• Risk appetite increased after China announced more stimulus measures.

• All eyes are now on US inflation figures.

• The pound remained fragile due to the recent bond market rout.

The GBP/USD price analysis shows some relief for the pound as market participants await crucial US inflation data. Nevertheless, the long-term outlook remains clouded as traders worry about UK finances amid turmoil in the bond market.

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The dollar eased slightly at the start of a new week. Risk appetite increased after China announced more measures to support its weak economy and the yuan. However, dollar bulls remain strong after the recent upbeat jobs report. Market participants expect the Fed to lower borrowing costs by 30-bps this year. This is a drop from the 50-bps expected at the start of the year. 

All eyes are now on US inflation figures, which will continue shaping the outlook for rate cuts. Economists expect consumer inflation to increase by 0.3%, similar to the previous reading. At the same time, they expect the annual figure to hold at 2.6%. A bigger-than-expected figure will lower the likelihood of a Fed rate cut this year. On the other hand, a downbeat report might bring back bets for two rate cuts this year. However, before the CPI report, traders will focus on wholesale inflation.

Elsewhere, the pound remained fragile due to the recent bond market rout. Market participants worry that the yield rally will force the government to adjust fiscal policy, hurting the economy.

GBP/USD key events today

GBP/USD technical price analysis: Bears aim for a new low in the downtrend

On the technical side, the GBP/USD price is dropping after retesting the 1.2250 key level. Bears have maintained a solid decline since the price broke below the 1.2400 support level. However, the downtrend paused at the 1.2102 level. Nevertheless, the bearish bias remains strong since the price still trades below the 30-SMA with the RSI in bearish territory. 

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Furthermore, if bears are ready to resume the downtrend, the price will soon break below the 1.2102 level to make a lower low. However, if the level holds firm, GBP/USD will make a double bottom, which could lead to a bullish reversal. The trend will only change when the price breaks above the SMA and the RSI above 50.

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Created on January 14, 2025

My previous GBP/USD signal on 6^th January was not triggered as there was no bearish price action when the two nearest resistance levels were first reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be entered prior to 5pm London time today.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2188 or $1.2166 or $1.2096.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2245 or $1.2270 or $1.2324.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

GBP/USD Analysis

I wrote in my previous GBP/USD forecast last week that the price was likely to respect the new support level at $1.2435 as the day’s pivotal point.

This was a good call as the price did rise fairly strongly once it broke above that level, and it reached $1.2500 (and quite far beyond) just as I forecasted.

The technical and fundamental/sentimental pictures have become more bearish over the past week, although that may have changed over the last day or so.

Until yesterday, the price fell quite strongly, within the bearish price channel represented by the linear regression analysis shows within the price chart below. The price reached a new 1-year low below $1.2100, partly on US Dollar strength (the US Dollar index was making a new 2-year high at the time), and partly on bets against the British Pound which have emerged in the markets as the new British government’s fiscal projections are regarded with some incredulity by the capital markets, and the government plunges rapidly to very unpopular ratings in opinion polls.

Despite this bearish picture, we see a rebound from yesterday, partly due to the news that the incoming Trump administration may be prepared to implement tariffs on US important gradually rather than all at once, which weakened the Dollar a bit.

The price has made a weak bullish breakout beyond the top of the descending price channel and now faces what looks likely to be a very pivotal resistance zone centred on $1.2250. If the price can get established above $1.2265 today, it will probably rise to $1.2324. However, so far we are seeing a bearish double top at $1.2265, so the price might remain below this level.

There is nothing of high importance due today concerning the GBP. Regarding the USD, there will be a release of PPI data today at 1:30pm London time.

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• USD/JPY hovers at the mid-range of the 157.00-158.00, set to finish in the red.
• Uptrend’s extension lies above 158.00 and 158.88, but BoJ intervention fears loom.
• A drop below the Tenkan-sen, opens the door towards 157.00.

The US Dollar losses some ground against the Japanese Yen on Monday amid a bank holiday in Japan as the USD/JPY shrugged off a rise in the US 10-year T-note yield. At the time of writing, the pair trades at 157.54, down by 0.11%.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart remains upward biased, but faces strong resistance at 158.00, amid fears that the Bank of Japan (BoJ) might intervene in the Forex markets. Momentum favors further upside, after the 50-day Simple Moving Average (SMA) at 154.58 crossed above the 200-day SMA, forming a ‘golden cross,’ implying that further upside is seen.

For a bullish continuation, the USD/JPY first ceiling level would be the 158.00 figure followed by the January 10 peak hit following US NFP data on Friday at 158.88. A breach of the latter will expose 159.00.

If USD/JPY tumbles below Tenkan-sen, the next support would be the January 6 low of 156.24, followed by the December 31 pivot low of 156.02.

USD/JPY Price Chart – Daily

• EUR/USD forecast remains bearish ahead of US CPI and Chinese GDP data
• Market Sentiment: Strengthening bond yields keeps EUR/USD, stocks under bearish pressure
• Economic Concerns: Weak Eurozone and Chinese growth add to Euro weakness

The EUR/USD has been struggling to find its footing, slipping to a new multi-year low today of just below the 1.0200 handle. The pair remains on a downward trajectory, now eyeing a potential fourth consecutive monthly decline. The bearish momentum has been fuelled by a surging US dollar, which has been supported on the back of stronger labour market data and expectations inflationary pressures will return under Trump. Combined with weak economic data from the Eurozone and China, this is all helping to keep the EUR/USD forecast and trend bearish.

EUR/USD forecast: How high will the dollar rise?

The greenback continues to dominate, supported by rising US bond yields and robust economic data. Investors have been repricing US interest rates higher, driven by persistent inflation concerns and unexpectedly strong labour market data. December’s non-farm payrolls report showed remarkable resilience, with job gains significantly outpacing expectations. While revisions shaved 8,000 jobs off previous months’ totals, the unemployment rate dipped to 4.1% from 4.2%, reinforcing the case for a prolonged pause in Federal Reserve policy shifts. Wage growth, although steady, underscores a resilient labour market, adding to the dollar’s appeal.

As a result, US bond yields have climbed further, with the benchmark 10-year yield nearing its October highs of 5.02%. This upward trajectory in yields continues to attract capital into the US dollar, keeping the EUR/USD forecast under bearish pressure.

Rising yields also hurting risk appetite

Of course, it is not just the euro that the dollar is rising against. Rising bond yields and diminishing hopes for further US rate cuts have given the Dollar Index a solid boost, pushing it higher for the seventh straight week and setting it up for a fourth consecutive monthly gain. On Friday, US 30-year bond yields hit 5%, inching closer to October’s peak of 5.178%, while the 10-year yields aren’t far behind, hovering near 4.80%.

It’s not just the US seeing this trend. In Europe, bond yields are climbing steadily, with German, French, Spanish, and Italian yields all extending their upward momentum. Over in the UK, the 10-year yield has surged past last year’s high of 4.755%, touching levels not seen since the 2008 financial crisis at nearly 5%. Even Japan has joined the mix, with its 10-year yields hitting 1.20%, their highest level since May 2011, although still relatively modest.

The takeaway? Bond yields are rising across the board, fuelled by resilient US economic data and persistent global inflation—except for China. With higher yields offering attractive returns, investors may hesitate to buy overbought growth stocks and government debt is proving a tempting alternative. This is an additional bearish factor for risk-sensitive currencies like the euro.

US CPI and Chinese GDP among this week’s highlights

All eyes will be on the US Consumer Price Index (CPI) release this Wednesday. Any indication of stubborn inflation could dash any remaining hopes of a Fed rate cut in the first half of the year, further bolstering the dollar. Conversely, a surprisingly weak CPI print could offer the Euro some breathing room, although a significant shift in market sentiment seems unlikely without a major downside surprise.

Later in the week, Friday’s Chinese GDP release, along with retail sales and industrial production data, will also be in the spotlight. The Chinese economy’s sluggish performance has already impacted global markets, with weaker growth dampening demand for European exports. Any further signs of economic slowdown in China could exacerbate concerns about the Eurozone’s growth prospects, amplifying the bearish EUR/USD forecast.

Where is EUR/USD headed?

Source: TradingView.com

The near-term outlook for EUR/USD remains tilted to the downside, with the pair likely to test and possibly break below the parity (1.000) level if data this week favours the dollar, or we see further rising in US yields. Persistent geopolitical tensions and weak economic performance in the Eurozone only add to the challenges for the Euro. Traders should stay cautious and watch for significant shifts in market sentiment, particularly around Wednesday’s CPI data. While the dollar’s bullish momentum shows no immediate signs of slowing, a potential inflection point could arise if inflation surprises to the downside or Chinese data beats expectations, offering a glimmer of hope for the Euro.

In terms of resistance levels to watch, 1.0300-1.0340 now marks a key resistance zone, having previously served as support. The bearish trend line comes in just above this zone, too. While below these levels, the path of least resistance on the EUR/USD is unambiguously bearish.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• EUR/USD forecast remains bearish ahead of US CPI and Chinese GDP data
• Market Sentiment: Strengthening bond yields keeps EUR/USD, stocks under bearish pressure
• Economic Concerns: Weak Eurozone and Chinese growth add to Euro weakness

The EUR/USD has been struggling to find its footing, slipping to a new multi-year low today of just below the 1.0200 handle. The pair remains on a downward trajectory, now eyeing a potential fourth consecutive monthly decline. The bearish momentum has been fuelled by a surging US dollar, which has been supported on the back of stronger labour market data and expectations inflationary pressures will return under Trump. Combined with weak economic data from the Eurozone and China, this is all helping to keep the EUR/USD forecast and trend bearish.

EUR/USD forecast: How high will the dollar rise?

The greenback continues to dominate, supported by rising US bond yields and robust economic data. Investors have been repricing US interest rates higher, driven by persistent inflation concerns and unexpectedly strong labour market data. December’s non-farm payrolls report showed remarkable resilience, with job gains significantly outpacing expectations. While revisions shaved 8,000 jobs off previous months’ totals, the unemployment rate dipped to 4.1% from 4.2%, reinforcing the case for a prolonged pause in Federal Reserve policy shifts. Wage growth, although steady, underscores a resilient labour market, adding to the dollar’s appeal.

As a result, US bond yields have climbed further, with the benchmark 10-year yield nearing its October highs of 5.02%. This upward trajectory in yields continues to attract capital into the US dollar, keeping the EUR/USD forecast under bearish pressure.

Rising yields also hurting risk appetite

Of course, it is not just the euro that the dollar is rising against. Rising bond yields and diminishing hopes for further US rate cuts have given the Dollar Index a solid boost, pushing it higher for the seventh straight week and setting it up for a fourth consecutive monthly gain. On Friday, US 30-year bond yields hit 5%, inching closer to October’s peak of 5.178%, while the 10-year yields aren’t far behind, hovering near 4.80%.

It’s not just the US seeing this trend. In Europe, bond yields are climbing steadily, with German, French, Spanish, and Italian yields all extending their upward momentum. Over in the UK, the 10-year yield has surged past last year’s high of 4.755%, touching levels not seen since the 2008 financial crisis at nearly 5%. Even Japan has joined the mix, with its 10-year yields hitting 1.20%, their highest level since May 2011, although still relatively modest.

The takeaway? Bond yields are rising across the board, fuelled by resilient US economic data and persistent global inflation—except for China. With higher yields offering attractive returns, investors may hesitate to buy overbought growth stocks and government debt is proving a tempting alternative. This is an additional bearish factor for risk-sensitive currencies like the euro.

US CPI and Chinese GDP among this week’s highlights

All eyes will be on the US Consumer Price Index (CPI) release this Wednesday. Any indication of stubborn inflation could dash any remaining hopes of a Fed rate cut in the first half of the year, further bolstering the dollar. Conversely, a surprisingly weak CPI print could offer the Euro some breathing room, although a significant shift in market sentiment seems unlikely without a major downside surprise.

Later in the week, Friday’s Chinese GDP release, along with retail sales and industrial production data, will also be in the spotlight. The Chinese economy’s sluggish performance has already impacted global markets, with weaker growth dampening demand for European exports. Any further signs of economic slowdown in China could exacerbate concerns about the Eurozone’s growth prospects, amplifying the bearish EUR/USD forecast.

Where is EUR/USD headed?

Source: TradingView.com

The near-term outlook for EUR/USD remains tilted to the downside, with the pair likely to test and possibly break below the parity (1.000) level if data this week favours the dollar, or we see further rising in US yields. Persistent geopolitical tensions and weak economic performance in the Eurozone only add to the challenges for the Euro. Traders should stay cautious and watch for significant shifts in market sentiment, particularly around Wednesday’s CPI data. While the dollar’s bullish momentum shows no immediate signs of slowing, a potential inflection point could arise if inflation surprises to the downside or Chinese data beats expectations, offering a glimmer of hope for the Euro.

In terms of resistance levels to watch, 1.0300-1.0340 now marks a key resistance zone, having previously served as support. The bearish trend line comes in just above this zone, too. While below these levels, the path of least resistance on the EUR/USD is unambiguously bearish.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• Taking a look at the dollar against the Japanese yen and you can see it was an extraordinarily volatile session during the trading session on Friday after the jobs report came out stronger than anticipated, which naturally had people running to the Japanese yen.
• This was a very difficult trading session for anybody who was involved and therefore if you find yourself on the wrong side of the trade, don’t be too upset about it.

I think at this point, you have to look to the longer term outlook for both of these central banks. And the reality is, even though Japan’s getting a little better, the U.S. economy is still very strong. And as a result, you should continue to see the U.S. dollar strengthen against most currencies, including the Japanese yen, but I also recognize that with the sell-off that we had seen in the stock market, it does make a certain amount of sense that people might’ve been looking for the safety of the Japanese yen, specifically Japanese investors involved in America.

Long Term

But in the longer term, you do get paid to hang on to this USD/JPY pair. And I think that’s something that a lot of people ignore, at least in the retail space. If we can break above the 158 yen level, then I think you’ve got a situation where we could make another attempt to break out completely, but right now it looks like we’re going to bounce around a little bit and just panic.

That’s not that unusual for this pair, but it’s difficult to make an argument for anything other than an uptrend right now. So I wouldn’t read too much into this other than there might’ve been some liquidity issues. The Bank of Japan might’ve been involved. We just don’t know, and of course, there was a lot of repositioning after that non-farm payroll announcement. I remain bullish, but I recognize this is going to be a headache.

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Created on January 13, 2025

• Over the past week, the GBP/USD pair plummeted below the support level of 1.2200, the lowest level for the currency pair in about 14 months and closed the week’s trading near these losses.
• Sterling losses against other major currencies increased as concerns about rising borrowing costs in Britain undermined the currency pair.
• Overall, the rise in government bond yields and the decline in the pound sterling were a clear reflection of the market’s discomfort with the fact that Reeves must now find billions of pounds in additional taxes or spending cuts to ensure compliance with a fiscal rule to ensure that debt as a percentage of GDP declines by 2029.

Pressure Factors on the Pound Sterling

According to reliable trading company platforms, the pound sterling (GBP) faced further losses against other major currencies as ongoing concerns about rising borrowing costs in Britain continued to weigh on sentiment. Recently, the yield on 10-year UK government bonds rose to its highest level since 2008, raising concerns about the country’s financial stability and the ability of the British government to effectively manage its economic challenges.

Trading Tips:

The pressure on the pound and the US dollar are still receiving more strength, which will ensure that the downtrend in the pound/dollar will remain for some time.

Will the selling of the pound continue?

In this regard, according to analysts from Deutsche Bank, the fundamental shifts that could work against the pound in the future include:

Loss of volatility-adjusted carry. This is where capital flows to countries with higher interest rates, which the UK prides itself on. But for this strategy to work, volatility must be low. According to the analysts: “Recent volatility is harmful.”

Meanwhile, the UK is printing “significantly weaker-than-expected economic data”. The first half of 2024 saw the opposite, with the UK growing faster than all its G7 peers.

Deutsche Bank therefore believes that the economic deterioration means there is a growing possibility of further interest rate cuts by the Bank of England this year compared to the current 50 basis points in money markets. Furthermore, the improvements in the current account deficit seen over recent years are also likely to fade as energy prices rise again. Deutsche Bank analysts added, “A wider current account deficit ahead increases the case for sterling weakness in an environment where UK yield rises are limited by the need for monetary policy easing,”.

They added, “After profiting on our long sterling positions at mid-December highs, we now recommend selling sterling,”.

Technical Analysis for the GBP/USD pair today:

Dear reader, according to recent trades, the overall trend of the GBP/USD currency pair is increasingly downward, and its recent losses were enough to push technical indicators towards oversold levels, led by the Relative Strength Index and the MACD. Currently, the closest support levels for the pound sterling are 1.2155, 1.2080, and the psychological support of 1.2000. Forex investors may look for buying opportunities, but this may be cautious until sentiment towards the sterling improves.

Conversely, and over the same timeframe, any attempts by bulls to rebound upwards may encounter resistance at levels of 1.2440 and 1.2600 respectively. Until then, gains in the pound sterling will remain vulnerable to a rapid collapse.

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Created on January 13, 2025

USD/JPY Forecast: The Psychological Resistance Level of 160.00 Remains in Sight

• In the last trading session of last week, the bulls’ control over the USD/JPY pair culminated in a move towards the resistance level of 158.88, the highest level for the pair in six months.
• Its gains increased as uncertainty persisted over the timing of Japan’s interest rate hike.
• In addition, Japanese Economy Minister Ryusei Akazawa stated that the economy is at a “critical stage” in overcoming the public’s deflationary mindset, but he did not provide any clear indication of when the Bank of Japan might raise interest rates.
• However, on the same trading day, the USD/JPY pair was exposed to profit-taking despite stronger-than-expected US jobs figures, with losses extending to 157.22 before closing trading stable around 157.70.

On the economic data front, household spending in Japan fell 0.4% year-on-year in November, while household income rose 0.7%. Externally, the Japanese yen faced additional pressure from the recent widening of the yield differential between the United States and Japan, driven by hawkish signals from the US Federal Reserve.

On the US side, according to economic calendar data, US job growth rates increased and unemployment rates decreased last month. According to an official announcement, the US economy added a total of 256,000 jobs last month, up from 212,000 jobs in November. The country’s unemployment rate, which was expected to remain at around 4.2%, fell to 4.1% last month. Overall, the final US jobs report for 2024 confirms that the economy and employment were able to grow at a strong pace even with interest rates significantly higher than before the pandemic. As a result, the likelihood of the US Federal Reserve cutting borrowing costs again in the coming months may be much lower.

Overall, the Federal Reserve has cut US interest rates three times in the past year in part due to concerns about slowing employment and growth. Strong jobs numbers suggest the economy is entering a post-Covid period of steady growth, higher interest rates, low unemployment and slightly higher inflation.

Trading Tips:

Don’t be fooled by the recent USD/JPY sell-off, it’s a natural thing after recent gains. The foundations of bullish control are in place and eyes are still easily set on the psychological resistance of 160.00

Expectations of a Pause in US Interest Rate Cuts

Following the latest economic data, expectations have increased that the US Federal Reserve may pause the pace of US interest rate cuts in the coming months amid concerns that Trump’s aggressive trade policies towards major global economies could re-ignite inflation.

Overall, the US numbers are likely to support policymakers’ intention to move cautiously this year – their December forecasts showed only two US interest rate cuts by 2025 – amid a clear pause in progress towards the 2% inflation target. Recently, Wall Street investors and economists had already scaled back expectations for rate cuts after the release. Also, this week’s US consumer and wholesale price reports will provide further clues on where inflation is headed ahead of the Fed’s next policy meeting on January 28-29.

USD/JPY Technical Analysis and Expectations Today:

Based on recent trading, USD/JPY is now trading slightly below its 100-hour moving average. However, the currency pair still has plenty of room to run before reaching oversold levels on the 14-hour RSI. In the near term, bears will look to extend the current decline towards 157.48 or lower to the support at 156.90. Bulls, on the other hand, will look to rebound higher with gains to the resistance levels at 158.00 and 158.65, respectively.

In the long term, based on the daily chart, the USD/JPY pair is trading in an ascending channel formation. Also, the 14-day RSI supports a long-term bullish bias as it approaches overbought levels. Therefore, bulls will seek to extend the overall uptrend gains towards the psychological resistance level of 160.00 or higher to the resistance of 162.60 respectively, which is enough to push all technical indicators towards strong overbought levels. On the other hand, and in the same time frame, bears will seek to benefit from pullbacks around 155.00 or lower at the support of 152.30 respectively.

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• Solid United States employment data smashed the odds for an interest rate cut.
• Hotter-than-anticipated European inflation to maintain the ECB on the dovish path.
• EUR/USD faces immediate resistance at 1.0197, the September 2022 monthly high.

The EUR/USD pair remained under selling pressure this week, with the US Dollar (USD) retaining its overall strength. The Greenback benefited from risk-aversion bouts, triggered by United States (US) President-elect Donald Trump’s tariffs plan. The pair heads into the weekend trading at around 1.0250, not far from the multi-year low posted on Friday at 1.0212.

Trade-war: Trump tariffs heat financial boards

The Washington Post reported on Monday that Donald Trump’s transition team was working on narrowing tariffs, focusing only on key sectors deemed vital to national security, such as defence, medical supplies and energy, narrowing the universal tariffs plan that Trump anticipated during his campaign. Latter in the day, however, Trump denied the headlines, saying that the story about paring back tariffs was wrong.

The EUR/USD pair jumped to 1.0431 with the initial headlines, as markets welcomed the idea of limited tariffs. Trump’s denial, on the other hand, boosted the US Dollar (USD) while sending stocks into a selling spiral.

Fears resumed mid-week when CNN reported that Trump was considering declaring a national economic emergency to impose widespread tariffs. Using the International Economic Emergency Powers Act (IEEPA) will unilaterally authorize a president to manage imports during a national emergency.

FOMC Minutes: Politics should not be in the way, but they are

The Federal Open Market Committee (FOMC) released the Minutes of the December Federal Reserve (Fed) monetary policy meeting on Wednesday, and the document brought some negative headlines.

Yet what caught investors’ attention is that the Minutes showed almost all members judged that the upside risk to inflation has increased. Officials mentioned “potential changes in trade, immigration, fiscal, and regulatory policies” as the reasons behind their fresh growth and inflation-related concerns.  Without saying it, officials said they are concerned about what Trump’s policies would mean to the economy.

Solid US employment data

Meanwhile, the US released multiple employment figures. The December ADP Employment Report showed that the private sector added 122K new jobs in the month, missing expectations of 140K. Additionally, Initial Jobless Claims for the week ended January 3 increased by 201K, better than the 218K expected and below the previous 211K. Also, US-based employers announced 38,792 cuts in December, a 33% decrease from the 57,727 cuts announced one month prior. It is up 11% from the 34,817 cuts announced in the last month of 2023, according to the Challenger Job Cuts report.

Finally, on Friday, the US published the Nonfarm Payrolls (NFP) report, which showed 256,000 new jobs were added in December. The reading was much stronger than the 160,000 anticipated and the November 212,000 reading. Even further, the Unemployment Rate edged lower to 4.1% from 4.2%, while the Labor Force Participation remained steady at 62.5%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, declined to 3.9% from 4%.

Markets turned risk-averse with the news, with the US Dollar rallying and stocks plummeting, as such figures suggest the Federal Reserve (Fed) will refrain from cutting interest rates in the upcoming months.

No good news in Europe  

European data fell once again short of encouraging. The preliminary estimate of the German Harmonized Index of Consumer Prices (HICP) was higher than anticipated, as the index rose 2.8% on its yearly comparison, above the 2.6% anticipated and the previous 2.4%. Retail Sales in the country fell 0.6% in November, while Factory Orders declined by 5.4% in the same period. 

The Eurozone HICP rose 2.7% in the year to December as expected, yet the Producer Price Index (PPI) was down 1.2% YoY in November, higher than the previous -3.3% or the -1.3% expected.

The European Central Bank (ECB) will likely continue trimming interest rates. That would keep the Euro on the downside, while a hawkish Fed means a stronger US Dollar. EUR/USD at parity is in the foreseeable future.

For the upcoming week, the focus will be on the US Consumer Price Index. The country will publish it next Wednesday, and Retail Sales will be published on Thursday. Other than that, the macroeconomic calendar has little relevant to offer.

EUR/USD technical outlook  

From a technical perspective, the EUR/USD pair is down for a fifth consecutive week and there are no technical signs that suggest an interim bottom is nearby. Indeed, EUR/USD is oversold in the weekly chart, yet the Relative Strength Index (RSI) indicator keeps heading south despite being at 28. The Momentum indicator in the same chart bounced just modestly from extreme levels but remains far below its midline, not enough to suggest an upcoming bounce. Finally, the 20 Simple Moving Average (SMA) has accelerated its slump and crossed below a flat 100 SMA, reflecting sellers’ strength.

In the daily chart, EUR/USD has plenty of room to extend its slide. Technical indicators head south within negative levels, still far from oversold readings. Even further, the EUR/USD pair posted lower lows after a couple of failed attempts to overcome a bearish 20 SMA, currently providing dynamic resistance at around 1.0380. In the same chart, the 100 SMA crossed below the 200 SMA after holding above it for roughly five months. Both moving averages stand around the 1.0800 level, not only anticipating additional slides but also reflecting sellers’ strength.

September 2022 high at 1.0197 is the immediate support level, ahead of the 1.0100 figure. A break below the latter exposes parity, albeit further slides seem unlikely in the upcoming days. The 1.0300 – 1.0330 area provides near-term support ahead of the 1.0400 mark.

• GBP/USD continues losing ground for the fifth straight day and drops to over a one-year low.

• Stagflation fears and UK fiscal concerns continue to weigh on the GBP amid a bullish US Dollar.

• A slightly oversold RSI on the daily chart warrants some caution for aggressive bearish traders. 

The GBP/USD pair remains under heavy selling pressure for the fifth straight day and dives to its lowest level since November 2023, around the 1.2125 region during the Asian session on Monday. Moreover, the fundamental backdrop seems tilted in favor of bearish traders, though slightly oversold conditions on the daily chart warrant some caution before positioning for further losses.

Investors remain concerned about the risk of stagflation in the UK. This, along with the anxiety about the UK’s fiscal health, turn out to be key factors contributing to the British Pound’s (GBP) relative underperformance. Apart from this, the underlying strong bullish sentiment surrounding the US Dollar (USD), bolstered by firming expectations that the Federal Reserve (Fed) will pause its rate-cutting cycle, validates the negative outlook for the GBP/USD pair. 

From a technical perspective, the Relative Strength Index (RSI) on the daily chart has dropped below the 30 mark, making it prudent to wait for some near-term consolidation or a modest rebound before the next leg down. Any attempted recovery, however, might confront resistance and remain capped near the 1.2200 mark. That said, some follow-through buying beyond the Asian session top, around the 1.2210 area, could trigger a short-covering move. 

The GBP/USD pair might then accelerate the positive move towards the 1.2245-1.2250 intermediate hurdle before aiming to reclaim the 1.2300 round figure. The latter should act as a key pivotal point, which if cleared decisively could negate the negative bias and shift the near-term bias in favor of bullish traders. 

Meanwhile, the downward trajectory seems strong enough to drag the GBP/USD pair further towards testing sub-1.2100 levels, or the November 2023 low. Acceptance below the said handle could make spot prices vulnerable to decline further towards October 2023 through, around the 1.2035 region, en route to the 1.2000 psychological mark.

GBP/USD daily chart