Created on November 19, 2024

• The British pound has bounced quite nicely from the 1.26 level on Monday morning as it looks like we are finally getting a little bit of a reprieve here from the oversold conditions.
• That being said, the US dollar is most certainly overbought at the moment, and I think this move makes sense.
• We are starting to see it across against the dollar, but also other ones such as the Australian dollar against the US dollar, the New Zealand dollar against the US dollar, etc.

The Dollar Got Far Too Overbought

So, with all that being said, I think what we’re seeing here is a little bit of calming down of the dollar bullishness. That does not mean that we are looking at some type of major trend change. I don’t expect that to be the case. I think we get a little bit of a move here, perhaps even most of the week, until we start seeing seller pressure again.

Seller pressure will come in right around the 1.28 level, I suspect, or perhaps just above there at the 200 day EMA. We do get PMI numbers from both manufacturing and services from multiple economies around the world on Friday. So, between now and then, you might have a little bit of profit taking in the greenback.

But I would also say that if we were to break down below the 1.26 level, that could open up the floodgates for another 200 pips. All things being equal, I think you’ve got a couple of days of a relief rally just waiting to get stepped on again. The Federal Reserve, although somewhat dovish, there are questions as to whether or not they can cut in December, and that’s part of what we’ve seen over the last week or so, as the markets are trying to sort out what Jerome Powell and company do next.

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• USD/JPY outlook weakens as the likelihood of a BoJ rate hike in December increased to 54%.

• The Fed’s policy outlook has changed significantly since Trump won.

• A BoJ rate hike might give the yen temporary support.

The USD/JPY outlook shows a stronger yen as Ueda’s hawkish remarks increase the likelihood of a December BoJ rate cut. Meanwhile, the dollar remained steady as markets priced a more gradual pace for Fed rate cuts.

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Bank of Japan governor Kazuo Ueda, in his speech on Monday, noted that Japan’s economy was on the right path. Therefore, the central bank would need to hike rates in the near future. His remarks increased the likelihood of a rate hike in December to 54%, boosting the yen. However, Ueda failed to give clear guidance on the possible timing for the next rate hike. 

The outlook for Japan’s currency had improved slightly when the Bank of Japan started increasing interest rates and the Fed began cutting. However, the Fed’s policy outlook has changed significantly since Trump won the election. The US central bank might not cut rates as much as previously expected since Trump’s policies might increase inflation. 

Consequently, the rate differential between Japan and the US will likely remain wide, weighing on the yen. At the same time, Fed policymakers sounded more hawkish, with Powell stating there was no rush to lower borrowing costs. On the other hand, top officials in Japan are getting worried about a weak yen. Therefore, they are piling pressure on the Bank of Japan to hike rates. 

A BoJ rate hike might give the yen temporary support. However, as long as demand and inflation go up with Trump’s administration, the dollar will remain strong, putting pressure on the yen. 

USD/JPY key events today

Market participants do not expect any key reports from Japan or the US. Therefore, they might continue with the Trump trade.

USD/JPY technical outlook: Bears break up-channel

On the technical side, the USD/JPY price has broken out of its bullish channel, with bears leading the way. The decline started at the 156.51 resistance level. Price action changed to show strong bearish candles, which broke below the 30-SMA. 

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Initially, the price paused at the channel support. However, bears made another attempt at the level and broke below. The price is now facing the 154.00 support level. A break below will allow USD/JPY to reach the 151.74 level.

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Created on November 18, 2024

Potential signal:

I would be a buyer of this pair if we can recapture the ¥164 level. If we get above there, I would put a stop loss at the ¥163 level and aim for the ¥167 level.

• Dear my daily analysis of the yen related pairs, it’s worth noting that the euro initially did try to rally, but then it plunged.
• Because of this, we are now testing the 200 Day EMA, which of course is an important indicator that a lot of people will pay attention to for the longer-term, and therefore think you get a situation where if the buyers are going to return, it’s probably going to be fairly soon.
• All things being equal, this is a fairly ugly candlestick, so it’ll be interesting to see if we can get some of that “mojo back” from the previous move higher.

All things being equal, this is a pair that continues to favor interest rate differentials for the euro, with this being the case, the market is likely to continue to see a lot of people getting involved, as they can get paid at the end of every day to hang on to this pair. Quite frankly, even though the euro itself isn’t necessarily a currency that I liked, it is going to probably fare better than the Japanese yen going forward.

Technical Analysis

The technical analysis for the EUR/JPY currency pair of course suggests that there is a lot of support in this area, as the ¥163 level is an area that we’ve seen a lot of action at previously. That being said, the market is likely to continue to see the area between they are in the ¥162 level as a major “squishy support level.” By doing so, the market is likely to continue to see a lot of value hunters out there trying to get involved, and therefore I think you’ve got a scenario where people will look for a value play to get long again.

If we were to break down below the ¥161 level, then it’s likely that the pair could drop down to the ¥158.50 level, which is an area that we have seen a lot of support at previously. That would be a target for short sellers, but at this point in time I think they will probably be repudiated long before we get to that area.

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• EUR/GBP crosses key 0.8350 threshold but faces resistance near 0.8400, with current trading influenced by UK GDP concerns.
• Potential upside could see the cross target the 100-day SMA at 0.8413, with further resistance at the 200-day SMA at 0.8475.
• Downside risks remain if the pair retreats, with support levels at recent lows of 0.8306 and 0.8260.

The Euro recovered some ground versus the British Pound on Monday as traders digested the latest UK Gross Domestic Product (GDP) report, which hinted the economy is slowing down. The EUR/GBP trades at 0.8359, up by 0.11%.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP extended its gains past the psychological 0.8350 area, though buyers remain unable to crack 0.8400. Additionally, sellers leaning to the 50-day Simple Moving Average (SMA) at 0.8360 keep the cross pair from reaching 0.84 despite printing a daily peak of 0.8373.

If bulls clear 0.8373 and 0.84, the next stop would be the 100-day SMA at 0.8413. A breach of the latter will expose the 200-DMA at 0.8475.

Conversely, if EUR/GBP retreats below 0.8350, the first support would be the November 14 low of 0.8306. Once surpassed, the next floor would be the November 11 swing low of 0.8260.

Oscillators such as the Relative Strength Index (RSI) suggest bulls are gathering momentu, as the RSI cleared its neutral line, turning bullish.

EUR/GBP Price Chart – Daily

Created on November 18, 2024

• The British pound initially did try to rally during the trading session on Friday but gave back gains as it looks like we continue to struggle overall.
• The 1.2650 level is an area that’s been important multiple times in the past, so I think it does make a certain amount of sense that it could offer support.
• But having said that, we have plunged over the last week or so, especially after the election in the United States as the US dollar is king again.
• Between the 1.2650 level and the 1.25 level, I think you’ve got an area that could be rather supportive, and a bounce from here would make a certain amount of sense mainly due to the fact that we’ve just sold off so much.

Interest Rates and More

Interest rates in America are to blame as to why the US dollar continues to strengthen as well as investment in US indices, because quite frankly, US indices continue to be the better performing ones in the world from a longer term perspective, dwarfing most others. So with that being said, I think you still have an argument for the US dollar, but whether or not we just fall from here, or if we get another bounce is the real question.

On a move to the upside, I’d be looking to fade any rally, especially if we get anywhere near the 200 day EMA, which is closer to the 1.2850 level. The Bank of England has been somewhat hesitant to cut rates, but they did recently. So it’ll be interesting to see what the trajectory there is. Federal Reserve comments coming out suggesting that perhaps the Americans might have to pause on any rate cuts. So, the game begins. We’ll have to wait and see how this plays out, but it certainly looks very negative at this point.

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• EUR/USD forecast remains neutral with no clear bias.
• Easing Fed’s dovishness keeps the US dollar strong.
• Market awaits impetus to break out of current range. 

The EUR/USD forecast remains neutral for the day as the economic calendar is light and trading activity is thin. The pair attempted to gain some ground from Friday’s lows but failed to sustain the gains at 1.0570. The broader dollar strength overshadows the recovery in risk assets.

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Geopolitics has again taken center stage with renewed heat from the Russia-Ukraine crisis.  Hence, the risk-off sentiment favors the US dollar and keeps pressure on the Euro. Moreover, the fear of a trade war between the European Union and the US has also deteriorated Euro’s outlook.

After Trump’s victory, market analysts have revised their forecast for the US dollar in 2025, expecting a sharp growth in the currency. Fed’s dovish bets have also eased as the rate cut path could be slowed down. Fed Chair Jerome Powell said he cannot predict Trump’s policy guidance on the future rate cuts. He also said that the economic indicators have not sent signals to ramp up rates. The inflation is slowly moving towards a sustainable 2% target that could help us attain a neutral rate.

Key Events to Watch

There is no significant event on the calendar today. However, the market participants may be looking for some fresh clues in today’s speech of ECB Chir Lagarde regarding monetary policy.

EUR/USD Technical Forecast: Rangebound behavior

The EUR/USD forecast remains elusive as buyers attempt to stay above the 1.0500 mark but fail to sustain the gains beyond 1.0570. The 4-hour chart shows the price remains in a tight range starting from Nov 13th. The pair is perhaps looking for a fresh impetus to break out of the range on either side.

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The 30-SMA lies above the price, showing a sustained bearish momentum, while the RSI has moved up to 40.0 level which indicates the pair is out of oversold condition and the downside momentum may continue.

Technically, the pair needs acceptance above 1.0600 to initiate a bullish momentum, while breaking the 1.0500 mark may bring strong selling towards the 1.0450 area.

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Created on November 18, 2024

• The British Pound’s resilience against the strong US Dollar has not lasted long.
• Over the past six trading sessions, the GBP/USD has been subjected to selling, starting from the resistance level of 1.3008.
• Reaching the support level of 1.2596, the lowest level for the currency pair in six months, and closing the week’s trading stable around the level of 1.2617.
• Technically, we mentioned that the movement of the pound sterling/dollar price below the psychological level of 1.3000 would give the bears momentum and thus prepare for stronger downward breaches, which is what actually happened.

The British Economy: Least Affected by Trump

With Trump’s victory, talk has increased about renewed trade wars and tariffs between global economies led by the United States. However, economic experts have stated that Trump’s policies may have a limited impact due to strong British service exports and the level of the goods trade deficit with the United States. Services are usually exempt from trade wars. Conversely, experts believe that the strength of the US economy under Trump will boost Britain if it increases the value of service exports.

Future of the Cautious Bank of England Policy

Moreover, Expectations have increased that the Bank of England’s policies will remain cautious after the recent announcement that inflation rates in the country rose above the bank’s target. According to the results of the economic calendar data, the British consumer price index may rise this week by an annual rate of 2.2%, according to the average forecast of 24 Bloomberg surveys. This is up from 1.7% last month, when it fell below the Bank of England’s 2% target for the first time in more than three years. At its last meeting, the Bank of England delivered a second interest rate cut by a quarter of a percentage point and sent no indication that rapid easing might be necessary. This came as the stance is more conservative than that of the neighbouring euro zone, and is in line with the calm tone adopted by US Federal Reserve Chairman Jerome Powell recently.

Technical forecasts and signals for the GBP/USD pair today:

Technically, the downward trend of the GBP/USD is gaining strength. The continued strength of the US dollar may give the bears the opportunity to move to stronger support levels, the closest of which is currently 1.2520, then 1.2440, and then 1.2300, which is important for moving technical indicators towards oversold levels. You can consider buying GBP/USD from both the second and last levels without taking risks and activating take-profit and stop-loss orders to ensure the preservation of the trading account. According to recent trades, the pound sterling is recording its worst extended losing streak in 10 years, falling by 2% last week alone, marking the seventh consecutive week of losses.

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As for the performance of technical indicators, the Relative Strength Index (RSI) is on the verge of the 30 level, which confirms its proximity to oversold levels. Therefore, currency traders will be watching for new buying opportunities. As for the MACD indicator, it is also heading towards oversold levels. Ultimately, the Stochastic indicator is settling well below the 20 level and is waiting for a rebound upwards.

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Created on November 18, 2024

• At the end of last week’s trading, the USD/JPY was subjected to selling, starting from the resistance level of 156.75, the highest for the currency pair in three months, with losses extending to the level of 153.86.
• Obviously, this came amid profit-taking before trading closed stable around the level of 154.30.
• Concurrently, the overall trend of the USD/JPY pair remains bullish and may remain so for some time.

US Dollar Stable Around Two-Year High

According to reliable trading platforms, the price of the US dollar index DXY, which measures the performance of the US currency against a basket of other major currencies, is stable around its highest in two years, and according to recent trading, the index has recorded seven consecutive weeks of gains. The US dollar’s gains came primarily in light of the strong US economic performance and hints from US Federal Reserve officials led by Jerome Powell that the bank will not accelerate the pace of reducing US interest rates as long as the economy is strong, especially compared to other global economies that are suffering. Recently, market expectations for a 25-basis point cut in US interest rates in December fell to 62%, down from 86% previously.

Strong US Economic Data

According to economic data, we have observed positive results for US economic sectors that confirm the view of the US Federal Reserve. Most notably, US retail sales exceeded expectations, indicating continued resilience in the consumer sector. Prior to that, the main and core US producer prices were announced as expected, but annual growth rates exceeded expectations, in contrast to the US consumer price index data, which met expectations.

In terms of the performance of US stock indices, over the past week, the S&P 500 lost 2.2%, the Dow Jones fell 2.3%, and the Nasdaq declined 2.9%, reflecting a reversal of the upward trend that followed the US presidential election and was driven by optimism surrounding President Trump’s policies.

USD/JPY Technical Analysis and Expectations Today:

Recently, the gap between expectations regarding the future of US and Japanese central bank policies has widened, which will be in favour of further strengthening the upward trend of the USD/JPY currency pair. Therefore expect to buy the currency pair back from every downward level, and currently, the closest support levels for the USD/JPY are 153.70, 152.20, and 150.00, respectively. Conversely, and according to the performance on the daily chart above, the psychological resistance of 160.00 will remain an important target for the upward trend and for the markets. Consequently, it will then increase talk of imminent Japanese intervention in the forex markets to prevent further decline in the yen. However, this time, there is Trump, who has often talked about countries that devalue their currencies.

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Created on November 18, 2024

• The US Federal Reserve’s affirmation of not rushing to cut interest rates, coupled with Trump’s election victory, has extended the US dollar’s gains.
• This has increased selling pressure on the EUR/USD currency pair, driving it down to 1.0496, its lowest level in a year.
• Last Friday, the euro attempted to rebound but gains were capped at 1.0592, and amidst stronger bearish control, the pair closed the week lower around the support level of 1.0538.

Trump Could Drive Euro/Dollar to Parity

According to Forex trading, the sharp losses that followed the announcement of Trump’s victory, which was followed by strong gains for the US dollar, its highest in two years, increased talk about the possibility of the euro/US dollar moving to the parity price of 1:1 in light of Trump’s trade policies. Especially, if the trade wars between the Eurozone and the United States expand. With the euro dollar breaking the 1.0440 level, these expectations may increase. Specifically, since they coincide with devastating economic and political issues that threaten the future of the single European currency area.

Concerns about Germany Will End Euro Gains

Given the increasingly gloomy outlook for the recovery of the German economy, coupled with the continued easing of European Central Bank policy, you should consider that any gains for the euro in the forex market may be subject to a rapid collapse. According to reliable trading platforms, the EUR/USD is around 1.0538, the EUR/JPY is around 162.64, the EUR/AUD is around 1.6300, and the EUR/GBP is around 0.8350, according to the latest trading price updates.

Will Germany See New Leadership?

The economic recession could hit the current German leadership. Markets are watching the agenda of the Christian Democratic Union leader who is vying to succeed Olaf Scholz. Dear reader, beware that the return of Donald Trump means that the next German government may have to deal with a global trade war, complicated relations with Beijing, and possibly difficult choices regarding the conflict in Ukraine – with extremist parties ready to capitalize on any misstep. Amid this tension, the Council of Economic Experts, which advises the German government, has scrapped its economic growth forecast for 2024 to predict a second year of contraction, followed by a small economic growth rate of 0.4% in 2025.

European Central Bank Policies

The US Federal Reserve’s recent affirmation that it will not rush to cut interest rates if the US economy is strong is widening the gap between it and the European Central Bank’s policies, which are following a rate-cutting path and will not change its direction in the face of current European political and economic concerns. Obviously, this would be a significant downward pressure factor for the EUR/USD in the coming months. Recently, the European Central Bank has cut interest rates three times since last June due to declining inflation and a slowdown in the eurozone economy. Currently, It is widely expected that interest rates will be cut again in December 2024, when policymakers receive updated forecasts that will help them assess the outlook for the eurozone.

EUR/USD Technical Analysis and Forecast:

Technically, the downward trend of the EUR/USD currency pair is getting stronger by breaking the support at 1.0500 consolidates the bears’ control. According to the direction of the technical indicators, the next most important support levels will be 1.0440 and 1.0390, which in turn will move the technical indicators towards strong oversold levels and increase expectations for the EUR/USD price to move towards the parity price. Conversely, and on the same time frame, the daily chart for a break of the downward trend on the bulls will push the EUR/USD price towards the resistance levels of 1.0750 and 1.0840, respectively.

We advise you to sell the EUR/USD pair from each upward level.

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Created on November 18, 2024

Potential signal:

I would be a buyer of this pair if we can recapture the ¥164 level. If we get above there, I would put a stop loss at the ¥163 level and aim for the ¥167 level.

• Dear my daily analysis of the yen related pairs, it’s worth noting that the euro initially did try to rally, but then it plunged.
• Because of this, we are now testing the 200 Day EMA, which of course is an important indicator that a lot of people will pay attention to for the longer-term, and therefore think you get a situation where if the buyers are going to return, it’s probably going to be fairly soon.
• All things being equal, this is a fairly ugly candlestick, so it’ll be interesting to see if we can get some of that “mojo back” from the previous move higher.

All things being equal, this is a pair that continues to favor interest rate differentials for the euro, with this being the case, the market is likely to continue to see a lot of people getting involved, as they can get paid at the end of every day to hang on to this pair. Quite frankly, even though the euro itself isn’t necessarily a currency that I liked, it is going to probably fare better than the Japanese yen going forward.

Technical Analysis

The technical analysis for the EUR/JPY currency pair of course suggests that there is a lot of support in this area, as the ¥163 level is an area that we’ve seen a lot of action at previously. That being said, the market is likely to continue to see the area between they are in the ¥162 level as a major “squishy support level.” By doing so, the market is likely to continue to see a lot of value hunters out there trying to get involved, and therefore I think you’ve got a scenario where people will look for a value play to get long again.

If we were to break down below the ¥161 level, then it’s likely that the pair could drop down to the ¥158.50 level, which is an area that we have seen a lot of support at previously. That would be a target for short sellers, but at this point in time I think they will probably be repudiated long before we get to that area.

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