The GBP/USD price analysis shows a brighter outlook for the UK economy.
The UK economy expanded by 0.1% in the fourth quarter of last year.
Market participants have lowered expectations for Fed rate cuts.
The GBP/USD price analysis shows a brighter outlook for the UK economy after GDP data revealed an unexpected expansion in Q4 last year. Meanwhile, the dollar remained fragile as the impact of Trump’s tariff threats faded.
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Data on Thursday revealed that the UK economy expanded by 0.1% in the fourth quarter of last year. This figure came above estimates of a 0.1% contraction. The British economy has slowed down significantly, putting pressure on the Bank of England to lower borrowing costs. The upbeat report eased some of that pressure, boosting the pound. Market participants are now pricing 54-bps of rate cuts this year by the Bank of England. If the economy shows more bright spots, rate-cut bets will drop.
On the other hand, market participants have lowered expectations for Fed rate cuts due to upbeat inflation data. Both consumer and wholesale inflation figures came in above estimates, suggesting higher rates for longer in the US. Initially, the more hawkish outlook boosted the dollar.
However, the focus shifted to Trump tariffs, leading to a drop in the US currency. Reports revealed that there will be delays in implementing Trump’s reciprocal tariff. As a result, market participants believe this will give countries time to negotiate better trading deals.
GBP/USD key events today
US core retail Sales m/m
US retail sales m/m
GBP/USD technical price analysis: Bulls reach a new high above 1.2550
GBP/USD 4-hour chart
On the technical side, the GBP/USD price has broken above the 1.2550 resistance level to make a new high in the bullish trend. Moreover, the price trades far above the 30-SMA, and the RSI is nearing the overbought level, indicating solid bullish momentum. If the rally continues, the price will reach the 1.2651 level.
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However, the price has maintained a shallow uptrend on a larger scale. As a result, when the price forms a new high, it is near the previous high. This means the price returns to the bullish support trendline soon after making a new high.
If this is the case, the price will soon reverse to break below the 30-SMA and retest the support trendline. Nevertheless, it will keep making higher highs if it stays above the trendline.
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EUR/USD trades at its highest level in over two weeks above 1.0450.
The US economic calendar will feature Retail Sales data for January.
US stock index futures trade marginally higher on the day.
EUR/USD gathered bullish momentum in the late American session on Thursday and gained nearly 0.8% on the day. After touching its highest level since January 28 above 1.0470 in the Asian session on Friday, the pair seems to have entered a consolidation phase near 1.0460 in the European morning.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-1.47%
-1.51%
0.90%
-0.89%
-0.98%
-0.69%
-0.65%
EUR
1.47%
0.03%
2.54%
0.73%
0.49%
0.88%
0.90%
GBP
1.51%
-0.03%
2.34%
0.65%
0.46%
0.85%
0.88%
JPY
-0.90%
-2.54%
-2.34%
-1.81%
-1.80%
-1.58%
-1.52%
CAD
0.89%
-0.73%
-0.65%
1.81%
-0.07%
0.17%
0.20%
AUD
0.98%
-0.49%
-0.46%
1.80%
0.07%
0.39%
0.41%
NZD
0.69%
-0.88%
-0.85%
1.58%
-0.17%
-0.39%
0.03%
CHF
0.65%
-0.90%
-0.88%
1.52%
-0.20%
-0.41%
-0.03%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
EUR/USD edged lower in the early American session on Thursday after US President Donald Trump hinted in a social media post that they could announce reciprocal tariffs.
Later in the day, Trump refrained from imposing new tariffs, instead he signed a memo ordering his economics team to devise a plan for reciprocal tariffs on every country that charges duties on US imports. Markets breathed a sigh of relief with this development, allowing risk flows to return and causing the USD to weaken. In turn, EUR/USD gained traction and closed the day decisively higher.
Meanwhile, Trump’s trade adviser, Peter Navarro, called German auto tariffs “grossly unfair” and a White House official said that Trump will no longer tolerate the EU’s value-added tax.
In the second half of the day, January Retail Sales data will be featured in the US economic calendar. Markets expect a decrease of 0.1% on a monthly basis. A positive surprise could help the USD stay resilient against its rivals with the immediate reaction. Nevertheless, EUR/USD’s losses are likely to remain limited in case risk flows continue to dominate the action in the financial markets. At the time of press, US stock index futures were trading marginally higher on the day.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 70, suggesting that EUR/USD correct lower before extending its uptrend.
On the upside, 1.0500-1.0510 (round level, Fibonacci 78.6% retracement of the latest downtrend) could be seen as the resistance area before 1.0550 (static level) and 1.0600 (static level, beginning point of the downtrend). Looking south, first support could be spotted at 1.0440 (100-period Simple Moving Average (SMA), Fibonacci 61.8% retracement) ahead of 1.0400 (Fibonacci 50% retracement) and 1.0350-1.0360 (Fibonacci 38.2% retracement, 200-period SMA).
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The GBPJPY pair ended the recent bullish rally by recording 191.17 level, approaching 193.30 barrier to force it to postpone the bullish attack and provide mixed trades by fluctuating near 191.80.
Also, the contradiction between the major indicators by the MA55 consolidation above the mentioned barrier confirm the price surrender to the domination of the sideways bias, to expect moving between the current barrier and 190.80 additional support.
The expected trading range for today is between 191.00 and 193.30
The EURJPY pair touched 161.18 level followed by declining below 160.25 barrier again due to the continuous contradiction between the major indicators to force it to postpone the bullish rally for now.
The price might continue to provide mixed trades until confirming breaching the mentioned barrier to reinforce the chances of achieving new gains that might extend towards 161.65 and 162.40 levels first, while declining below 159.00 will force it to suffer big losses by crawling towards 157.90 and 157.30 levels.
The expected trading range for today is between 159.20 and 160.25
Tesla’s stock price (TSLA) rose in the intraday levels after finishing the harmonic short term formation that is the AB/CD pattern, which is a positive pattern, combined with positive signals from the RSI after reaching oversold levels, amid the dominance of the main upward trend in the medium term, while still suffering due to trading below the 50-day SMA, hindering upcoming gains.
Therefore we expect more gains for the stock, targeting the important resistance of $377.30, provided the support of $326.60 holds on.
Tesla’s stock price (TSLA) rose in the intraday levels after finishing the harmonic short term formation that is the AB/CD pattern, which is a positive pattern, combined with positive signals from the RSI after reaching oversold levels, amid the dominance of the main upward trend in the medium term, while still suffering due to trading below the 50-day SMA, hindering upcoming gains.
Therefore we expect more gains for the stock, targeting the important resistance of $377.30, provided the support of $326.60 holds on.
The Euro has rallied during the trading session on Thursday as we are now testing the crucial 50 Day EMA.
The 50-day EMA is a significant technical indicator that many traders closely monitor.
Ultimately, this is a market that I think continues to see a lot of choppiness, but I believe that the Euro will continue to be rather weak from the longer-term standpoint.
Recent Consolidation
Recently trading in this market has been between the 1.05 level at the top and the 1.02 level at the bottom. At this point, we are getting fairly close to the top, and it’s probably worth noting also that the 1.05 level has a lot of noise that extends all the way to the 1.06 level. Because of this, I think you’ve got a situation where a lot of traders are going to be struggling to break out above there, but if we did see the Euro break that level, then you have to have serious discussions as to whether or not the trend has changed.
As things stand right now, I don’t see the EUR/USD pair breaking above there, unless something drastically changes in the United States, because the European Union is starting to see signs of life in Germany and France, but they still have a long way to go as far as monetary policy is concerned. In fact, this is part of the problem with the European Union, you have countries like Spain which will be completely different than countries like Greece or Finland. I would not want the job of setting monetary policy in this scenario.
As things stand right now, I’m more than willing to start fading signs of exhaustion after short-term rallies, and I think ultimately this is a market that will continue to look for a long wick’s to the upside to start shorting again. This is what I’ve been doing for a couple of months, and until something fundamentally changes, or we break above the 1.06 level, there’s no reason to get long of the Euro.
During the trading session on Thursday, we have seen the British pound rallied quite significantly, but at this point in time it also looks like we are struggling with the same resistance barrier that we have been dealing with for some time.
I think at this point in time, the market will face a lot of noise between the 1.25 level in the 1.26 level above.
At this point, I think you have a situation where traders will continue to pay close attention to the bond market. It looks like interest rates are pulling back a little bit in the United States to weaken the US dollar for the short term, but over the longer term, it’s very likely that we will see the British pound soften a bit. We could see some exhaustion coming back into the market rather soon. However, it’s also worth noting that we are through most of the fundamental announcements for the week, so I think we’ve got a situation where the next day or 2 could tell us a lot. After all, if there is no fundamental reason for the British pound to suddenly weaken or give up some strength, it tells you how weak that Sterling really is.
On the Other Hand
On the other hand, if we were to continue to go higher and break above the 1.26 level, then we are going to be fighting the 200 Day EMA. The 200 Day EMA is a large technical indicator that a lot of people pay close attention to, and some people even base the entire trend on this indicator. If we were to break above there, then it’s likely that the market could go looking to the 1.2750 level after that.
That being said, I don’t necessarily think we are going to break above there but if we did, that would obviously be a very bullish sign. At that point, I would anticipate that the US dollar is in serious trouble against most currencies, not just the British pound. However, when you look at the chart you can see easily that the market is still for the most part in a consolidation zone, so I think it makes a lot of sense that we fade this rally given enough time.
The USD/JPY forecast suggests a brief pause after a rally in the previous session.
The US reported that inflation increased by 0.5% in January.
Market participants are keeping an eye on Trump’s tariff developments.
The USD/JPY forecast suggests a brief retreat as traders take profits after an upbeat US inflation report. However, the bullish bias remains intact as market participants price a hawkish Fed and only one rate cut this year. High borrowing costs will keep a wide gap in rates between the US and Japan, hurting the yen.
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The dollar rallied to new peaks against the yen after an upbeat consumer inflation report, reversing the previous downtrend. The US reported that inflation increased by 0.5% in January, well above estimates of a 0.3% increase. At the same time, the annual figure jumped by 3.0%, beating forecasts of 2.9%. The unexpectedly hot numbers pushed market participants to slash bets for Fed rate cuts. After the report, traders were only pricing 28-bps of rate cuts this year, down from 37-bps.
Meanwhile, market participants are keeping an eye on Trump’s tariff developments. The US President has promised to impose duties on all countries that have tariffs on US goods. Such an outcome would rekindle fears of a global trade war and economic uncertainty. Moreover, tariffs will likely keep US inflation high, forcing the Fed to keep rates at elevated levels.
USD/JPY key events today
US core PPI m/m
US PPI m/m
US unemployment claims
USD/JPY technical forecast: Bulls pause to retest 154.01 as support
USD/JPY 4-hour chart
On the technical side, the USD/JPY price has broken above the 30-SMA and soared past the 154.01 resistance level. At the same time, the RI has jumped and now trades near the overbought region. This shows a strong shift in sentiment from bearish to bullish.
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Previously, the price had shown massive bearish momentum when it collapsed through the 154.01 support and reached the 151.02 level. However, bears could not continue beyond this level. As a result, bulls emerged and made an engulfing candle that signaled a looming reversal. Soon after, the price broke above the SMA, rising to new highs.
At the moment, the price is retesting the 154.01 level as support. If it holds firm, the price will likely climb to the 156.00 resistance level. However, it might drop further to the 30-SMA before making new highs.
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