• The Japanese Yen draws haven flows amid concerns over Trump’s tariff plans and geopolitical risks. 
• The USD languishes near the weekly low amid sliding US bond yields and weighs on the USD/JPY pair.
• BoJ rate-hike uncertainty warrants caution for the JPY bulls ahead of the crucial US inflation data. 

The Japanese Yen (JPY) buying remains uninterrupted on Wednesday, which, along with a modest US Dollar (USD) weakness, drags the USD/JPY pair below the 152.00 mark, or a three-week low during the early European session. Against the backdrop of geopolitical risks stemming from the protracted Russia-Ukraine war, concerns about US President-elect Donald Trump’s tariff plans turn out to be key factors driving flows towards the safe-haven JPY. 

Furthermore, expectations that Trump’s US Treasury Secretary nominee, Scott Bessent will restrain budget deficits continue to drag the US Treasury bond yields lower. This, in turn, keeps the USD bulls on the defensive near the weekly low and offers additional support to the lower-yielding JPY. That said, the uncertainty over the Bank of Japan’s (BoJ) rate-hike plans could act as a headwind for the JPY ahead of Wednesday’s important US macro releases. 

Japanese Yen bulls retain near-term control amid flight to safety, sliding US bond yields

• Concerns that US President-elect Donald Trump’s tariffs would trigger trade wars, and impact the global economy, continue to drive some haven flows towards the Japanese Yen. 
• Scott Bessent’s nomination as the US Treasury secretary provided some respite to US bond investors and dragged the benchmark 10-year US Treasury yield to a two-week low on Monday.
• Data released on Tuesday showed broadening service-sector inflation in Japan, keeping the door open for another rate hike by the Bank of Japan at its next policy meeting in December. 
• Japanese Prime Minister Shigeru Ishiba said on Tuesday that he would ask companies to implement significant wage hikes at the annual “Shuntō” negotiations next spring.
• The November FOMC meeting minutes revealed that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated.
• Officials expressed confidence that inflation is easing and the labor market is strong, which should allow the Federal Reserve to cut rates further, albeit at a gradual pace.
• According to the CME Group’s FedWatch Tool, traders are currently pricing in a 63% chance that the Fed will lower borrowing costs by 25 basis points in December. 
• The US Dollar struggles to gain any meaningful traction and languishes near the weekly low touched on Tuesday, exerting additional pressure on the USD/JPY pair. 
• Lebanon-based Hezbollah militant group said that it launched drones towards Israel on Tuesday night, while Israel launched air strikes on Beirut’s southern suburbs.
• Moments later, US President Joe Biden announced that Lebanon and Israel have agreed to the ceasefire deal, which comes into effect from 02:00 GMT this Wednesday.
• Traders now look forward to the first revision of the US Q3 GDP print and the US Personal Consumption Expenditure (PCE) Price Index for some meaningful impetus.
• The market attention will then shift to a slew of Japanese macro data, including Tokyo’s Core CPI report, due for release during the Asian session on Friday. 

USD/JPY acceptance below the 152.00 pivotal support sets the stage for deeper losses

From a technical perspective, the overnight close below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the subsequent downfall favors bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and support prospects for a further USD/JPY depreciating move. Hence, some follow-through weakness towards the very important 200-day SMA, currently pegged around the 152.00 mark, looks like a distinct possibility. A convincing break below the latter could expose the monthly swing low, around the 151.30-151.25 region. 

On the flip side, the 153.00 round figure might now act as an immediate hurdle ahead of the 153.25-153.30 region. A sustained strength beyond the latter might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 154.00 mark. The upward trajectory could extend further towards the 154.60 intermediate hurdle en route to the 155.00 psychological mark and the next relevant hurdle near the 155.35-155.40 area.

Created on November 27, 2024

• A surge in sentiment following Trump’s absence of threats to impose tariffs on the Eurozone helped the EUR/USD currency pair rebound to a high of 1.0544.
• However, the EUR/USD pair quickly returned to its broader downward trajectory, stabilizing around the 1.0460 level at the time of writing.
• According to reliable trading platforms, the EUR/USD’s attempts to rebound were halted after the release of the minutes of the latest meeting of the US Federal Reserve.

The US Central Bank: Cautious in cutting interest

According to the minutes of the latest meeting of the US Federal Reserve, Fed officials indicated broad support for a cautious approach to future US interest rate cuts considering the strength of the US economy and declining inflation. The minutes stated, “Participants expected that if incoming data were consistent with their current assessments, with inflation continuing to move down sustainably toward 2% and the U.S. economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral policy stance over time.”

The US Federal Reserve cut its benchmark interest rate by a quarter of a percentage point at its meeting this month to a range of 4.5%-4.75%, following a larger-than-usual half-point cut in September. In the same month, Fed Chairman Jerome Powell stated that the US economy is not sending signals to policymakers that they need to rush to cut interest rates.

Meanwhile, US Federal Reserve officials will meet for their last policy meeting of the year 2024 on December 17 and 18.

US Inflation and Its Impact on Fed Policy

Also, the minutes showed that some officials said the Fed could pause U.S. interest rate cuts and keep borrowing costs at a contained level if U.S. inflation remains high. Some officials have suggested that cuts could be accelerated if the economy or labour market deteriorates. Policymakers also cited the lack of clarity on the so-called neutral rate, a level of policy that neither restricts nor stimulates economic growth, as a reason for caution.

As for the U.S. labour market, U.S. monetary policymakers saw downside risks to employment and growth as “somewhat reduced.” Officials generally assessed that there was “no sign of rapid deterioration” in the U.S. labour market. On inflation, officials reported that price growth has slowed significantly from its peak but noted that the core measure, which excludes food and energy, remains “moderately elevated.”

You should expect inflation rates to increase during the Trump administration as his trade wars will inevitably result in higher inflation rates.

Euro outlook remains cautious

Investors remain cautious due to the ongoing economic gloom in Europe and growing concerns about the potential impact of the incoming Trump administration. Before taking office, Trump doubled down on his threats to impose tariffs, indicating a 10% increase in tariffs on China and a 25% increase on Mexico and Canada. At the same time, he also warned of imposing large tariffs on European goods, especially cars, claiming that the European Union “will pay a big price.”

As is well known, these threats increase the challenges facing Europe’s struggling manufacturing sector. Overall, this gloomy outlook has prompted investors to increase bets on aggressive monetary easing by the European Central Bank. While a 25-basis point interest rate cut next month is fully priced in, the probability of a larger 50 basis point cut has risen to 58%. These factors will continue to weigh on the performance of the euro.

EUR/USD Analysis Today:

There is no change in our technical view of the performance of the euro against the US dollar EUR/USD. Technically, the general trend remains bearish and the expectations for the future parity rate of the most popular currency pair in the forex market are increasing and closer than before. The implementation of Trump’s threats and global geopolitical tensions, in addition to the worsening economic and political situation in Germany, will remain valid factors for further collapse of the Euro Dollar price in the coming months. Currently, the closest support levels for the Euro Dollar are 1.0400, 1.0335 and 1.0200, respectively, which are sufficient to push all technical indicators towards strong oversold levels.

Today, the Euro Dollar pair will be affected by the announcement of a package of important US economic data before tomorrow’s holiday, the most prominent of which are the US GDP growth reading, the number of weekly jobless claims, and US durable goods orders, in addition to the US Federal Reserve’s preferred inflation reading.

EUR/USD Trading Signals:

In the above-mentioned narrative, we recommend selling the Euro Dollar currency pair EUR/USD from every upward level.

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• Traders sought safety after Trump’s tariff vows raised fears of trade wars.

• The dollar rallied at the prospects of stronger economic performance.

• Japan’s services producer price index increased by 2.9% in October.

The USD/JPY price analysis shows a strengthening yen amid safe-haven demand and increasing Bank of Japan rate cut expectations. Meanwhile, the dollar paused its rally as market participants awaited key reports including inflation, unemployment claims, and GDP.

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The yen rallied on Tuesday and Wednesday as traders sought safety after Trump’s tariff vows raised fears of trade wars. The US president-elect promised to impose a 25% tariff on goods from Mexico, Canada and China. This news reduced risk appetite and boosted safe-haven currencies like the yen. Tariffs will significantly hurt major economies like China and Canada, impacting the global economy. 

On the other hand, the dollar rallied at the prospects of stronger economic performance. Tariffs imposed on imported goods will increase demand for local goods and boost the economy. However, by Wednesday, the rally paused as market focus shifted to looming US economic data. 

Elsewhere, data revealed that Japan’s services producer price index increased by 2.9% in October after a 2.8% rise in the previous month. Higher inflation increases the likelihood that the Bank of Japan will hike rates in December, lifting the yen.

Meanwhile, the US will release reports on GDP, unemployment claims, and inflation. Economists expect the economy to expand by 2.8%, holding from the previous reading. Meanwhile, the core PCE price index might increase by 0.3% as it did in the previous month. Upbeat economic data will lower the likelihood of a December rate cut, boosting the dollar. On the other hand, downbeat data will solidify rate-cut expectations.

USD/JPY key events today

• US prelim GDP q/q
• US unemployment claims
• US core PCE price index m/m

USD/JPY technical price analysis: Bears break below 151.74

On the technical side, the USD/JPY price is on the verge of breaking below the 151.74 support level. The price has fallen sharply after detaching from the 154.51 key level. It trades well below the 30-SMA, indicating a steep decline. Meanwhile, the RSI has dipped into the oversold region, showing solid bearish momentum. 

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If the price closes well below the 151.74 level, the decline will continue to the next support level. On the other hand, if USD/JPY fails to breach the support, it might pull back to retest the 30-SMA before making another attempt.

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• EUR/USD trades in a narrow channel following Tuesday’s indecisive action.
• The US economic calendar will feature several high-impact data releases.
• The pair could extend its recovery once it clears 1.0520 resistance.

EUR/USD failed to make a decisive move in either direction on Tuesday and closed the day virtually unchanged slightly below 1.0500. The pair moves sideways in a narrow channel early Wednesday as investors await macroeconomic data releases from the US.

After dipping below 1.0450 on Tuesday, EUR/USD recovered its losses in the American session as the mixed data from the US and the modest improvement seen in risk mood made it difficult for the US Dollar (USD) to find demand.

Later in the day, the US Bureau of Economic Analysis will publish its second estimate of the annualized Gross Domestic Product (GDP) growth for the third quarter and release the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s (Fed) preferred gauge of inflation, for October.

Investors expect the core PCE Price Index to rise 0.3% on a monthly basis to match September’s increase. A reading at or above the market expectation could support the USD with the immediate reaction. On the other hand, a print below analysts’ estimate could weigh on the USD and help EUR/USD push higher.

Ahead of the Thanksgiving holiday, the US economic calendar will feature other important data releases as well, making it difficult for market participants to assess the impact of these data on the USD’s valuation. The US Department of Labor will publish the weekly Initial Jobless Claims alongside the US Census Bureau’s Durable Goods Orders figures for October.

EUR/USD Technical Analysis

EUR/USD faces first resistance at 1.0520, where the upper limit of the descending regression channel meets the 50-period Simple Moving Average (SMA). In case the pair rises above this level and starts using it as support, 1.0570 (static level) could be seen as next hurdle before 1.0600 (100-period SMA).

On the downside, immediate support is located at 1.0480 (20-period SMA) ahead of 1.0430 (mid-point of the descending channel) and 1.0400 (static level).

• The EUR/JPY cross may depreciate further as the daily chart analysis suggests a prevailing bearish bias.
• A corrective move could be indicated once the 14-day RSI falls below the 30 mark.
• The primary support appears at the descending channel around the psychological level of 159.00.

EUR/JPY extends its losses for the second consecutive day, trading around 159.60 during the Asian hours on Wednesday. Technical analysis of the daily chart shows the pair is moving downwards within the descending channel pattern, suggesting an ongoing bearish bias.

Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly below the 30 level, confirming the bearish sentiment for the EUR/JPY cross. A dip below the 30 mark would indicate an oversold situation and direct a corrective rebound.

In terms of support, the EUR/JPY cross may find primary support at the lower boundary of the descending channel around the psychological level of 159.00, followed by a two-month low of 158.10, recorded on September 30. A break below this level could strengthen the bearish sentiment and put downward pressure on the currency cross to navigate the area around its 11-month low of 154.41, which was recorded in December 2023.

On the upside, the EUR/JPY cross may approach to test the upper boundary of the descending channel near the nine-day Exponential Moving Average (EMA) at the 161.80 level, followed by the 14-day EMA at 162.43. A decisive breach above these levels would cause the emergence of the momentum shift from bearish to bullish and support the pair to re-test a four-month high of 166.69, a level last seen on October 31.

EUR/JPY: Daily Chart

• EUR/GBP might be unfolding a bullish leg within a sideways range.  
• The MACD has crossed its signal line and is above zero, – a bullish sign. 

EUR/GBP is clawing its way back up within its multi-week range. It is possible that this may be the start of an up leg within the range towards the ceiling at around 0.8450.

The pair is probably in a sideways trend on a short-term basis and given the principle of technical analysis that prices are more likely to extend in the direction in which they are trending it will probably continue oscillating in its sideways trend until it makes a decisive breakout either higher or lower. It is overall at two and a half year lows. 

EUR/GBP 4-hour Chart 

EUR/GBP made a false break lower on November 8 and then, a second time, on an intraday basis, on November 22. On both occasions it failed to follow-through lower, however, and instead just recovered back inside the range. 

Because it is in a sideways trend the odds favor a continuation sideways, which suggests the possibility of a recovery from the current level up to ceiling. 

A break above 0.8375 would probably lead to a continuation higher to a target at 0.8440, just below the ceiling. 

The Moving Average Convergence Divergence (MACD) momentum indicator, which is a reliablñe indicator in sideways markets has crossed above its red signal line and is also now above the zero line suggesting a bullish short-term bias.

Created on November 26, 2024

• The EUR/USD currency pair’s attempt to recover at the end of last week with gains to the 1.0530 level quickly evaporated and returned downward this week.
• Today, the euro-dollar pair plummeted today to the support level of 1.0425 ahead of important US data.
• The performance confirms our technical view that the EUR/USD will remain in its downward range and any upward rebound may be a selling opportunity.

Will the EUR/USD rise in the coming days?

So far, most technical and momentum indicators are still clear in expecting further decline in the performance of the EUR/USD pair. Accordingly you should expect more weakness. Subsequently, if the selling wave returns, the lowest support levels recorded by the currency pair in recent trading sessions at 1.0331, the lowest for the currency pair in two years, will be retested, followed by a test of the support level at 1.02. However, tactically, there is room for some strength in the coming days with a correction of the recent excessive selling levels. The relative improvement in the performance of the currency pair came after the announcement of the candidate for the position of US Treasury Secretary, which gave some optimism to investors and markets.

The State of the German Economy and Its Impact

According to forex market trading, the euro price was affected by economic data that showed that the German Ifo business climate index fell from 86.5 in October to 85.7 in November, weaker than the expected reading of 86.0. In the same announcement, the current conditions index fell from 85.7 to 84.3 and the expectations index fell from 87.3 to 87.2. Overall, the reading confirms that the German economy is still in recession. Therefore, the outlook for next year 2025 is also weak as the loss of competitiveness in industry. Moreover, the adverse demographic structure is likely to offset any boost from recovery in real household incomes and monetary easing.

Concurrently, the BCI index is consistent with a sharp contraction in German GDP, as is last week’s November Purchasing Managers’ Index survey. Also, the composite Purchasing Managers’ Index fell further into recession territory in November. The next major release will be eurozone inflation figures, which could determine whether the European Central Bank (ECB) will cut interest rates by a large 50 basis points in its interest rate decision next month.

European Inflation Figures Under the Microscope

According to this week’s economic calendar, forex traders will be focusing on the official German inflation figures next Thursday. Similarly, Spain releases inflation figures on the same day. As is well known, the German and Spanish releases often serve as a good guide to where the Eurozone inflation release – due on Friday – will fall and because of this, the impact on the Euro could be significant if there are any surprise deviations from expectations.

Meanwhile, Eurozone inflation is forecast to rise to 2.4% from 2.0% in October, which would ensure the ECB sticks to a 25-basis point cut next month. However, if inflation data comes in lower than expected, the ECB may consider cutting interest rates by a larger amount, especially in light of last week’s disappointing PMI data. If so, the euro could come under pressure against other major currencies, especially the US dollar.

Trump’s Policies Continue to Support the US Dollar

The US dollar continued to make further gains against other major currencies. Optimism was dampened by the name of the new US Treasury Secretary. Furthermore, Trump promised that he would impose an additional 10% tariff on goods from China. Comparably, he pledged to impose 25% tariffs on all products from Mexico and Canada, which led to a decline in their currencies by about 1% each. Simultaneously, the US dollar index DXY returned to stability above the 107.00 resistance, near its highest level in two years.

In general, risk sentiment is now collapsing due to the risks of Trump’s tariffs – the dollar is seen as a safe haven. According to reliable trading platforms, the US dollar recorded gains today against all currencies except the Japanese yen in Asian trading. In the same performance, the 10-year Treasury yield rose by 2 basis points to 4.29% after declining by 13 basis points in the last session.

EUR/USD Analysis Today:

Technically, the overall trend of the EUR/USD currency pair remains downward. As we previously advised, dear reader, you should expect any gains for the EUR/USD currency pair to evaporate quickly and the expectations of the EUR/USD parity become stronger. Currently, the closest support levels are 1.0420, 1.0330, and 1.0200, which are sufficient to push all technical indicators towards oversold levels.

EUR/USD Trading Signals:

No matter how strong and accurate the analysis is, you should always work with a trading strategy of not risking and activating profit and stop loss orders to ensure the safety of your trading account from any price surprises, especially in the Trump era.

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Created on November 26, 2024

• During the trading session on Monday, we have seen a little bit of a pullback in the British pound against the Japanese yen to test the crucial 200 day EMA.
• That being said, the 200 day EMA has held so far, and it looks like we are trying to build up enough pressure to turn around and break to the 195 yen level.
• If we can clear that level, then I think it opens up the possibility of a move to the 200 yen level.

All things being equal, GBP/JPY is a pair that is highly sensitive to risk appetite, so you do have to keep that in mind. So, it’ll be interesting to see how we behave over the next couple of days as this pullback has been a little bit of relief for those who got a little stretched. And now we have to see whether or not sideways action will build enough of a base here in order to continue to go higher. If we do break higher and clear the 50 day EMA, then I think we’ve got a situation where the market goes looking to the 200 yen level. If we can break above there, then the 207.50 yen level could be the target.

If We Break Down

On a breakdown below the 200-day EMA, I believe that the 190 yen level will offer a significant amount of support. Keep in mind that the Bank of Japan continues to be fairly loose with its monetary policy, despite the fact that occasionally they will jawbone the market. The interest rate differential does pay you at the end of every day, and I think a lot of traders will continue to pay close attention to this on a move above the 195 yen level, I do think that more traders will jump in and try to catch a little bit of a FOMO trade at that point.

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Created on November 26, 2024

• The British Pound has pulled back just a bit during the early hours on Monday as we continue to see a lot of noisy behavior.
• With this being said, I think we’ve got a situation where the 1.25 level continues to offer significant support, an area that also has been very important multiple times.

If the GBP/USD market were to bounce from here again, then we could see a move to the 1.27 level, which is an area where we had bounced from and then came back below it, only to bounce back to the downside once we reached it again. In other words, there should be a lot of market memory in this area. If we can break the above there, then we have the possibility of going to look at the 200-day EMA.

On the Other Hand

On the other hand, if we were to break down below the 1.25 level, then it opens up the possibility of a move down to the 1.23 level, an area that I think will continue to be important as it also has a lot of market memory. All things being equal, the US dollar is by far one of the strongest currencies in the world right now. And while the British pound itself isn’t too bad, it’s not the US dollar.

So, I still think this is a market that rallies will get faded at the first signs of exhaustion, and therefore I’m looking for selling opportunities. If we do break above here, then I think we’ve got a lot of work to do to turn things around. This isn’t to say that we won’t get the bounce that looks like it’s trying to set up, because quite frankly, a little bit of profit taking might make a certain amount of sense. But nonetheless, at this point in time, I think you’ve got a lot of work to go before we can truly turn things around for a longer term move.

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