USD/JPY Key Takeaways

• Strong ISM and JOLTS surveys in the morning were followed by a mediocre bond auction this afternoon.
• The auction showed below-average demand for US Treasuries, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.
• USD/JPY is essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair

It’s been a mixed day for US data, with better-than-expected readings on the ISM Services PMI and JOLTS Job Openings surveys raising optimism about the US economy before a mediocre 10-year treasury bond auction in the early afternoon.

The auction showed a 2bps “tail”, indicating less demand for the bonds than expected, and dealers were obligated to take on 15.6% of the issue, above the 13.1% average over the last six months. All in all, the auction showed below-average demand for the benchmark US Treasury bond, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.

Stock indices have seen the morning’s gains evaporate, with the 10yr yield rising to 4.69%, its highest level since last April. More to the point for FX traders, the US dollar is edging higher against most of its major rivals, though the moves are fairly limited as we go to press.

Japanese Yen Technical Analysis – USD/JPY Daily Chart

Source: TradingView, StoneX.

Looking at the chart of USD/JPY, the pair attempted a breakout to 6-month highs above 158.00 on the back of this morning’s data releases before reversing back into the holiday period trading range in short order.

Now, rates are essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair. A confirmed bullish breakout above the top of the range could target 160.00 in short order, whereas a bearish breakdown could open the door for a deeper retracement toward 154.00.

— Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

US Dollar Outlook: USD/JPY

USD/JPY extends the advance from the start of the week to clear the December high (158.09), but the Relative Strength Index (RSI) may show the bullish momentum abating as the recent rise in the exchange rate fails to push the oscillator into overbought territory.

USD/JPY Clears December High Ahead of US NFP Report

USD/JPY climbs to a fresh weekly high (158.43) as the US Bureau of Labor Statistics (BLS) reports that ‘the number of job openings was little changed at 8.1 million on the last business day of November,’ with the Job Openings and Labor Turnover Summary (JOLTS) revealing that ‘the number of job openings increased in professional and business services (+273,000), finance and insurance (+105,000), and private educational services (+38,000).’

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

US Economic Calendar

In turn, the update to the US Non-Farm Payrolls (NFP) may also influence USD/JPY as the economy is anticipated to add 154K jobs in December, and evidence of a strong labor market may put pressure on the Federal Reserve to alter the path for monetary policy as the economy shows little signs of an imminent recession.

In turn, a positive development may generate a bullish reaction in the US Dollar as it raises the Fed’s scope to pause its rate-cutting cycle, but a weaker-than-expected NFP report may drag on the Greenback as it fuels speculation for lower US interest rates.

With that said, swings in the carry trade may continue to influence USD/JPY as the Federal Open Market Committee (FOMC) pursues a neutral stance, but the exchange rate may further retrace the decline from the 2024 high (161.95) as it clears the December high (158.09).

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

• USD/JPY trades to a fresh weekly high (158.43) following the failed attempt to close below 156.50 (78.6% Fibonacci extension), with a move above 160.40 (1990 high) bringing the 2024 high (161.95) on the radar.
• Next area of interest comes in around the December 1986 high (163.95), but USD/JPY may hold within last year’s range should if struggle to extend the recent series of higher highs and lows.
• A close below 156.50 (78.6% Fibonacci extension) may push USD/JPY back towards 153.80 (23.6% Fibonacci retracement), with a break/close below 151.95 (2022 high) opening up the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone.

Additional Market Outlooks

GBP/USD Recovery Keeps 2024 Range Intact

US Dollar Forecast: AUD/USD Approaches November 2023 Low

USD/CAD Pullback Keeps RSI Below Overbought Territory

US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff

— Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

USD/JPY Key Takeaways

• Strong ISM and JOLTS surveys in the morning were followed by a mediocre bond auction this afternoon.
• The auction showed below-average demand for US Treasuries, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.
• USD/JPY is essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair

It’s been a mixed day for US data, with better-than-expected readings on the ISM Services PMI and JOLTS Job Openings surveys raising optimism about the US economy before a mediocre 10-year treasury bond auction in the early afternoon.

The auction showed a 2bps “tail”, indicating less demand for the bonds than expected, and dealers were obligated to take on 15.6% of the issue, above the 13.1% average over the last six months. All in all, the auction showed below-average demand for the benchmark US Treasury bond, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.

Stock indices have seen the morning’s gains evaporate, with the 10yr yield rising to 4.69%, its highest level since last April. More to the point for FX traders, the US dollar is edging higher against most of its major rivals, though the moves are fairly limited as we go to press.

Japanese Yen Technical Analysis – USD/JPY Daily Chart

Source: TradingView, StoneX.

Looking at the chart of USD/JPY, the pair attempted a breakout to 6-month highs above 158.00 on the back of this morning’s data releases before reversing back into the holiday period trading range in short order.

Now, rates are essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair. A confirmed bullish breakout above the top of the range could target 160.00 in short order, whereas a bearish breakdown could open the door for a deeper retracement toward 154.00.

— Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

GBP/USD Forecast: Bullish bias remains intact ahead of US data

GBP/USD capitalized on the broad-based US Dollar (USD) weakness and registered impressive gains on Monday. The pair continues to stretch higher in the European session on Tuesday and trades near the key resistance area at 1.2575.

The improving market mood made it difficult for the USD to find demand at the beginning of the week. Risk flows dominated the action in financial markets and triggered a USD selloff after the Washington Post reported that US President-elect Donald Trump’s aides were exploring tariff plans that would be applied to every country but only cover critical imports. Read more…

GBP/USD: To consolidate between 1.2450 and 1.2550 – UOB Group

Pound Sterling (GBP) is expected to consolidate in a range between 1.2450 and 1.2550. In the longer run, GBP is expected to trade in a range, likely between 1.2420 and 1.2620, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

24-HOUR VIEW: “GBP soared by 0.79% yesterday, closing at 1.2522. The rapid rise appears to be excessive. Today, instead of continuing to rise, GBP is more likely to consolidate, expected to be between 1.2450 and 1.2550.” Read more…

Important DisclaimersThe content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party’s services, and does not assume responsibility for your use of any such third party’s website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.Risk DisclaimersThis website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.

Created on January 07, 2025

• According to recent trades and after its sharp losses, the EUR/USD exchange rate is heading towards parity.
• Before that, investors will be watching closely for the reaction to the release of US jobs data next Friday.
• According to reliable trading platforms, the euro price has fallen to its lowest level in two years against the US dollar amid sharp gains for the US currency.
• As a result, all indicators indicate that the euro dollar exchange rate is on its way to testing 1.0 and below.

Can You Buy the Euro-Dollar Now?

In this regard, European fundamentals are difficult for euro sellers looking to buy the US dollar, and contrast markedly with US fundamentals, as the US economy is still in good shape. The dynamics of the gas market embody the stark difference in economic fortunes. From one side, Europe faces headwinds amid rising natural gas prices. From anther, the US is receiving tailwinds as the US is the one stepping into the void left by Russia in the European gas market.

US Jobs Data Under the Microscope

According to this week’s economic calendar, the US non-farm payrolls report on Friday is the key data release for this week’s trading, and if the US jobs numbers come in stronger than expected, bears could find an opportunity to push the EUR/USD price towards deeper bearish levels. Overall, analysts expect US job gains to remain high in December at 180,000, recording only a modest slowdown from 227,000 in November.

On the other hand, leading survey indicators have improved recently, confirming the strong position of the US economy, which is consistent with the continued strength of the US dollar. However, the market is well-positioned for a strong jobs reading, and there is a chance of a US dollar decline if the data meets expectations or comes in weaker.

Consequently, this could allow the EUR/USD pair some respite over the weekend.

Tomorrow, another development affecting the forex market is that on Wednesday, the minutes of the Federal Reserve’s last meeting for 2024 will be released. During which it cut interest rates but warned that it is unlikely to do so in 2025, which pushed the US dollar higher. In addition, there is a lot of uncertainty in the outlook with Donald Trump poised to return to the White House. Currently, analysts believe that Trump will bring inflationary policies, which will require the Federal Reserve to abandon further US interest rate hikes. All of this will ultimately support the US dollar.

On the Eurozone front, the focus will be on German inflation data for December, which will provide an important hint as to where we can expect the Eurozone data to be. Overall, analysts expect Eurozone CPI inflation to rise to 2.4% year-on-year in December from 2.2% in November. However, analysts do not believe that this will be enough to upset expectations of further interest rate cuts by the European Central Bank, which could limit any rise in the Euro.

Trading Tips:

The EUR/USD will remain bearish until the announcement of important US economic data and events this week

EUR/USD Technical Analysis Today:

According to recent trades, the EUR/USD exchange rate has risen to match the nine-day exponential moving average (EMA), indicating that it has recovered from some of the peak selling levels seen in recent trades. Technically, it is noteworthy that this nine-day EMA has acted as a resistance layer to the strength of the EUR/USD pair since October. Therefore, this technical indicator indicates a decline, suggesting that there may be some retreat from the negative pressure.

Overall, it is difficult to be pessimistic about the EUR/USD pair in the current technical and fundamental macroeconomic situation, and the chances of recovery from here are limited. Meanwhile, the exchange rate may hold around 1.03-1.04 in the near term as markets wait for a catalyst for the next decline. Also, most markets may have been on a break during the Christmas and New Year period, the EUR/USD has not rested, as the selling wave that has been ongoing since October has extended. Ultimately, the recent losses came after a renewed rise in European gas prices to their highest levels in two years.

Ready to trade our EUR/USD daily analysis and predictions? Here are the best European brokers to choose from. 

• GBP/USD continues to push higher following Monday’s upsurge.
• The pair faces the next resistance level at 1.2575. 
• Investors await key macroeconomic data releases from the US.

GBP/USD capitalized on the broad-based US Dollar (USD) weakness and registered impressive gains on Monday. The pair continues to stretch higher in the European session on Tuesday and trades near the key resistance area at 1.2575.

The improving market mood made it difficult for the USD to find demand at the beginning of the week. Risk flows dominated the action in financial markets and triggered a USD selloff after the Washington Post reported that US President-elect Donald Trump’s aides were exploring tariff plans that would be applied to every country but only cover critical imports.

Later in the day, Trump disputed this claim in a social media post and helped the USD find a foothold, calling the story “just another example of fake news.”

The ISM Services PMI report for December and JOLTS Job Openings data for November from the US will be watched closely by market participants in the second half of the day.

The headline ISM Services PMI is expected to rise to 53 from 52.1 in November. A reading below 50, which would point to a contraction in the service sector’s economic activity, could put additional weight on the USD’s shoulders and open the door for another leg higher in GBP/USD. Conversely, a strong print of 55 or higher could support the USD.

GBP/USD Technical Analysis

As of writing, GBP/USD was trading near 1.2575, where the Fibonacci 50% retracement level of the latest downtrend is located. Once the pair stabilizes above this level and starts using it as support, it could target 1.2620-1.2630 (200-period Simple Moving Average (SMA), Fibonacci 61.8% retracement) and 1.2700 (Fibonacci 78.6% retracement) next.

On the downside, first support could be seen at 1.2555 (100-period SMA) before 1.2525 (Fibonacci 38.2% retracement), 1.2500 (round level, 50-period SMA) and 1.2460 (Fibonacci 23.6% retracement).

• EUR/USD trades in positive territory above 1.0400 on Tuesday.
• The pair could extend its uptrend once it flips 1.0410-1.0420 into support.
• Eurozone inflation report and US data will be watched closely by market participants.

EUR/USD started the week on a bullish note and registered strong gains on Monday as the US Dollar (USD) remained under persistent selling pressure throughout the day. The pair holds its ground and trades in positive territory above 1.0400 in the European morning on Tuesday.

The USD weakened against its rivals on Monday in reaction to the Washington Post report that said US President-elect Donald Trump’s aides were considering tariffs that would be applied to every country but only cover critical imports.

Although Trump disputed this claim by calling the story “just another example of fake news,” the USD failed to stage a decisive rebound as risk flows dominated the market action.

Eurostat will publish December inflation data on Tuesday. On a yearly basis, the Harmonized Index of Consumer Prices (HICP) is forecast to rise 2.4% in December, up from the 2.2% increase recorded in November. A stronger increase than expected in the annual HICP could help the Euro preserve its strength.

In the second half of the day, the ISM Services PMI report for December and JOLTS Job Openings data for November will be featured in the US economic docket. The headline ISM Services PMI is seen rising to 53 from 52.1 in November. A reading below 50 could trigger another bout of USD selloff and lift EUR/USD. On the other hand, a print of 55 or higher could help the USD find a foothold and limit the pair’s upside.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, reflecting the bullish bias in the near term. The Fibonacci 50% retracement level of the latest downtrend and the 100-period Simple Moving Average (SMA) form a key resistance area at 1.0410-1.0420. In case EUR/USD rises above this area and starts using it as support, 1.0460 (200-period SMA; Fibonacci 61.8% retracement) could be seen as next resistance before 1.0520 (Fibonacci 78.6% retracement).

Looking south, supports could be spotted at 1.0370 (50-period SMA, Fibonacci 38.2% retracement) and 1.0320 (Fibonacci 23.6% retracement, 20-period SMA).

Created on January 06, 2025

• At the beginning of trading in the new year 2025, the pressure to sell the pound sterling continued and its losses against the US dollar extended to the support level of 1.2352.
• Obviously, this is the lowest for the pound sterling dollar pair in eight months before settling around the level of 1.2417 at the beginning of trading in the US jobs week and the content of the minutes of the last meeting of the US Federal Reserve.

Will the Pound Sterling rise in the coming period?

According to reliable trading company platforms, the pressures on the Sterling continue, but some analysts do not believe that this move will continue. According to recent trades, the losses incurred by the Pound Sterling followed news of a decline in the UK manufacturing Purchasing Managers’ Index and another rise in wholesale gas prices to their highest levels in two years.

Developments confirm that the UK’s economic outlook for 2025 will be challenging, but this is not new news, and the move made by the Pound Sterling far exceeded what was expected given the secondary nature of these developments. However, if this is the correct assessment, then the Pound Sterling may find itself targeted by low-priced buyers in the coming days, which may help it recover. According to the forex market trades, the intensive selling was significant, as the GBP/USD pair lost 1.10%, its biggest daily decline since Donald Trump won the US election.

The performance of the Pound Sterling and the pressure of rising gas prices

According to currency analysts, concerns about growth in Europe remain a major focus for investors, and this could weigh on the pound and the euro as 2025 begins. In general, the topic of rising energy prices has come into focus again, and there has been another sharp rise in natural gas prices after gas supplies through Ukraine ended. The cost of wholesale gas prices in the UK rose to a two-year high, indicating higher energy costs for businesses and households. The development is particularly difficult for British companies, which will also face rising wage and tax bills in the coming months.

On the other hand, the performance of the pound is particularly sensitive to interest rate expectations from the Bank of England; markets expect two to three rate cuts in 2025, but most analysts believe the actual outcome will be four times. Therefore, the market should adjust to this view. As this happens, British bond yields and the pound should decline.

Again, it should be stressed that the movement in the pound exchange rate goes beyond the fundamental nature of developments.

Trading Tips:

Keep a close eye on the future of central bank policies and the extent of investors’ risk appetite or lack thereof to predict the future direction of the pound dollar

Sterling forecasts in 2025

Several forex market analysts expect the Pound Sterling to outperform most of its peers in 2025, aided by a relatively strong economy and a slow pace of interest rate cuts at the Bank of England. In its 2025 forecast report, NatWest Markets says the Pound Sterling looks like the “Carry King” of 2025. The term “Carry” refers to a strategy where investors borrow capital where interest rates are low to invest in financial assets where interest rates are higher, which usually provides a profit in a low-volatility environment.

Meanwhile, the subsequent flow of money to places where interest rates are higher creates demand for the recipient currency.

The Pound Sterling was the second best-performing currency in 2024 as interest rates in Britain remain high compared to elsewhere, with the Bank of England saying it will cut interest rates cautiously as inflation is expected to remain high. If this view is correct, the Pound Sterling will look attractively priced after the massive sell-off on January 2nd.

Technical Analysis for the GPB/USD pair today:

The overall trend of the GBP/USD pair remains bearish, and as I mentioned before, the stability below the 1.2500 support level will continue to encourage the stronger dominance of bears on the trend. According to the daily chart performance, approaching the 1.2350 support as it happened last week pushes technical indicators towards oversold levels. Technically, we expect the selling pressure on the Sterling Dollar to continue until investors react to the announcement of US jobs figures and the content of the latest Federal Reserve meeting minutes.

Ready to trade our daily GBP/USD Forex analysis? Check out the best forex trading company in UK  worth using.