Created on December 02, 2024

• At the beginning of this week, the US dollar regained its recent losses following Trump’s recent harsh threats and ahead of the start of trading for those who abandon the US dollar.
• As a result, the EUR/USD currency pair is stabilizing on a downward trend around the support level of 1.0515 after closing last week’s trading at around 1.0575.
• We expect the downward momentum for the euro-dollar to persist until the reaction to the announcement of US jobs figures at the end of the week, which will have a strong reaction on the expectations for the future of US Federal Reserve policies.

US Treasury Yields Stronger

Today, the yield on 10-year US Treasury bonds rose to more than 4.2%, reflecting a two-week decline, and its gains came with increasing speculation among investors about the strong US economic performance before the new year 2025. Also, the rise in bond yields followed the rally in the US dollar after a sharp threat from Trump to the BRICS group of countries. Correspondingly, he stated that he would impose a 100% tariff if the BRICS countries created or supported a new currency that could replace the dollar.

US central bank policies support the dollar

In terms of monetary policy, financial markets are currently betting on the possibility of the Federal Reserve cutting US interest rates by 25 basis points this month by 67%, up from 53% a week ago. In general, investors are now focusing on US jobs data and statements from a number of US Federal Reserve policy officials.

US Stocks Stabilize

According to stock trading platforms, US stock futures have seen little change today as investors seek new catalysts in the last month of 2024. Overall, US stock market indices have emerged from a strong week and month, with the three major indices rising between 1.1% and 1.45% last week and rising between 5.7% and 7.8% in November trading. Also, the Dow Jones and S&P 500 indices hit all-time highs on Friday. Simultaneously, these gains were largely driven by the rally that followed the election after the decisive victory of President-elect Donald Trump. Ultimately, the resilience of the US economy and the corporate sector also boosted investor sentiment.

EUR/USD Analysis Today:

My technical outlook for the EUR/USD currency pair remains unchanged. The overall trend is still downward, and as we mentioned before and confirm now, the stability of the euro-dollar around and below the support level of 1.0500 will continue to encourage the dominance of the bears on the trend. Furthermore, the expectations will return to the proximity of the euro-dollar parity if the bears succeed in pushing the currency pair towards the support levels of 1.0455 and 1.0380 again. Technically, these levels and below will push the technical indicators towards strong oversold levels. Conversely, and based on the daily chart, the psychological resistance of 1.1000 will remain the most important for a shift in the euro-dollar direction to bullish.

EUR/USD Trading Signals:

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• GBP/USD declines over 0.50%, with sellers targeting further lows after breaking past 1.2644.
• Bearish momentum confirmed by RSI; GBP faces key supports at 1.2600 and 1.2486.
• Potential recovery hinges on surpassing resistance at 1.2700 and 1.2818 (200-day SMA).

The Pound Sterling tumbled over 0.50% against the Greenback on Monday, as the latter recovered from last week’s losses, remaining bid on Monday. At the time of writing, the GBP/USD trades at 1.2659, dropping after reaching a daily high of 1.2735.

GBP/USD Price Forecast: Technical outlook

The GBP/USD downtrend remains intact, and it could be threatened if buyers clear the 200-day Simple Moving Average (SMA) at 1.2818. Sellers must clear the November 28 daily low of 1.2644 before extending their drop to 1.2600. A breach of the latter will expose the latest major support at 1.2486, the November 22 swing low, followed by the current year’s low of 1.2299.

Conversely, if GBP/USD clears the 1.2700 figure, the first resistance would be the 1.2800 figure, followed by the 200-day SMA at 1.2818. Once those two levels are surpassed, it would emerge 1.2900 and the 50-day SMA as next key resistance at 1.2943.

The momentum remains bearish, as depicted by the Relative Strength Index (RSI), which aims to be lower at the beginning of December.

GBP/USD Price Chart – Daily

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• GBP/USD trades in negative territory near 1.2700 on Monday.
• The renewed USD strength weighs on the pair at the beginning of the week.
• The ISM Manufacturing PMI data will be featured in the US economic calendar.

GBP/USD rose more than 1.5% in the previous week and registered weekly gains for the first time since late September. The pair, however, started the new week under bearish pressure and retreated slightly below 1.2700 by the European morning on Monday.

The renewed US Dollar (USD) strength forces GBP/USD to stay on the back foot. The market reaction to US President-elect Donald Trump’s comments on social media boosted the USD at the weekly opening.

Trump threatened BRICS members with 100% tariffs if they were to try to replace the USD.  “We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy,” he said on X.

In addition to Trump comments, the cautious market mood makes it difficult for GBP/USD to gain traction. At the time of press, US stock index futures were down about 0.2% and the UK’s FTSE 100 Index was trading marginally lower on the day.

In the second half of the day, the ISM will release November Manufacturing PMI data. In case the headline comes in above 50 and shows a rebound into expansion territory in the manufacturing sector’s economic activity, the immediate reaction could help the USD gather further strength. Conversely, a weaker-than-forecast print could have the opposite effect on the currency and allow GBP/USD to hold its ground.

GBP/USD Technical Analysis

Despite the decline seen at the beginning of the week, the Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 and GBP/USD manages to stay a float a few pips above the 100-period Simple Moving Average, suggesting that the buildup of bearish momentum is not yet strong enough to trigger a reversal.

On the downside, 1.2690 (100-period SMA) aligns as immediate support. If GBP/USD falls below this level and starts using it as resistance, 1.2630 (50-period SMA, static level) could be seen as next support before 1.2600. On the flip side, the pair could face resistance at 1.2750 (static level) ahead of 1.2800 (static level, round level) and 1.2825 (200-period SMA).

Created on December 02, 2024

• The cable rallied a bit during the trading session on Friday to break above the crucial 1.27 level.
• However, we have seen a little bit of pushback.
• So, this is what I call a holding pattern in the Forex world. We’ve broken out. And once you see this candlestick alarm bells should be ringing because we now see that there is a significant amount of resistance above.

So, it’ll be interesting to see if we can go higher from here. If we can sustain and move above the top of this candlestick, then I think you do have a rally just waiting to happen, probably for about another 125 pips, maybe 150 pips from there. On the other hand, if we break down from here, that just tells me we’ve got more work to do in this range between 1.25 and 1.27.

Risk Appetite?

All things being equal, a lot of this will come down to risk appetite because the US dollar is considered to be a safety currency. The British pound, while not necessarily the riskiest currency in the world, is considered to be a little further out on the spectrum. Interest rate differential is negligible between the United States and Great Britain. So, I don’t even think that comes into the picture. The pound has been a little bit more resilient against the greenback than many other currencies.

I watch this GBP/USD pair a lot just because it gives me an idea as to how the US dollar is doing because if it can squash the British pound, it’ll do a number on several other currencies, perhaps even currencies like the Japanese yen. So, I’m watching very closely. It’s a bit of a binary setup. We’ll just have to see how this plays out. If we break higher, we go higher. If we break down below the bottom of the candlestick we continue to see more back and forth.

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• EUR/USD retreats toward 1.0500 at the beginning of the week.
• Trump’s comments and the risk-averse market atmosphere supports the USD.
• The US economic calendar will feature ISM Manufacturing PMI data for November.

EUR/USD struggles to build on the previous week’s gains and declines toward 1.0500 in the European morning on Monday. The technical outlook points to a bearish tilt in the near term.

The negative shift seen in risk mood and US President-elect Donald Trump’s comments on BRICS help the US Dollar (USD) gather strength at the beginning of the week.

Over the weekend, Trump warned against BRICS nations trying to replace the USD with their own currency. “We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy,” he said on X.

Meanwhile, US stock index futures were last seen losing above 0.2% on the day, reflecting the cautious market stance.

Later in the day, the ISM Manufacturing PMI data will be featured in the US economic docket. The headline PMI is forecast to edge higher to 47.5 in November from 46.5 in October. A reading above 50 could boost the USD and further weigh on the pair. On the other hand, a disappointing reading could hurt the USD with the immediate reaction. Nevertheless, EUR/USD’s recovery attempts could remain limited unless the risk mood improves in the second half of the day.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 50 and EUR/USD closed the last three 4-hour candles below the 100-period Simple Moving Average (SMA), despite ending the week slightly above it.

On the downside, immediate support is located at 1.0500 (static level, round level) before 1.0440 (static level) and 1.0400 (static level, round level). Looking north, first resistance could be spotted at 1.0550 (100-period SMA) ahead of 1.0610 (static level) and 1.0660 (static level).

• GBP/USD trades in the negative territory around 1.2700 in Monday’s early European session. 
• The negative outlook of the pair remains intact below the 100-day EMA, with a bearish RSI indicator. 
• The first downside target to watch is the 1.2600 psychological level; the immediate resistance level is seen at 1.2834. 

The GBP/USD pair tumbles to near 1.2700 during the early European session on Monday, pressured by the firmer US Dollar (USD) broadly. The US President-elect Donald Trump’s tariff threats, the rising geopolitical tensions in West Asia and the rising expectation for less aggressive Fed rate cuts support the Greenback and act as a headwind for GBP/USD. The release of US ISM Manufacturing Purchasing Managers Index (PMI) data will be the highlight on Monday. 

Technically, the negative view of GBP/USD prevails, with the price holding below the key 100-day Exponential Moving Average (EMA) on the daily chart. The downward momentum of the major pair is reinforced by the 14-day Relative Strength Index (RSI), which stands below the midline around 44.40. 

The initial support level for GBP/USD emerges at the 1.2600 psychological level. Sustained bearish momentum could drag the major pair to the lower limit of the Bollinger Band at 1.2445. A break below this level could push prices lower toward 1.2331, the low of April 23.  

On the bright side, the first upside barrier is located at 1.2834, the low of November 6. Extended gains above this level could pave the way for a test of the 1.2890-1.2900 zone, representing the round mark and the 100-day EMA. The psychological level and the upper boundary of the Bollinger Band of 1.3000 appear to be a tough nut to crack for bulls.  

GBP/USD daily chart

Created on November 29, 2024

• The US dollar rallied just a bit during the course of the trading session on Thursday as we are seeing a little lack of liquidity late in the day as it is Thanksgiving in the United States.
• I think you’ve got a situation that the market is simply just a bit oversold we’ve seen the Japanese yen give up some of its gains in multiple pairs right now including against the Canadian dollar.

The 107.50 yen level is an area that I think a lot of people will be paying close attention to. Although I don’t think it’s a massive support level, I do think it’s one that has a little bit of history. If we can break higher from here and clear the 50 day EMA near the 109.50 yen level, then it opens up a move to the 111.50 yen level.

This CAD/JPY pair will more likely than not end up being a situation where it’s probably going to be more about the yen than anything else. Pay attention to how the Japanese yen is behaving against multiple other currencies, and you’ll probably get the direction of this pair correct. If we were to break down below the 107 point volume zero yen level, then it’s possible that we could see a steeper decline, perhaps all the way down to 104 yen.

If This Happens, the Yen Will Be The Cause

That would accompany other yen related pairs falling. It wouldn’t just be this one. So again, I think this is more about the Japanese yen than it is the Canadian dollar. Although we do have Canadian GDP coming out on Friday that could change things. But recently all yen related pairs have all moved in the same manner and in the same type of momentum. And I think that continues to be the case going into the future.

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Softer wage growth, a sub-100k increase in nonfarm payrolls, and a higher unemployment rate could raise bets on a December rate cut. On the other hand, strong data could temper expectations for a December Fed rate cut.

In summary, rising bets on a December Fed rate cut on weak labor market data could drag the USD/JPY pair below 147.5. Conversely, upbeat labor market data may drive the pair toward 155.

Other US data include finalized private sector PMI and consumer sentiment numbers. However, barring marked revisions, they will likely play second fiddle to the labor market reports.

Short-term Forecast:

Near-term USD/JPY trends will hinge on upcoming Japanese and US data. Monetary policy divergence favoring the Japanese Yen could drive the USD/JPY below 147.5, while falling bets on a Fed rate cut or BoJ rate hike may push the pair toward 155.

Investors should stay alert, monitoring real-time data, central bank views, and expert commentary to adjust trading strategies accordingly. Don’t miss crucial market movements. Follow our real-time FX updates and stay ahead in the markets here!

USD/JPY Price Action

Daily Chart

The USD/JPY sits below the 50-day and 200-day EMAs, sending bearish price signals.

A USD/JPY break above the 200-day EMA could signal a move toward the 50-day EMA and the 151.685 resistance level. A breakout from the 151.685 resistance level may enable the bulls to target the trend line.

Investors should consider the economic indicators and central bank commentary, potentially affecting USD/JPY price trends.

Conversely, a drop below the 148.529 support level could bring the 147.5 level into play. A fall through 147.5 may give the bears a run at the 145.891 support level.

The 14-day RSI at 38.45 suggests a USD/JPY drop below the 148.529 support level before entering oversold territory (RSI< 30).

December 1, 2024 – Written by James Fuller

STORY LINK Pound to Dollar December Forecast: Trump Trade but Upside Still Expected

After an initial retreat to below 1.25, Bank of America (BoA) expects the Pound to Dollar exchange rate (GBP/USD) to strengthen to 1.38 at the end of 2025 with a further surge to 1.49 at the end of 2026.

ING, however, expects dollar strength to dominate and has a 12-month GBP/USD forecast of 1.24.

After posting gains for 8 successive weeks, the dollar succumbed to profit taking during the week.

In this context, position adjustment ahead of the Thanksgiving Holiday was a key factor.

Seasonal factors could play a significant short-term role.

Danske notes the risk of near-term dollar losses; “December has historically been the most bearish month for the broad USD, with an average monthly decline of 0.8%.”

There were no major US data releases during the week, but policy expectations surrounding a Trump Administration remained a key talking point.

Trump threatened to impose tariffs of 25% on imports from Mexico and Canada on day one of the new Administration which rattled markets.

According to ING; “Investors and corporate treasurers think they know what Donald Trump will mean for the dollar, having seen this film before in 2018-2019. European FX in particular looks the most vulnerable.”

Nordea expects upward pressure on yields; “We think strong economic activity and inflation above 2% inflation combined with an increasing budget deficit could move the US 10-year government rate back up toward 5% from its current level at 4.40%.”

The bank added; “It is hard to know how much the currency will offset the next iteration of tariffs, but we think that it could lead to a substantial appreciation of the dollar. This makes us more comfortable with our bullish dollar forecast.”

It sees a risk of GBP/USD trading below 1.20 next year.

Rhetoric from Bank of England officials maintained expectations of a very cautious stance and only slow interest rate cuts.

BoA expects the dollar will fail to hold initial gains and is bullish on the Pound.

On Sterling, it commented; “Heading into the new year, we have made some adjustments to our GBP profile to highlight our conviction that further upside is likely over the medium-term.”

As far as the dollar is concerned it noted; “Our baseline assumes that the USD will remain strong in the first half of next year, on the back of US tariffs, resilient US economy, and Fed stopping rate cuts early.”

The bank, however, expects that the dollar will retreat later in the year. It added; “This assumes that the US economy eventually resumes its landing, with some of the negative implications of trade protectionism also taking hold.”

HSBC maintains a bullish medium-term dollar stance; “In our opinion, the case for USD strength through 2025 is robust. It is based on expectations of fiscal stimulus and heightened import tariffs that together may slow the pace of Fed easing and keep interest rates elevated.

It added; “If the rest of the world is still languishing, at least in relative terms, then the USD is likely to remain strong.”

HSBC is, however, cautious over near-term trends; “Despite our belief in a strong USD through next year, we are a little wary of just how quickly it has strengthened.”

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