Created on December 26, 2024

Bullish View

• Buy the GBP/USD pair and set a take-profit at 1.2665.
• Add a stop-loss at 1.2400.
• Timeline: 1-3 days.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.2400.
• Add a stop-loss at 1.2665.

The GBP/USD exchange rate remained relatively unchanged this week, as the forex market experienced low volumes due to the Christmas Holiday. It has stalled at 1.2545, a few pips above this month’s low of 1.2478.

The GBP/USD has also stalled because there was no important economic data from the UK and the United States. The only data that came out were Monday’s US consumer confidence and UK GDP numbers.

While these are crucial numbers, their impact on the pair was muted because they came a few days after the Bank of England (BoE) and the Federal Reserve made their final decisions of the year.

The BoE left interest rates at 4.75% as it expressed concerns about the country’s inflation, which rose again in November. However, with the UK economy contracting, there are odds that the bank will cut interest rates several times in 2025.

The Fed, on the other hand, slashed interest rates by 0.25%, bringing the year-to-date cuts to 1% It, however, expressed a more hawkish tone as it hinted that it will deliver just two cuts in 2025. The Fed is highly concerned that Trump’s policies will be highly inflationary.

Some of his most notable policies are mass deportations, tax cuts, which will increase the budget deficit, and tariffs.

The next data to watch on Thursday will be initial and continuing jobless jobs numbers. While these are important numbers, their impact on the Fed and the GBP/USD pair will be muted.

GBP/USD Technical Analysis

The daily chart reveals that The GBP/USD exchange rate has been downtrend in the past few days. It has dropped below the important support at 1.2665, its August lows.

The pair has also moved below the 50-day moving average. Also, oscillators like the MACD and the Relative Strength Index (RSI) have all pointed downwards.

On the other hand, it has formed a double-bottom pattern at 1.2478. A double-bottom often leads to more gains. Therefore, the pair will likely have a brief rebound in the next few days. Such a move will see it rise to the next key resistance level at 1.2665.

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Created on December 26, 2024

• The US dollar initially pulled back just a bit during the trading session on Tuesday, only to turn around and show signs of life.
• At this point, if we can break above the crucial ¥158 level, then it’s likely that we will continue to see a lot of upward momentum, perhaps opening up the possibility of a move to the ¥162 level.
• This is an area that has been important a couple of times, so I think this makes a lot of sense.

Short-term pullbacks at this point in time will continue to see plenty of support, and I think the ¥155 level continues to offer a short-term floor in the market. Interest rate differential favors the US dollar which is something that you should not forget anytime soon, as the US dollar continues to see interest rates climb. Despite what the Fed’s doing, most traders focus on what the Fed says, but what you really need to do is pay attention to what the bond markets do. Now we have pretty high yields in the US, ten-year especially. So that continues to make the US dollar like a wrecking ball against most other currencies, and especially the Japanese yen, which has a whole litany of problems by itself.

Bank of Japan? Not a Factor.

The Bank of Japan recently raised rates a bit. We’ve completely turned around since then, and now it looks like we are going to continue to climb again. A break above the ¥158 level could open up the possibility of a move to the ¥162 level. I have no interest whatsoever in shorting this USD/JPY market, and it’s very possible we may go much higher before it’s all said and done, as the Federal Reserve looks like they will be a little bit more hawkish in 2025 than people had anticipated.

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Created on December 26, 2024

• The British pound initially did try to rally during the trading session on Tuesday, but gave back gains and we are essentially closing pretty much flat.
• It does make a certain amount of sense that the market would do very little as we are facing a cluster of resistance.
• This is an area that I think would continue to be a massive barrier and headache unless we get a lot of yen selling across the board.

The fact that the liquidity wouldn’t have been there comes into play as well. That being said, despite the fact that the British pound isn’t necessarily a currency I love, it’s not the worst one out there. And the worst one out there might actually be the Japanese yen, maybe the Swiss franc. It’s kind of a tossup at this point. You could even throw the euro into that group.

Big Support Level Under Here

So, I do think then if we get a little bit of a pullback, it’s probably worth paying close attention to the ¥195 level, which is an area that’s a large round, psychologically significant figure, an area that’s seen some market action previously. And an area that the 50 day EMA is rapidly approaching. If it can break above the ¥195 level, then the short term technical flaw will just simply move up with that 50 day EMA.

On the upside, we have the ¥200 level, which has been like a brick wall for the British pound. But if and when we finally break above there, it’s likely that we would see this GBP/JPY pair really start to take off to the upside, perhaps driving the British pound all the way up to the ¥208 level, which of course was the recent swing high. I have no interest in buying the yen, which means I have no interest in shorting this pair.

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Pound Sterling consolidates against USD in holiday-curtailed week

The Pound Sterling (GBP) trades sideways above the psychological support of 1.2500 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair consolidates as trading volume is low amid a holiday-shortened week due to Christmas Eve and Boxing Day on Wednesday and Thursday, respectively.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, also trades sideways around 108.15. Read more…

GBP/USD Forecast: Pound Sterling stays directionless below 1.2550

GBP/USD moves sideways in a tight range below 1.2550 in the European morning on Tuesday after posting small losses on Monday. The pair is likely to have a hard time finding direction in the near term, with trading conditions remaining thin heading into the Christmas holiday.

The US Dollar held its ground on Monday but struggled to gather strength following mixed macroeconomic data releases from the US. Read more…

Created on December 23, 2024

• The US dollar initially did try to rally during the trading session on Friday, but gave back the gains rather rapidly as the US dollar is certainly overbought at this point.
• Furthermore, interest rates in America dropped, which of course helps a lot of people get away from the greenback, and therefore it does make a certain amount of sense that we pulled back a bit.
• The ¥155 level underneath is a large, round, psychologically significant figure, and an area that previously had been important. I think ultimately this is a scenario where we are waiting to see some type of value that we can take advantage of.

Technical Setup?

It is possible that we have a technical setup coming, with the ¥155 level being a prime example of an area where people would be willing to jump into. This would be a complete repudiation of that massive candlestick on Thursday, and of course one would assume that there would be a certain amount of volume right there, as it was where the candlestick jumped from. Any bounce in that area could end up being a nice buying opportunity, but if we were to break down below there, then we may have to go looking to the 50 Day EMA near the ¥152 region.

On the other hand, if we were to turn around a break above the ¥158 level, then it just shows a significant amount of momentum jumping into the market, and perhaps pushing this market toward the ¥160 level. After that, we have a much bigger move just waiting to happen, and I do think that eventually the US dollar continues to strengthen against the Japanese yen, if for no other reason than the fact that monetary policy in 2025 ends up being a somewhat tight year for the Federal Reserve. Conversely, the Bank of Japan can do very little to normalize rates, at least not anything significant. With this, I prefer to buy dips going forward.

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Created on December 24, 2024

• In the shortened trading week due to Christmas holidays, the performance of the Euro is likely to remain under pressure against the US Dollar.
• Since the beginning of the week’s trading, the EUR/USD exchange rate has been stable around and below the support level of 1.0400, and as mentioned, any attempts at short-term recovery will be weak.

Reasons for the Euro’s Decline Against the US Dollar

According to licensed trading platforms, the EUR/USD pair is facing pressure again, as it failed to extend the recovery it achieved last Friday. European Central Bank President Christine Lagarde told the Financial Times at the beginning of trading this week that she is optimistic that the central bank is on track to achieve its 2.0% inflation target. Lagarde stated that we are “very close” to the point where “we achieve sustainably a 2% inflation rate over the medium term.”

The comments reinforce the view that declining inflation will allow the ECB to “outperform” similar central banks in the coming months, keeping the euro under pressure, especially against the US dollar. Additionally, the ongoing political and economic uncertainty plaguing the largest economies in the Eurozone continues to affect investor sentiment towards the euro.

The US Federal Reserve is Not in a Hurry to Cut Interest Rates in 2025

In this context, and with the latest announcement, the US Federal Reserve indicated that it is likely to cut US interest rates only twice in 2025 amid a recovery in economic activity. However, the US dollar declined slightly on Friday following the release of some US inflation figures in personal consumption expenditures, which came in below expectations, reducing the US dollar’s rise.

According to economic calendar data, the core personal consumption expenditures price index in the United States increased by 0.1% on a monthly basis in November, half the expected rate of 0.2%. The year-over-year comparison remained unchanged at 2.8% in November, while the market expected an increase to 2.9%. Overall, this has provided some relief in the market and intensive selling of the US dollar, which needs a constant supply of “hawkish” data surprises to fuel its rise. Therefore, any accurate or below-expectations data will lead to declines in the US currency.

However, some forex analysts believe that by early 2025, the weakness of the EUR/USD pair may resume with the confirmation of more superior US economic performance. Also, the setup for the markets until 2025 is good for the trends to continue. Moreover, the US elections and the shift to a stronger US dollar have received support from the Federal Open Market Committee (FOMC), which reduced expectations of interest rate cuts in 2025.

According to the forex analysis team at MUFG Bank, “Our outlook for the EUR/USD outlook remains that the euro will decline to near parity in the first quarter of next year before stabilizing and recovering moderately in the second half of the year.” MUFG Bank believes this is due to the divergence in economic performance between the Eurozone and the United States, which continued during the first part of the year before fading.

Trading Tips:

Keep in mind that the EUR/USD trend will remain bearish and stability below the 1.05 support confirms the strength of the bears’ control. The current trading week includes the Christmas holidays, which affects liquidity and investors’ desire to trade.

EUR/USD Analysis Today:

Dear reader, according to the latest trading performance of the EUR/USD pair, there is now decent support at the horizontal support line 1.0344, which is where the euro’s weakness was bought last week over three consecutive days. Technically, any weakness in the euro-dollar pair this week would likely test this area first and may be bought again, allowing for a more neutral tone. However, caution should be exercised as a break below the 1.0344 support level could lead us to the next important support level of 1.0230 in a relatively short period. From there, it will quickly reach the euro-dollar parity. Overall, market conditions will be tense in the next two weeks, but there are still some economic reports to watch. Low liquidity can often lead to large movements, indicating that we are not necessarily in a state of idleness for trading.

As mentioned before and we confirm now, any attempts by the EUR/USD to recover upwards will be weak and prone to a rapid collapse.

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Created on December 24, 2024

• The British pound has initially tried to rally a bit during the trading session on Monday, but as you can see, has struggled a bit to continue to go higher and has turned things around actually to show signs of weakness.
• With that being the case, I think you’ve got a situation where traders will look at this through the prism of a market that is testing the 1.25 level for some type of support.
• If it continues to find support at the 1.25 level, then we may enter a range between 1.25 and 1.2750, which is a range that we’ve been in for a while now.

All things being equal, I do think it could very well be that case. We also have to keep in mind that this is a market that is dealing with a serious lack of liquidity at this point. Therefore, we have to pay attention to the idea of the holidays being a time where you probably should be leaving this alone. But even if we do have to trade this or we find that we are trading this, if we were to break down below the 1.25 level, I think the downside is somewhat limited, at least in the short term.

Trying to Find Value?

Short term speaking, I think you’ve got a situation where GBP/USD traders will be looking at this through the prism of trying to find value. But if we break down below the 1.25 level, 1.23 is an area where we’ve seen buyers come in previously, and it wouldn’t surprise me to see the British pound defended there. On the upside, the 1.275 zero level has been extraordinarily difficult to get above, and now we have the 50 day EMA there as well. I suspect the next couple of days will be more sideways with a downward slant than anything else.

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• EUR/USD trades in a narrow channel near 1.0400 early Tuesday.
• Trading action is likely to remain subdued on Christmas Eve. 
• Technical picture highlights the pair’s indecisiveness in the near term.

EUR/USD closed marginally lower on Monday but the pair remained confined within a tight channel. The pair fluctuates near 1.0400 in the European morning on Tuesday as trading conditions thin out on Christmas Eve.

Mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains on Monday and helped EUR/USD find a foothold.

The US Census Bureau reported that Durable Goods Orders declined by 1.1% on a monthly basis in November, coming in worse than the market expectation for a decrease of 0.4%. Meanwhile, the Conference Board’s Consumer Confidence Index fell to 104.7 in December from 112.8 (revised from 111.7) in November. On a positive note, New Home Sales increased by 5.9% in November following the 14.8% decrease recorded in October.

The economic calendar will not feature any macroeconomic data releases. Bond and stock markets in the US will operate half day on Tuesday and remain closed on Christmas Day on Wednesday.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 50 but EUR/USD fluctuates at around the 20-period Simple Moving Average (SMA), highlighting a lack of directional momentum.

First resistance could be spotted at 1.0440 (static level) before 1.0490-1.0500, (100-period Simple Moving Average (SMA), static level). On the downside, 1.0350 (static level) and 1.0300 (static level, round level) could be seen as next support levels if EUR/USD confirms 1.0400 (static level, round level) as resistance.

• GBP/USD fluctuates below 1.2600 after closing in positive territory on Friday.
• The pair remains bearish in the near-term technical outlook.
• The risk perception could drive GBP/USD’s action in the second half of the day.

After suffering large losses on Wednesday and Thursday, GBP/USD corrected higher on Friday but ended up closing the week in the red. The pair stays in a consolidation phase below 1.2600 early Monday as trading conditions remain thin ahead of the Christmas holiday.

The Federal Reserve’s (Fed) hawkish dot plot and the Bank of England relatively dovish language following the last policy meeting of the year triggered a sharp decline in GBP/USD. The positive shift seen in risk mood heading into weekend on US Congress’ avoidance of a government shutdown caused the US Dollar (USD) to weaken against its rivals and helped the pair erase a portion of its weekly losses.

Meanwhile, the softer-than-expected November inflation data put additional weight on the USD’s shoulders. The US Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s (Fed) preferred gauge of inflation, rose 0.1% on a monthly basis in November. This reading followed the 0.3% increase recorded in October and came in below the market expectation of 0.2%.

In the absence of high-tier data releases, investors could react to changes in risk perception in the second half of the day. At the time of press, US stock index futures were up between 0.1% and 0.5%. A bullish opening in Wall Street could make it difficult for the USD to stay resilient against its rivals and support GBP/USD.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and GBP/USD is yet to make a 4-hour close above the 20-period Simple Moving Average (SMA), reflecting buyers’ hesitancy.

On the downside, interim support is located at 1.2550 (static level) before 1.2480 (static level) and 1.2400 (static level, round level). Looking north, resistances could be seen at 1.2600 (static level, round level), 1.2640 (50-period SMA) and 1.2680 (100-period SMA).

Created on December 23, 2024

• The past trading week witnessed a strong dominance of bears on the EUR/USD pair, with the most traded currency pair in the forex market plummeting to the support level of 1.0343, near its two-year low.
• The trading closed around the 1.0428 level, with a strong dominance of bears on the trend and anticipation of a move towards the expected parity price for the euro-dollar.
• The markets will be monitoring the future of the US government shutdown this week. However, holidays this week will dampen investor risk appetite.

Stock Market Turmoil with Weakening Sentiment

According to recent stock market trading and stock trading company platforms, European stocks have recently suffered a severe setback. Also, the sharp decline in shares of Novo Nordisk A/S by $93 billion weakened investor sentiment. In addition to Novo, shares of Nestle SA and LVMH Moët Hennessy Louis Vuitton SE were also affected. Furthermore, losses in the shares of these European companies pushed the Stoxx Europe 600 index towards its worst performance compared to the S&P 500 index in nearly a quarter of a century.

European interest rate cut for 2025

In this regard, a member of the European Central Bank’s policy confirmed that it will continue to reduce borrowing costs in 2025. Croatian central bank chief Boris Vujcic added that “the trend is clear, it is a continuation of the trend from 2024, which is to reduce interest rates further.” For its part, the European Central Bank last week cut its deposit rate by a quarter of a percentage point to 3%, the fourth such move since last June. Officials indicated that more steps would follow, although they differed on how many steps would be necessary. the official added, “I don’t even know at what point” the ECB will cut interest rates”. Also, “That will be determined by the data, especially the inflation rate, whether it slows down, according to our expectations, and we will see the impact of the transmission of monetary policy, our expectations.”

However, HSBC expects the ECB to be more aggressive; “We believe there is an increasing risk that the ECB will cut rates below the perceived neutral rate to stimulate the economy, and possibly even to 1.00%. Among the uncertainties weighing on the outlook is the threat of US tariffs after Trump takes office. In this regard, the official said: “If a trade war erupts, it will be bad for growth in Europe and the rest of the world,” adding that trade wars usually lead to higher prices. “We hope we don’t see a trade war, and it won’t be good for anyone.”

Trading Tips:

Keep in mind that the Euro Dollar’s path will remain bearish and stability below the 1.05 support confirms the strength of bear control. The current trading week includes Christmas holidays, which affects liquidity and investors’ desire to trade.

EUR/USD Analysis Today:

According to the performance on the daily chart above, the general trend of the Euro against the US Dollar EUR/USD is still bearish and Forex investors will not care about the technical indicators reaching strong oversold levels as much as they care about monitoring the negative impact factors on the Euro’s performance, led by the economic and political turmoil of the bloc’s largest economies and the future of the European Central Bank’s policies and the future of trade wars on the region’s economy, which is already suffering. The Euro Dollar’s gains will remain vulnerable to a rapid collapse, so caution is required. The relative strength indicators and the MACD indicator are still in oversold areas. The future of the Euro Dollar parity price is close and the closest support levels are currently 1.0380, 1.0300 and 1.0225, respectively.

On the other hand, and in the same time frame, there will be no first break of the Euro-Dollar downtrend without the bulls moving towards the resistance levels of 1.0665 and 1.0800 respectively. I still prefer to sell the Euro-Dollar.

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