Created on December 05, 2024

• As we predicted earlier, the Euro will remain weak as long as economic and political tensions in the largest economies of the Eurozone persist and increase.
• As a result, investor appetite for the Euro has weakened. For two consecutive days, the EUR/USD currency pair has attempted to rebound upward, but its gains have not exceeded the level of 1.0544 before settling around 1.0515 at the time of writing this analysis.

Will the Euro continue to decline?

Dear reader, we previously mentioned that the Euro’s price in the Forex market may remain weak for a longer period due to several factors. Furthermore, the most prominent of which is the widening scope of political and economic concerns in the largest economies in the Eurozone – Germany and France – coinciding with the European Central Bank’s adherence to its easy monetary policy, in addition to the ongoing Russian-Ukrainian conflict. Also, the latest threat of Trump’s trade wars, which could directly or indirectly affect the Eurozone economy.

The French Political Situation is Unstable

According to reliable trading platforms, the Euro has recently been under selling pressure against other major currencies ahead of the vote of no confidence in French Prime Minister Michel Barnier. Moreover, this move comes after Barnier used a constitutional clause to impose his budget, which aims to reform France’s finances. Therefore, if Barnier loses, he will resign to French President Emmanuel Macron, heralding a new period of political uncertainty in Europe’s second-largest economy.

On the other hand, if Barnier wins, somehow, the euro exchange rate will recover. In general, without fiscal austerity, French debt will continue to rise and is expected to reach 7% of GDP next year, which is much higher than what the European Union allows. At the same time, eurozone countries enjoy the advantage that the powerful European Central Bank will always act as a backstop to ensure the uncontrolled deterioration of any given country’s debt.

Trading Tips:

Dear TradersUp follower, we recommend selling the Euro/US Dollar EUR/USD from every upward bounce, as the stronger downward pressure factors and Trump’s policy in the coming years – the stronger US dollar – and the US trade wars will strain the Eurozone economy as well as the single European currency.

European Stock Indices Continue to Recover

According to stock trading companies’ platforms, for five consecutive trading sessions, European stock market indices are rising, led by German stocks, which recorded a new record level. According to trading, the Stoxx Europe 600 index rose by 0.4% at the close. In the same performance, the DAX index for German stocks rose by 1.1% after breaching the 20,000-point level in the previous trading session. Also, the performance of the FTSE 100 index for British stocks, which relies heavily on exports, was weak with the rise of the pound sterling against the dollar.

Despite the gains, European stock markets were late in rising compared to the US stock markets, which recorded record numbers in September, as concerns about potential US tariffs, a weak European economy, and geopolitical tensions represented by the Russian/Ukrainian war and Middle East wars continued. Political concerns in both Germany and France seem to be clearly affecting investor sentiment.

EUR/USD Analysis Today:

Dear reader, the overall trend of the EUR/USD currency pair remains downward. As we mentioned before, the stability of the price around and below the support level of 1.0500 supports the strong control of the bears and. Consequently, the readiness for stronger losses if US jobs data comes in stronger than all expectations and political tension within the Eurozone increases.

As we mentioned before, expectations for the future parity of the EUR/USD exchange pair will increase if the bears succeed in moving first towards the support levels of 1.0455 and 1.0365. Conversely, and over the same time period, the daily chart will show a breach of the downward trend if the bulls succeed in moving towards the resistance levels of 1.0675 and 1.0885 again. Until now, we recommend selling the EUR/USD from every upward level.

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• GBP/USD holds above 1.2700 in the European session on Thursday.
• The pair could stretch higher if it clears 1.2750 resistance.
• GBP/USD’s upside could remain capped in case markets turn cautious.

GBP/USD registered small gains for the second consecutive day on Wednesday and continued to edge higher early Thursday. The technical outlook suggests that the bullish bias remains intact in the near term.

Falling US Treasury bond yields and disappointing macroeconomic data releases from the US made it difficult for the US Dollar (USD) to stay resilient against its major rivals on Wednesday. The ISM Services PMI declined to 52.1 in November from 56 in October and missed the market expectation of 55.5. Additionally, the ADP Employment Change came in at 146,000 in November, compared to analysts’ estimate of 150,000.

In the meantime, EUR/GBP closed in negative territory for the sixth consecutive day on Wednesday, suggesting that Pound Sterling continued to capture capital outflows out of the Euro.

In the early American session on Thursday, the US Department of Labor will release the weekly Initial Jobless Claims. Ahead of Friday’s Nonfarm Payrolls (NFP) data, however, the market reaction to this data is likely to remain short-lived. Instead, investors could react to changes in risk perception. At the time of press, US stock index futures were trading mixed. In case safe-haven flows dominate the action in financial markets later in the day, GBP/USD could struggle to push higher.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart holds comfortably above 50 and GBP/USD trades above the ascending trend line, reflecting the bullish bias.

On the upside, 1.2750 (Fibonacci 50% retracement of the latest downtrend) could be seen as next resistance before 1.2790-1.2800 (Fibonacci 61.8% retracement, 200-period SMA) and 1.2850 (static level). On the downside, immediate support is located at 1.2700 (Fibonacci 38.2% retracement) ahead of 1.2650 (100-period Simple Moving Average) and 1.2620 (Fibonacci 23.6% retracement).

• EUR/USD holds steady above 1.0500 in the European session on Thursday.
• The near-term technical outlook points to a lack of bullish momentum.
• The 20-day SMA aligns as next immediate resistance at 1.0550.

EUR/USD met resistance near 1.0550 on Wednesday but managed to close the day above 1.0500. The pair clings to small daily gains and the technical outlook is yet to point to a buildup of bullish momentum.

The US Dollar (USD) struggled to gather strength following the disappointing macroeconomic data releases on Wednesday and helped EUR/USD hold its ground. The political uncertainty in France, however, limited the Euro’s gains. French Prime Minister Michel Barnier is expected to submit his resignation on Thursday after his government lost the no-confidence vote in parliament.

In the European session, the cautious market stance doesn’t allow EUR/USD to stretch higher. In the second half of the day, the US economic calendar will feature weekly Initial Jobless Claims data. A reading below 200,000 could boost the USD with the immediate reaction, while a print near 250,000 could have the opposite impact on the currency’s valuation.

Nevertheless, investors could refrain from taking large positions ahead of Friday’s highly-anticipated November labor market report from the US.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50, reflecting a lack of bullish momentum.

Additionally, EUR/USD is yet to clear the 1.0520-1.030 resistance, where the Fibonacci 23.6% retracement of the latest downtrend and the 100-period Simple Moving Average (SMA) are located. In case EUR/USD stabilizes above this area, the 20-day Simple Moving Average (SMA) could act as next resistance at 1.0550 ahead of 1.0600 (Fibonacci 38.2% retracement).

On the downside, 1.0500 (static level) aligns as interim support before 1.0440 (static level) and 1.0400 (end-point of the downtrend, static level).

GBP/USD is trading at $1.27185, up 0.14% for the session, reflecting a cautiously bullish tone. The pair remains above its pivot point at $1.26916, signaling potential upward momentum.

Immediate resistance lies at $1.27217, followed by targets at $1.27452 and $1.27693. Key support levels include $1.26610, $1.26408, and $1.26173.

The 50-day EMA at $1.26873 and the 200-day EMA at $1.26676 reinforce near-term support, underscoring $1.26916 as a critical level. A break above $1.27217 could pave the way for further gains, while a dip below $1.26916 may trigger sharper selling.

Euro Stays Subdued Amid Mixed PMI Data and Lagarde’s Remarks

The euro saw limited movement as mixed PMI data highlighted uneven growth in the services sector. Spanish PMI dropped to 53.1, while Italian PMI declined to 49.2.

French PMI improved slightly to 46.9. ECB President Lagarde reiterated a dovish tone, stating that rate cuts would continue, though their pace remains uncertain.

German PPI met expectations at 0.4%, while upcoming industrial and retail data will provide further direction for the euro.

EUR/USD Technical Forecast

Image © Adobe Images

The Dollar fell after an unexpected slowdown in the mighty U.S. services sector was reported by the Institute for Supply Management (ISM).

The ISM Services PMI read at 52.1% in November, well below October’s 56% and the consensus estimate of 55.5%.

The ISM said election ramifications and tariffs were cited by respondents to the survey as being behind a more cautious sentiment.

The index’s Employment, Business Activity and New Orders components all receded versus the month prior.

In the wake of the release, the Pound to Dollar exchange rate (GBP/USD) is 0.32% higher on the day. The rise comes amidst a broader pullback by the Dollar.

The price action suggests markets have grown more confident that the Federal Reserve will cut interest rates in December after these softer data.

Several members of the Federal Reserve’s policy-setting committee have spoken recently, with most saying they are inclined to cut interest rates if incoming data turns softer.

“This week’s ISM reports have ticked that box and a soft jobs number on Friday would likely seal the deal even if next week’s inflation data remains sticky,” says James Knightley, Chief International Economist at ING Bank.

Above: GBP/USD is forming a base following a period of decline.

GBP/USD investment bank consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. It shows a sizeable uplift was made to the consensus forecasts for GBP/USD. Please request a copy here.

“On balance, it is supportive of the rate cut narrative at the December FOMC meeting and suggests a cooling in economic growth in the fourth quarter,” he adds.

ING tells clients that if Friday’s U.S. job report indicates an approximate 100k net job creation, and the unemployment rate ticks up to 4.2%, then a 25bp rate cut on December 18 looks probable.

The Dollar has outperformed in October and November on the back of a run of above-consensus economic data releases that confirm the U.S. economy is in robust shape.

The data outcomes have prompted investors to slash expectations for the scale of rate cuts to come from the Fed, which has bolstered U.S. bond yields and the Dollar.

However, sentiment towards the USD is nearing stretched levels, leaving the currency at risk of a pullback in the event of data setbacks.

This PMI report is a perfect example of such a setback, and the Dollar’s response is, therefore, unsurprising.

The EUR/JPY is our featured technical chart, for not only a technical breakdown is looking increasingly likely, but the macro back backdrop makes for a bearish fundamental backdrop. In short, the euro is undermined because of Europe’s persistent economic and political challenges, while a potential rate hike from the Bank of Japan magnifies the yen’s appeal.  Against this backdrop, our short-term EUR/JPY forecast is bearish.

EUR/JPY forecast: Political and economic uncertainty risks loom for euro 

The euro rebounded slightly across the board amid a firmer risk tone with the DAX and S&P hitting new record highs this week. Still, FX traders are treading cautiously ahead of significant political developments in France and a packed week of US economic data, which could have indirect influence on the JPY through the bond market (i.e., should US data surprise to the upside, this should push US and global bond yields higher, which would be negative for the low-yielding assets like JPY).

Meanwhile, geopolitical tensions are still at the forefront. Donald Trump’s recent threat of trade tariffs, slated for implementation once he assumes office in January, adds an obvious layer of pressure on the euro. Over the weekend, Trump also warned of tariffs targeting BRIC nations not aligned with the US dollar as a reserve currency. In Europe, French Prime Minister Michel Barnier faces mounting pressure, with his coalition government on the verge of collapse. A no-confidence vote is scheduled for tomorrow, and analysts anticipate he will struggle to retain his position. This could usher in further political instability in the eurozone’s second-largest economy, potentially weighing on the EUR/JPY forecast and undermining other euro crosses.

Adding to the bearish sentiment for the euro are weak economic fundamentals. Yesterday’s release of updated Eurozone PMIs showed no improvement, underscoring the region’s deepening manufacturing recession, with little sign of recovery in sight. 

Yen gains momentum amid BoJ rate hike speculation

The yen has been strengthening as speculation grows that the Bank of Japan could raise interest rates this month. This anticipation is not only boosting the yen against the dollar but also pressuring other pairs like the GBP/JPY and AUD/JPY.

And it looks like speculators appear eager to capitalize on the yen’s rally, according to the latest CFTC positioning data. Last week, large speculative traders significantly increased their long positions on the yen, driven by renewed expectations of a 25 basis point rate hike by the Bank of Japan this month. Notably, these traders reduced their short positions while boosting long exposure by over 23%, adding nearly 15,000 contracts to their bullish wagers.

Technical EUR/JPY forecast: Key levels and factors to watch

Source: TradingView.com

As far as the technical EUR/JPY forecast is concerned, well this pair slid below the pivotal 160.00 level last week and is now hovering near the 158.00 old support level. Once support, this level could turn into resistance and potentially trigger another drop in this pair. The next level of support comes in around 156.50 to 157.00, which also marks the trend support in place since August. Should the EJ break below this area, then this could pave the way for a potential drop to take out liquidity resting below the lows of September and August at 155.15 and 154.41, respectively.

So, not only is the EUR/JPY under pressure because of a stronger yen, but the euro’s ongoing weakness, driven by Europe’s persistent economic and political challenges, further magnifies the yen’s appeal.  Against this backdrop, our short-term EUR/JPY forecast is bearish, and we expect to see a breakdown below the summer low of 154.41.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• The Bank of England will likely stick to a gradual pace for rate cuts next year.

• US job vacancies rose more than expected.

• Markets are pricing a 75% chance of a Fed cut in December.

The GBP/USD forecast indicates a strong pound after slightly hawkish Bank of England remarks. Meanwhile, the dollar gained after upbeat data in the previous session, and markets awaited more crucial US employment figures.

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BoE governor Andrew Bailey on Wednesday noted that the Bank of England would stick to a gradual pace for rate cuts next year. Markets are pricing four rate cuts in 2024. However, they do not expect any more cuts this year. 

Meanwhile, the greenback rose on Tuesday after figures showed that US job vacancies rose more than expected. The JOLTs report revealed 7.74 million job openings, above estimates of 7.51 million. The numbers indicated a high demand for labor. However, there was little impact on rate cut expectations as traders awaited the more crucial nonfarm payrolls report. 

According to estimates, the economy might add 195,000 new jobs in November. Meanwhile, the unemployment rate might increase to 4.2%. The last report showed dismal job growth at 12,000.

However, experts chalked it up to hurricane disruptions. Another month of poor job growth could be a red flag for the labor sector. Moreover, it would increase bets for a rate cut in December, weighing on the dollar.

On the other hand, an upbeat report could lower the chances of a rate cut, boosting the greenback.  At the same time, traders will pay attention to Powell’s speech later in the day for clues on the outlook for rate cuts. Currently, markets are pricing a 75% chance of a cut in December. 

GBP/USD key events today

• US ADP non-farm employment change
• US ISM services PMI
• Fed Chair Powell Speaks

GBP/USD technical forecast: Struggling to break 1.2701 resistance

On the technical side, the GBP/USD price has bounced off the 30-SMA but failed to breach the 1.2701 resistance level. Bulls took over when the downtrend paused at the 1.2500 support level. The price broke above the 30-SMA and made a new high slightly above the 1.2701 resistance level. 

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From here it retested the 30-SMA as support and remained attached to the line. A surge in bullish momentum will allow the price to break above 1.2701 to continue the uptrend. Otherwise, it might break below the SMA to retest the 1.2500 support.

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Key Events

• Israel-Lebanon Potential Ceasefire Deal for 60 Days
• December 1 OPEC Meeting Anticipations
• Japan’s Corporate Services Inflation rising toward 2.9%
• Trump Tariff Policies supporting dollar strength against market trends
• Japanese Inflation Metrics, including Tokyo Core CPI

GBP Outlook

UK inflation surged from 1.7% to 2.3% in November, but GBPUSD remains under pressure due to the Bank of England’s gradual interest rate cut plan. The dollar’s continued strength weighs heavily on the pound, alongside recent drops in manufacturing and services PMI metrics, which have fallen below the critical 50-expansion mark. This combination creates a strong bearish outlook on broader charts. However, key support levels outlined below may influence near-term moves.

JPY Outlook

For the yen, critical levels against the dollar are once again in focus, with BOJ intervention risks rising if the yen surpasses the 157 and 160 marks. Volatility risks are anticipated with key upcoming events such as the FOMC minutes, US Core PCE, unemployment claims, GDP, and Tokyo Core CPI.
As per BOJ Governor Ueda’s remarks, policies will adjust in response to economic developments. Notably, the services producer price index has risen back to 2.9%, near its yearly high of 3%, aligning with nine-year highs. This keeps speculation alive for a potential rate hike drift. Meanwhile, Tokyo CPI dropped below 2% to 1.8% in October, its first dip since May, and further confirmation from Friday’s data will be closely watched.

Oil Outlook

Ceasefire resolutions and escalating war headlines have fluctuated for months, with painful reversals on each deal attempt. The path toward resolving conflicts involving Russia-Ukraine and Israel-Lebanon remains uncertain. This uncertainty sustains upside risk potential for oil within the $72-$76 range until feasible solutions emerge.
The upcoming OPEC meeting on Sunday is expected to leave production quotas unchanged, reflecting risk assessments for 2025 demand-supply levels and weak oil price trends.

Technical Analysis: Quantifying Uncertainties

Crude Oil Forecast: Weekly Time Frame – Log Scale

Source: Tradingview

While headlines can spur critical oil price movements, current price action remains bound within the $72-$76 resistance range and $68-$64 support range.

2025 Sentiment

The overall chart leans bearish due to risks from US oversupply, Chinese contracting demand, and OPEC production quota adjustments. However, unless there is a decisive break and close below the $64 support, upside risk remains present.

Scenarios

Bullish: A firm close above $72 and $76 could extend the rally to $80 and $84, possibly establishing a longer-term uptrend

Bearish: A firm close below $64 could drive the bear trend, targeting $58 and $49, continuing the decline since the 2022 highs.

GBPJPY Forecast: Monthly Time Frame – Log Scale

Source: Tradingview

The GBP/JPY pair is currently exhibiting a bearish inclination, influenced by a weakening British pound and potential intervention by the Bank of Japan (BOJ) to support the yen. The 3-month price action is leaning towards bearish dominance, with an overbought RSI retesting levels previously seen in 2007 and 1998.

The overall breakout of the GBPJPY pair from the consolidating pattern across its history leans towards a longer-term bull run, yet a pullback down towards the borders of the consolidation may be possible.

The scenarios are the following

Bearish Scenario: a close below the 183-support zone can ignite a pullback towards support levels 172 and 155

Bullish Scenario: a close above the 208 high can extend the bull run towards potential resistance levels 223 and 251

— Written by Razan Hilal, CMT – on X: @Rh_waves

JPY, USD/JPY EUR/JPY Talking Points:

The Bank of Japan is expected to release a policy review later this month, just a day after the FOMC rate decision, and JPY-strength has started to show more prominently against most major currencies.

In USD/JPY, the US Dollar hasn’t been very weak over the past few weeks, but JPY strength has started to take on greater prominence of late. The pair set a fresh high on November 15^th as USD-strength drove after the U.S. Presidential election. Resistance eventually showed at the 76.4% Fibonacci retracement of the July-September sell-off; but a week later, as USD jumped up to a fresh two-year-high in DXY, USD/JPY lagged, setting a lower-high and building within the confines of a descending triangle formation.

I looked at that formation in last week’s webinar, just ahead of the U.S. holiday, and that formation filled in later that day and continued to see bears go to work as USD/JPY drove below 151.95, 150.77 and, eventually, the 150.00 handle.

And even today, to start the week, DXY is showing a bounce up to the 106.51-106.88 zone and USD/JPY is much less decisive, showing currently as a doji on the daily. This illustrates Yen-strength against the USD.

USD/JPY Four-Hour Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

USD/JPY Daily

From the daily chart, we can see where there’s been quite a few inflections from the July-September Fibonacci retracement. The current high shows right at the 76.4% retracement, and last week’s support for the descending triangle was right around the 61.8% marker. The 50% level from that same retracement setup was support last Wednesday and then resistance to start this week, and that also points out the 38.2% retracement level as a deeper support, plotted around the 148.13 level.

But the bigger question is whether USD/JPY is an optimal venue to seek out that Yen-strength as the US Dollar has been strong against many currencies recently, especially the Euro which is back below the 1.0500 handle.

USD/JPY Daily Price Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

EUR/JPY

While the USD remains very near recently-established two-year-highs, it’s been a far tougher road for the Euro.

I focused in on the difference between EUR/JPY and USD/JPY a couple weeks ago and at the time, USD/JPY still had bullish scope. EUR/JPY, on the other hand, had just set a fresh lower-low and was holding resistance at a big spot on the chart. There was also a relationship with the 200-day moving average, where EUR/JPY was trading below its 200-dma while USD/JPY and even GBP/JPY held above their own.

But since then, Yen-strength has returned in a big way and now all three pairs are now operating below their 200-day moving averages. As the descending triangle in USD/JPY broke down last week, EUR/JPY had even more steam as Euro-weakness was meshed with Yen-strength. And while the trend has been clean and aggressive, the pair is now showing oversold conditions on the daily chart, which can make it difficult to chase, at this point. Support is currently showing at the trendline projection, taken from August and September swing lows.

EUR/JPY Daily Price Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

EUR/JPY Shorter-Term, Strategy

Oversold conditions on the daily chart do not necessarily preclude bearish continuation scenarios. It does make the prospect of chasing prices lower a bit more daunting, but a look at the trend over the past couple of weeks shows healthy two-way price action, and that’s something that can be tracked for those looking to take the trend-lower.

There was a support bounce around the 158.04-158.24 zone, and that remains of note as there hasn’t yet been a resistance test at that prior support. Inside of that, a Fibonacci level plots at 157.31 and that’s similarly of note, as that’s the 76.4% retracement from a major move that showed support at the 38.2, 50 and 61.8% retracements.

That 61.8% retracement of prior support is also of interest if bulls can stretch a pullback, and that plots at 159.10. Even the 160.00 level could be of interest and as I highlighted in the video, the key there would be bears defending the prior swing high at 160.34. If they fail to hold the lows below that price, then the prospect of a larger retracement or pullback move will look more prominent and at that point, bears will likely want to re-assess.

EUR/JPY Four-Hour Price Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

— written by James Stanley, Senior Strategist