Created on January 08, 2025

• The US dollar rallied significantly during the early hours on Tuesday in what has been insane trading, especially as we watch the 10-year yield really start to rip to the upside in America.
• That is going to have a major influence on how the US dollar trades.

Ultimately, I do think we break above the 158 yen level regardless, but with rising yields and the volatility that we are seeing in the bond market, this makes the dollar even stronger. Add to that the fact that the Bank of Japan, who might begin to normalize is probably looking at less than half a percent, you’re still going to get paid to own this USD/JPY pair, and there’s not a lot the Japanese can do about it. They basically need the Federal Reserve to step in and start cutting rates and then somehow convince the market to go along with it, which so far Jerome Powell hasn’t been able to do. On a break above the 158.50 level, I think you could see the US dollar go racing toward the 162 yen level.

Pullbacks Offer Opportunity

Short-term pullbacks continue to offer buying opportunities, especially near the 157 yen level, and most certainly at the 155 yen level where I see previous action and the 50 day EMA racing toward it. I have no interest in shorting this pair. I do not wish to fight the trend and trying to pick the top is a game for losers. The market continues to see fundamental reasons for the US dollar to strengthen. And while it has had a very strong run against the Japanese yen, that doesn’t mean that it can’t continue. With non-farm payrolls on Friday, that could be the next catalyst, we don’t know. But really, I’m just looking at a market that’s consolidating, building up pressure to try to go to the upside yet again.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out. 

Created on January 08, 2025

• You can see that we initially did rally to break above the 1.04 level only to turn around and show signs of weakness again.
• It’s ridiculous to think that the Euro is going to suddenly turn things around for no apparent reason.
• Just because the Euro’s cheap doesn’t mean it has to turn around. In fact, cheap things typically become cheaper.

Now there will come a point in time when we turn around, but there’s no fundamental reason for that right now. The European economy is very weak and at the same time we have the US economy which is very strong and inflation in America is stronger than most people would like to think.

So, with that being the case I do think you have a situation where the US dollar continues to beat up on anything it can, and the euro is one of the particularly weakest currencies as far as majors are concerned. I believe this is the “epicenter” of all things Forex at the moment, as it typically is.

Parity is Likely

I do think eventually we will get to the parity level, but we do have a jobs number on Friday, so there might be a little bit of noise here and there this week, only to see things continue to the downside. If we did rally though, I would be looking at the 1.05 level, the 50-day EMA, and the 1.06 level for signs of exhaustion that I could start shorting again, because quite frankly this is a pair that I want to be aggressively bearish of when I get the opportunity to pick up cheap dollars. That’s the caveat.

Ready to trade our EUR/USD daily forecast? Here’s a list of some of the top forex brokers in Europe to check out. 

GBPUSD Forecast Highlights

• Sterling price has weakened further into the New Year
• Subdued UK economic prospects and strong Dollar are weighing on Cable
• Bearish momentum may lessen GBPUSD at around 1.240-1.250 on technical buying

How has the Pound performed against the Dollar recently?

The New Year appears to be bringing some respite to the bearish GBPUSD.

Cable was swinging upwards in fine form until the tax-raising Budget was announced by the Chancellor in late autumn, which promptly checked its advance. Since then, the rate has been haemorrhaging strength. GBPUSD dipped to a six-month low in early 2025, on low volume, to probe the 52-week lows of 1.230 (see below).

What now? What is the market trying to say about the future of GBPUSD? Trendwise, the current slide remains in motion. The pattern of lower lows and lower highs is intact.

But its recent v-shaped drop-and-recovery suggests some tentative buying at 1.230-1.240. Perhaps the market is seeing some value after a ten-week drop from 1.300. Even the Financial Times remarked last week (££) that “Britain’s economic outlook in fact looks quite robust compared to other advanced economies.”

But to overcome GBPUSD’s bearish posture requires more than just technical buying. Macro catalysts with bullish leanings are needed to revise the market’s downbeat view of the UK exchange rate. For now, these catalysts are critically absent. UK’s economic growth is uninspiring, inflation looks ready to rebound, and interest rates remain at elevated levels.

What’s more, the dollar is holding on to its strength. The financial market is eagerly awaiting for the new Trump administration this month (inauguration on January 20). What Trump 2.0 will do to the economy is a big unknown, although the stock market is already loving Donald (see Nasdaq’s relentless rise since Nov 5).

For now, the rate may bounce around 1.250, until a new market consensus is formed.

Is it a good time to buy US Dollars with pounds?

Given that Pound Sterling has weakened against the Dollar, should we sell GBP to buy USD before it drops further?

If you need dollars now, watch to sell some Pound Sterling on any bounce to buy dollars.

But if you can wait, perhaps look for a rebound above 1.260 to let go of some Sterling for Dollars. The decline from 1.300 is ‘oversold’ in technical terms and may be due for a further bounce. There is risk in waiting though, as the rate could stay in a sideways-negative trend longer than anticipated.

Will the pound get stronger against the USD in the first quarter of 2025?

There are many serious macro factors weighing on the GBP rates these days. However, extrapolating the current GBPUSD downtrend may not necessarily work due to the complexity of the economic trends.

For one, the market is eagerly eyeing new policy guidance from the incoming Trump administration. Tariffs, budgets, and geopolitical decisions are all on the table waiting to be deliberated by the new cabinet. These issues may impact the dollar, however tangentially.  For instance, the dollar weakens this week (Jan 6) when rumours of lower tariffs swirled in the FX market.

What is more, the economic outlook of the US is far stronger than anticipated. Listen to the recent speech by Lisa Cook, a serving member of the Federal Reserve Board, on January 6:

I continue to view the risks to achieving the two sides of the Federal Reserve’s dual mandate of price stability and maximum employment as being roughly in balance……the 100 basis points of rate cuts since September have notably reduced the restrictiveness of monetary policy. All along, I envisioned moving more quickly in the early stages of our easing campaign and then easing more gradually as the policy rate came closer to neutral…….since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time. Thus, I think we can afford to proceed more cautiously with further cuts.

In other words, all the big rate cuts envisioned by investors a year ago have been thrown out of the window.

In light of the robustness of the American economy, no wonder US interest rates are climbing steeply. Rates are definitely staying ‘higher for longer’.

In the past six weeks, the 10-year US Treasury Yield surged to 4.6 percent, a level which is only a short distance from the 2023 peak of 5 percent. If we view this trend via bond prices (bond price and yield move inversely), the breakdown of US Treasury prices is very worrying indeed.

The iShares Treasury Bond ETF (ticker:TLT) tentatively slipped to new 52-week lows this week. The correction from September now exceeds 13 points (see below). Many bondholders could be in the red. If further inflationary economic data appears, another bond rout is quite possible.

In sum, the above discussions points towards a firm Dollar that is backed by a strong American economy and high bond yields. To get GBPUSD back to, say 1.350, requires perhaps a marked reversal of these macro tidings. Not easy, given current set of factors.

However, expectations of GBP are low – and possibly baked in current low prices. This, in turn, means that better-than-expected economic data may set GBPUSD up for a tidy rally since the sentiment is so negative.

In a nutshell, to predict where GBPUSD will be at the end of this quarter is near impossible since there are so many paths it could take. Hence I will just opine that the rate will probable trade at a level not too far from where it is now.

What is the GBPUSD forecast in weeks, months, and years?

GBPUSD’s weak trend is being extrapolated by the market. Many brokers are expecting a further dip in the weeks ahead. Who dares to fight an entrenched trend? Very few.

If we look three months ahead, the interesting part of the predictions is the bifurcation of the predictions. Some anticipate a further decline (1.200-1.21) while a few expect a bounce (to 1.260-1.270). The range of the forecast tells you how volatile the market is at the moment.

Therefore, we just have to see where the market is willing to take the GBPUSD rate. Watch for a tussle between supply and demand around 1.250.

Source: fxstreet.com (Jan 2025)

DAX rises for a third session despite weak data

• Factory orders slump -5.4%
• Retail sales fall  0.6% MoM in November
• DAX rises towards 20,500

The DAX is rising for a third straight day despite a weaker close in the US and softer than forecast data from Germany. SAP is leading the rise, up over 1%, while Siemens, Airbus, and Allianz also saw modest gains.

German factory orders plunged -5.4% in November compared to the previous month, far worse than the 0.2% decline economists had predicted.

This marked the sharpest drop in factory orders in three months, highlighting the industry’s weakness just weeks ahead of the German election. Following the data, automakers are the worst-performing sector.

Meanwhile, German retail sales fell unexpectedly in November, dropping by 0.6% despite hopes for a recovery based on pre-Christmas promotions.

The soft data comes after German inflation rose by more than expected 2.6% year on year, raising concerns surrounding the economy, which appears to be in recessionary territory but with rising inflation.

Still, the ECB is widely expected to cut rates this month and continue cutting rates across the year to support the economy. The prospect of further rate cuts is keeping the DAX supported even when the data is weak; in a bad news is good news scenario.

Attention will now turn to eurozone PPI figures and economic sentiment PPI is expected to rise 1.5% MoM after rising 0.4% in October. Meanwhile, economic confidence is expected to dip to 95.6 from 95.8

DAX forecast – technical analysis

The DAX has recovered from the 19,700 zone, rising above 20,000 as it heads towards 20,500 and fresh all-time highs. The RSI supports further upside while it remains out of overbought territory.

Support is at 20k and 19700, with a break below the latter creating a lower low.

USD/JPY rises ahead of Fed minutes & ADP payrolls

• USD tracks treasury yields higher
• Strong US data revives inflation concerns
• ADP payrolls are forecast to slip to 140k vs 146k
• USD/JPY trades at a 6-month high

The US dollar is heading higher on Wednesday, extending gains from yesterday as investors digest stronger-than-expected data and look ahead to the Fed minutes as well as ADP payrolls later today.

ADP payrolls are expected to show 140,000 jobs added in the private sector in December. The data comes after jolts jobs openings were stronger than expected at 8.08 million up from 7.79 million in the previous month, suggesting the US labour market remains solid.

US ISM services PMI was also stronger than expected at 54.1 up from 52.2. However, the costs subcomponent showed that cost pressures were at the highest since 2023, raising concerns of a revival in inflation

Attention will now be on the minutes of the December Fed meeting, where the Fed cut rates by 25 basis points but surprised the market by signalling just two rate cuts in 2025. Still after yesterday’s strong data, the market is now only pricing in one rate cut this year.

The yen continues to struggle after the BoJ keeps quiet about the timing of a possible rate hike. BoJ governor Ueda said in a press conference earlier this week that officials were looking to raise interest rates further only if the economy allows it.

USD/JPY forecast – technical analysis

USD/JPY has extended its recovery from the December 3 low of 148.64, rising above the 200 SMA, the rising trendline dating back to 2022 and the 78.6% fib retracement of the 162 high and 139.50 low. This combined with the RSI above 50 could support further gains.

Buyers will look to extend gains towards the 160.00 round number before bringing 162.00, the 2024 high, into focus.

Immediate support can be seen at 157.1 the 78.6% retracement. A break below here and the 155.00 round number exposes the rising trendline support at 154.00.

Created on January 08, 2025

• During yesterday’s trading session, the EUR/USD pair attempted to rebound upwards, but its gains did not exceed the 1.0435 level before settling back down around 1.0335 at the time of writing this analysis.
• This comes ahead of the release of the minutes of the latest US Federal Reserve meeting, during which the bank changed the market’s outlook for future US interest rate cuts in the new year.

Eurozone Inflation Stronger Than Expected

According to reliable trading company platforms, the Euro received a positive boost from stronger-than-expected inflation data in the Eurozone. According to economic calendar data, annual inflation in the Eurozone accelerated to 2.4% in December, its highest level since July, up from 2.2% in November, in line with market expectations. This was the third consecutive monthly rise, reinforcing the view that the European Central Bank will take a cautious approach to cutting interest rates.

In the same context, higher-than-expected inflation figures in Germany and Spain reinforced this sentiment, even as France and Italy reported weaker inflation figures. Meanwhile, the market remained focused on US President Trump’s tariff plans, as he rejected claims that his administration might adopt more moderate trade measures.

Trading Tips:

Dear follower, the performance of the euro dollar will remain bearish until Trump is inaugurated and his policy towards the US and global economy becomes clear.

US stock indices stabilize

In today’s session, and through stock trading platforms, US stock futures stabilized after a sharp sell-off in yesterday’s trading session, following a rise in Treasury yields. Yesterday, the Dow Jones index fell by 0.42%, the S&P 500 index fell by 1.11%, and the Nasdaq Composite fell by 1.89%. These losses came after the latest ISM services data showed an acceleration in activity and a rise in prices, raising concerns about persistent inflation and reducing expectations for further US interest rate cuts by the Federal Reserve.

According to trading, the US 10-year Treasury yield rose by about 6 basis points to 4.68%, reflecting inflation expectations and revised prices. According to stock performance, Nvidia shares led the decline, falling by 6.2% and erasing the gains driven by CEO Jensen Huang’s keynote speech at CES on new artificial intelligence and technological advancements. Other large-cap tech stocks, AI-focused companies and cryptocurrency-related stocks also saw significant declines.

The US dollar is stronger ahead of important events

According to forex trading. The US dollar, which is linked to US economic data, recovered better than expected. US bond yields and the dollar had risen after new data confirmed continued inflationary pressures in the US economy, reducing the chances of a US interest rate cut by the Federal Reserve. Obviously, this came after the Institute for Supply Management’s services PMI survey showed that prices paid by businesses reached their highest level since February 2023. Overall, the market now believes that the Federal Reserve will not cut US interest rates again before July, confirming the “higher for longer” interest rate thesis that has supported the dollar’s ​​rise that has been in place since October 2024.

On the other hand, US JOLTS job vacancies rose to a six-month high of 8.098 million in November, easily beating expectations of 7.740 million and 7.744 million in the previous month. Overall, the US dollar will also remain supported amid market uncertainty related to US President Donald Trump’s tariff plans.

EUR/USD Technical Analysis Today:

Dear reader, the performance is moving according to our expectations that selling the EUR/USD from any upward level is the best trading strategy and that the factors weakening the Euro are stronger and may last for a while. The return of the bears to the EUR/USD pair towards support levels of 1.0300, 1.0245, and 1.0180 will bring the EUR/USD parity closer and at the same time will move all technical indicators towards oversold levels, led by the Relative Strength Index and the MACD. Conversely, and over the same timeframe, the daily chart will have a level of 1.06 as the first target to break the current downtrend barrier.

Ready to trade our Forex daily analysis and predictions? Here are the best European brokers to choose from.

• EUR/USD trades slightly below 1.0350 after closing in negative territory on Tuesday.
• The technical outlook highlights buyers’ hesitancy in the near term.
• Investors await employment-related US data and FOMC Minutes.

Following Monday’s upsurge, EUR/USD reversed its direction on Tuesday and closed in negative territory. The pair stays relatively quiet below 1.0350 in the European morning on Wednesday. 

The US Dollar (USD) benefited from the negative shift seen in risk mood and upbeat macroeconomic data releases on Tuesday, forcing EUR/USD to push lower. The ISM Services PMI improved to 54.1 in December from 52.1 in November, pointing to an ongoing expansion in the services sector’s activity at an accelerating pace. Additionally, JOLTS Job Openings rose to 8.09 million in November from 7.84 million in October. Both of these figures came in better than analysts’ estimates.

On Wednesday, ADP Employment Change data from the US will be watched closely by investors. The market expectation is for private sector payrolls to rise 140,000 in December following the 146,000 increase recorded in November. A reading above 150,000 could support the USD, while a disappointing print below 130,000 could have the opposite effect on the currency’s valuation.

Later in the American session, the Federal Reserve will publish the minutes of the December policy meeting. Unless there is a dovish surprise in the publication, the USD is likely to stay resilient against its rivals.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour retreated slightly below 50, reflecting buyers’ hesitancy. Additionally, EUR/USD closed the last three 4-hour candles below the 20-period and the 50-period Simple Moving Averages (SMA).

On the downside, 1.0320 (Fibonacci 23.66% retracement level of the latest downtrend) aligns as first support before 1.0300 (round level, static level) and 1.0240 (end-point of the downtrend). Looking north, resistances could be spotted at 1.0370 (50-period SMA, Fibonacci 38.2% retracement), 1.0400 (100-period SMA) and 1.0420 (Fibonacci 50% retracement).

USD/JPY Key Takeaways

• Strong ISM and JOLTS surveys in the morning were followed by a mediocre bond auction this afternoon.
• The auction showed below-average demand for US Treasuries, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.
• USD/JPY is essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair

It’s been a mixed day for US data, with better-than-expected readings on the ISM Services PMI and JOLTS Job Openings surveys raising optimism about the US economy before a mediocre 10-year treasury bond auction in the early afternoon.

The auction showed a 2bps “tail”, indicating less demand for the bonds than expected, and dealers were obligated to take on 15.6% of the issue, above the 13.1% average over the last six months. All in all, the auction showed below-average demand for the benchmark US Treasury bond, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.

Stock indices have seen the morning’s gains evaporate, with the 10yr yield rising to 4.69%, its highest level since last April. More to the point for FX traders, the US dollar is edging higher against most of its major rivals, though the moves are fairly limited as we go to press.

Japanese Yen Technical Analysis – USD/JPY Daily Chart

Source: TradingView, StoneX.

Looking at the chart of USD/JPY, the pair attempted a breakout to 6-month highs above 158.00 on the back of this morning’s data releases before reversing back into the holiday period trading range in short order.

Now, rates are essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair. A confirmed bullish breakout above the top of the range could target 160.00 in short order, whereas a bearish breakdown could open the door for a deeper retracement toward 154.00.

— Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

US Dollar Outlook: USD/JPY

USD/JPY extends the advance from the start of the week to clear the December high (158.09), but the Relative Strength Index (RSI) may show the bullish momentum abating as the recent rise in the exchange rate fails to push the oscillator into overbought territory.

USD/JPY Clears December High Ahead of US NFP Report

USD/JPY climbs to a fresh weekly high (158.43) as the US Bureau of Labor Statistics (BLS) reports that ‘the number of job openings was little changed at 8.1 million on the last business day of November,’ with the Job Openings and Labor Turnover Summary (JOLTS) revealing that ‘the number of job openings increased in professional and business services (+273,000), finance and insurance (+105,000), and private educational services (+38,000).’

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

US Economic Calendar

In turn, the update to the US Non-Farm Payrolls (NFP) may also influence USD/JPY as the economy is anticipated to add 154K jobs in December, and evidence of a strong labor market may put pressure on the Federal Reserve to alter the path for monetary policy as the economy shows little signs of an imminent recession.

In turn, a positive development may generate a bullish reaction in the US Dollar as it raises the Fed’s scope to pause its rate-cutting cycle, but a weaker-than-expected NFP report may drag on the Greenback as it fuels speculation for lower US interest rates.

With that said, swings in the carry trade may continue to influence USD/JPY as the Federal Open Market Committee (FOMC) pursues a neutral stance, but the exchange rate may further retrace the decline from the 2024 high (161.95) as it clears the December high (158.09).

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

• USD/JPY trades to a fresh weekly high (158.43) following the failed attempt to close below 156.50 (78.6% Fibonacci extension), with a move above 160.40 (1990 high) bringing the 2024 high (161.95) on the radar.
• Next area of interest comes in around the December 1986 high (163.95), but USD/JPY may hold within last year’s range should if struggle to extend the recent series of higher highs and lows.
• A close below 156.50 (78.6% Fibonacci extension) may push USD/JPY back towards 153.80 (23.6% Fibonacci retracement), with a break/close below 151.95 (2022 high) opening up the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone.

Additional Market Outlooks

GBP/USD Recovery Keeps 2024 Range Intact

US Dollar Forecast: AUD/USD Approaches November 2023 Low

USD/CAD Pullback Keeps RSI Below Overbought Territory

US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff

— Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

USD/JPY Key Takeaways

• Strong ISM and JOLTS surveys in the morning were followed by a mediocre bond auction this afternoon.
• The auction showed below-average demand for US Treasuries, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.
• USD/JPY is essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair

It’s been a mixed day for US data, with better-than-expected readings on the ISM Services PMI and JOLTS Job Openings surveys raising optimism about the US economy before a mediocre 10-year treasury bond auction in the early afternoon.

The auction showed a 2bps “tail”, indicating less demand for the bonds than expected, and dealers were obligated to take on 15.6% of the issue, above the 13.1% average over the last six months. All in all, the auction showed below-average demand for the benchmark US Treasury bond, potentially signaling fear about the ongoing deficit and potential for inflation to reaccelerate.

Stock indices have seen the morning’s gains evaporate, with the 10yr yield rising to 4.69%, its highest level since last April. More to the point for FX traders, the US dollar is edging higher against most of its major rivals, though the moves are fairly limited as we go to press.

Japanese Yen Technical Analysis – USD/JPY Daily Chart

Source: TradingView, StoneX.

Looking at the chart of USD/JPY, the pair attempted a breakout to 6-month highs above 158.00 on the back of this morning’s data releases before reversing back into the holiday period trading range in short order.

Now, rates are essentially unchanged on the day, with tomorrow’s ADP and initial jobless claims reports looming as the next potential injection of volatility into the pair. A confirmed bullish breakout above the top of the range could target 160.00 in short order, whereas a bearish breakdown could open the door for a deeper retracement toward 154.00.

— Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

GBP/USD Forecast: Bullish bias remains intact ahead of US data

GBP/USD capitalized on the broad-based US Dollar (USD) weakness and registered impressive gains on Monday. The pair continues to stretch higher in the European session on Tuesday and trades near the key resistance area at 1.2575.

The improving market mood made it difficult for the USD to find demand at the beginning of the week. Risk flows dominated the action in financial markets and triggered a USD selloff after the Washington Post reported that US President-elect Donald Trump’s aides were exploring tariff plans that would be applied to every country but only cover critical imports. Read more…

GBP/USD: To consolidate between 1.2450 and 1.2550 – UOB Group

Pound Sterling (GBP) is expected to consolidate in a range between 1.2450 and 1.2550. In the longer run, GBP is expected to trade in a range, likely between 1.2420 and 1.2620, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

24-HOUR VIEW: “GBP soared by 0.79% yesterday, closing at 1.2522. The rapid rise appears to be excessive. Today, instead of continuing to rise, GBP is more likely to consolidate, expected to be between 1.2450 and 1.2550.” Read more…