1275 to convince me that the uptrend is alive. The bottom line is that euro bulls have work to do.

One note about this week’s close. The EURUSD needs to close convincingly below 1.1200 to confirm a buy-side fakeout. It won’t be enough to see the pair close the week at 1.1200 or a few pips below. It must be convincing.

GBPUSD Forecast

GBPUSD is another currency pair that has stalled this month. Since climbing above 1.3200 one month ago, the pound has consolidated in a 300-pip range.

It isn’t surprising to see the pair take a breather. The April rally was incredibly aggressive, so profit-taking from buyers is expected. 1.3440 is also significant resistance, so sellers will naturally defend it.

One thing I’m watching as we head into next week is the potential for a bull flag pattern. Given this choppy price action, I’m not yet convinced, but the potential exists.

GBPUSD must break channel resistance near 1.3330/40 to confirm the bull flag. Just above that is the multi-month resistance at 1.3440. A sustained break above that on the high time frames opens the door to 1.3630 and 1.3750.

Key support for GBPUSD is 1.3200. The pair fell below that on May 12th but quickly rebounded. That shows strength from bulls, but they have more work to do.

Lastly, I can’t rule out the potential for a deeper retracement to 1.3050 while below channel resistance. But as mentioned in Thursday’s video, the price action during this pullback favors bulls for now.

USDJPY Forecast

USDJPY has been a difficult pair to trade. On the other hand, the yen basket of currencies is an incredibly clean chart on the high time frames. See the video above for details.

If the Japanese yen holds above its March 2020 trend line on the weekly and monthly charts, pairs like USDJPY could suffer. That’s especially true if the DXY breaks below 100.20.

However, if the yen fails to hold above its March 2020 trend line, it would confirm a failed breakout. A fakeout on the high time frames would likely trigger a move in the opposite direction.

That could trigger a rally for USDJPY, but only if the yen index fails to hold support. I discuss this scenario in detail in today’s video (above).

USDCHF Forecast

USDCHF is one of the more promising-looking charts for dollar bulls. The pair reclaimed the 0.8330 level I discussed in recent videos. Monday’s rally flipped the 0.8330 area to new support.

However, the 0.8475 lows attracted sellers during Monday’s rally. 0.8475 is the other level I mentioned recently that could be a significant hurdle for USDCHF bulls.

A view of the weekly time frame (see the video above) isn’t as convincing for bulls. USDCHF is trading above the 2023 low, but to turn higher, it must also close above the August and September 2024 lows.

Currently, USDCHF is between 0.8330 and 0.8400, so the stalemate continues. I’m keeping the pair on my radar for now, but this week’s price action has been less than convincing.

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• GBP/USD trades slightly below 1.3300 in the European session on Friday.
• The technical outlook points to a lack of buyer interest in the near term.
• The US economic calendar will feature UoM Consumer Sentiment Index data for May.

GBP/USD stays under modest bearish pressure in the European session on Friday and trades below 1.3300 after posting small gains on Thursday. The pair’s near-term technical picture highlights a lack of buyer interest.

The US Dollar (USD) struggled to find demand after mixed macroeconomic data releases on Thursday and helped GBP/USD stays in positive territory in the second half of the day.

The data published by the US Bureau of Labor Statistics showed that the annual producer inflation, as measured by the change in the Producer Price Index, declined to 2.4% in April from 2.7% in March. Meanwhile, Retail Sales increased 0.1% on a monthly basis in April, and US Department of Labor Reported that there were 229,000 weekly Initial Jobless Claims, matching the previous week’s reading and the market expectation.

The University of Michigan will release the Consumer Sentiment Index data for May later in the day. The one-year Consumer Inflation Expectation component of the survey rose for five consecutive months and reached 6.5% in April, compared to 2.6% in November 2024. In case there is a noticeable decline in this data, the immediate reaction could hurt the USD and open the door for a rebound in GBP/USD. On the flip side, another increase could boost the USD, causing the pair to stretch lower heading into the weekend.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 50, reflecting buyers’ hesitancy.

On the upside, the first resistance level is located at 1.3300 (100-period Simple Moving Average (SMA) on the 4-hour chart, 20-day SMA) before 1.3400 (static level) and 1.3450 (end-point of the latest uptrend).

Looking south, supports could be located at 1.3260 (Fibonacci 23.6% retracement) of the latest uptrend, 1.3200 (static level, 200-period SMA) and 1.3160 (Fibonacci 38.2% retracement).