The GBPCAD price lost the positive momentum recently after reaching 1.8160 level, to activate the correctional bearish track and achieve some gains by declining towards 1.7850, approaching the additional support at 1.7800.

Note that holding within the bullish channel and the consolidation of the MA55 near the mentioned additional support line will reinforce the chances of renewing the bullish attempts, to expect rallying towards 1.7980 soon, followed by attempting to renew the pressure on 1.8070 obstacle.

The expected trading range for today is between 1.7865 and 1.7980

Trend forecast: Bullish

• The dollar collapsed when a 25% tariff meant for Canada and Mexico failed to take off.

• The Bank of England lowered borrowing costs.

• Data on Friday showed a mixed picture of the US labor sector.

The GBP/USD weekly forecast indicates a brief respite for the pound as Trump’s policies weaken the dollar.

Ups and downs of GBP/USD 

The GBP/USD pair had a bullish week despite a rate cut by the Bank of England. The rally came from a decline in the dollar after Trump paused tariffs on Canadian and Mexican goods. 

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On Tuesday, the dollar collapsed when a 25% tariff meant for Canada and Mexico failed to take off. The two countries negotiated better trade deals, giving them more time. Meanwhile, the Bank of England lowered borrowing costs but emphasized the need for caution due to high inflation. Finally, data on Friday showed a mixed picture of the US labor sector, with both jobs and the unemployment rate easing.

Next week’s key events for GBP/USD

Next week, market participants will focus on inflation and retail sales data from the US. Meanwhile, the UK will release figures on manufacturing production and GDP. The US consumer inflation report will shape the outlook for Fed rate cuts. 

In the previous month, the core CPI figure missed forecasts, indicating soft underlying price pressures. As a result, the dollar fell as rate cut expectations rose. Another month of cooler-than-expected inflation might further weigh on the dollar. 

Meanwhile, the UK GDP report will show the state of the UK economy, which has been slowing down. 

GBP/USD weekly technical forecast: Price briefly retreats after channel breakout

On the technical side, the GBP/USD price has broken out of its bearish channel, indicating a bullish shift in sentiment. The price now trades slightly above the 22-SMA, showing bulls are in the lead. However, the RSI remains slightly below 50, a sign that bearish momentum is still strong. 

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GBP/USD has maintained a strong downtrend, making lower highs and lows and breaking past key support levels. However, bears paused when the price hit the 1.2200 support level. Here, price action showed small-bodied candles with large wicks, indicating indecision. 

After that, bulls took charge by breaking above the channel resistance and the 22-SMA resistance. The price is currently retesting the SMA as support. If bulls remain in the lead, the price will climb to the 1.2800 resistance. A break above this resistance would confirm a new bullish trend.

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• Japan released data showing solid wage growth.

• A pause in US tariffs weakened the greenback.

• US employment figures revealed a drop in job growth and lower unemployment.

The USD/JPY weekly forecast is bearish amid increasing bets for a Bank of Japan rate hike, boosting the yen.

Ups and downs of USD/JPY

The USD/JPY pair ended the week lower as the yen rallied against the dollar due to a surge in BoJ rate hike expectations. At the same time, a pause in US tariffs weakened the greenback. 

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BoJ rate hike bets rose after Japan released data showing solid wage growth. 

Meanwhile, the dollar eased as market participants became more convinced that Trump’s tariffs were just a negotiation tactic. He paused tariffs on Canada and Mexico, plunging the dollar. Additionally, employment figures revealed a drop in job growth and lower unemployment, painting a mixed picture of the labor sector.

Next week’s key events for USD/JPY

Next week, traders will focus on data from the US, including consumer inflation, producer inflation and retail sales. The inflation figures will show the state of price pressures, shaping the outlook for Fed rate cuts. 

Last month, inflation came in at 2.9%, nearing the Fed’s 2% target. However, policymakers have remained cautious because it has paused near this level. As a result, the central bank has been waiting for more progress before signaling further rate cuts. Meanwhile, the retail sales report will show the state of consumer spending in the US.

USD/JPY weekly technical forecast: Price targets the 150.06 support

On the technical side, the USD/JPY price is approaching the 150.06 support level after breaking below its bullish trendline. The price trades far below the 22-SMA, showing a strong lead for bears. At the same time, the RSI trades near the oversold region, indicating solid bearish momentum. 

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Bulls paused the previous move when the price got to the 158.54 resistance level. Moreover, although the price made higher highs and lows, it broke below the 22-SMA, indicating a corrective move. At the same time, the RSI failed to enter the overbought region, a sign that either bulls were holding back, or bears were strong too. 

After the corrective move, USD/JPY might make an impulsive leg. Therefore, the price might break below the 150.06 support to reach the 145.00 support. However, the price might retest the 22-SMA as resistance before continuing lower.

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• GBP/USD stabilizes above 1.2400 after closing in the red on Thursday.
• The BoE cut the policy rate by 25 bps as expected but the vote-split weighed on Pound Sterling.
• January Nonfarm Payrolls data from the US could drive the USD’s valuation in the American session.

GBP/USD lost its traction and dropped to a multi-day low below 1.2400 on Thursday following the Bank of England’s (BoE) monetary policy announcements. After staging a rebound in the American session, the pair seems to have stabilized above 1.2400 early Friday.

The BoE lowered the policy rate by 25 basis points (bps) at the February policy meeting, as widely anticipated. Two members of the Monetary Policy Committee (MPC), however, unexpectedly voted in favor of a 50 bps cut, triggering a Pound Sterling selloff with the immediate reaction. 

In the post-meeting press conference, “we must judge in future meetings whether underlying inflation pressures are easing enough to allow further cuts” BoE Governor Andrew Bailey said and helped GBP/USD find a foothold.

The US Bureau of Labor Statistics will publish the employment report for January later in the day. Nonfarm Payrolls (NFP) are forecast to rise by 170,000, following the 256,000 increase recorded in December. In the same period, the Unemployment Rate is seen holding steady at 4.1%.

A positive surprise, with an NFP reading above 200,000, could boost the USD in the American session and force GBP/USD to stretch lower. On the other hand, a print below 150,000 could revive expectations for a Federal Reserve (Fed) rate cut in March and open the door for a leg higher in the pair.

GBP/USD Technical Analysis

Despite Thursday’s pullback, the Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50 and GBP/USD holds above the ascending trend line, reflecting sellers’ hesitancy.

GBP/USD could face immediate resistance at 1.2450 (Fibonacci 50% retracement of the latest downtrend) ahead of 1.2500 (static level, round level) and 1.2530 (Fibonacci 61.8% retracement). On the downside, the 200-period Simple Moving Average (SMA) could act as first support at 1.2400 before 1.2370 (Fibonacci 38.2% retracement, ascending trend line, 100-period SMA) and 1.2300 (static level, round level).

Image: © Mohamed Yahya, Reproduced under CC licensing

Société Générale’s latest monthly FX market assessment sees the U.S. dollar increasingly fragile due to policy uncertainty, high valuation, and evolving trade risks.

The Japanese yen stands out as the top-performing G10 currency, benefitting from the Bank of Japan’s tightening cycle, while emerging market (EM) currencies appear positioned for a comeback after a turbulent 2024.

1. USD Outlook: Still Strong but More Fragile

Key Change: While the US dollar remains strong, it has become more volatile due to policy uncertainty and high valuation.

Drivers include growth and interest rate differentials that still support the USD, but not as strongly as in 2022-2024. U.S. trade and geopolitical risks (tariffs, negotiations) are now mostly priced in, limiting further upside.

That being said, Soc Gen sees no clear catalysts for a sharp USD reversal yet.

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2. JPY Forecast: Stronger Due to BoJ Tightening

The Japanese yen (JPY) is the only G10 currency with a clear positive shift. The Bank of Japan (BoJ) is tightening monetary policy while other central banks consider rate cuts, potentially allowing USD/JPY to fall into the 140-150 range in H1 2025, from recent highs near 159.

Longer-term, a return to USD/JPY 100 is possible but could take over a decade.

3. EUR/USD Volatility Rising

Key Change:

EUR/USD volatility is expected to stay high due to US protectionism and potential “currency war” escalation. Tariff risks impacting European exports and the ECB’s monetary response must also be considered says Soc Gen.

4. European Currencies: SEK and CHF Could Outperform

Key Changes:

SEK (Swedish krone) could outperform as a European equity recovery takes hold.

CHF (Swiss franc) weakening as risk appetite returns and the SNB intervenes to manage currency strength.

EUR/GBP expected to range between 0.83-0.87 in 2025 as GBP shorts increase.

5. EM Currencies: Turning Point for Recovery

A stronger EM FX performance is expected in 2025 after a difficult Q4 2024.

Peak uncertainty and market pain may be behind us, says Soc Gen, and as more tariff hurdles are resolved, market fears will ease. A more favorable US interest rate environment and improved growth outlook will also offer some support.

The Mexican peso is tipped to be the first to recover, followed by Brazilian real.

6. Tariff Impact on AUD, NZD, and CAD

The Australian, New Zealand, and Canadian dollars are under pressure due to US tariff threats. Soc Gen says US trade tensions are set to disproportionately affect these economies. CAD has broken above 1.45 against USD due to US-Canada tariff risks. AUD/USD will remain under pressure until geopolitical risks ease.

7. Emerging Market Currencies:

Latin America:

The Mexican peso is positioned for a recovery, as tariff fears ease.

The Brazilian real is rebounding due to reduced concerns over fiscal policy credibility.

Asia:

The Chinese yuan remains weak due to US tariff escalation and moderate Chinese retaliation.

The Indian rupee is one of the weakest EM performers, facing structural slowdowns and portfolio outflows.

CEEMEA:

The Turkish lira will see controlled depreciation, but total returns remain attractive.

The South African rand faces risks from Trump’s social media threats and potential removal from AGOA trade deal.

8. FX Forecast Adjustments

EUR/USD: Expected to remain between 1.01 and 1.07 in H1 2025.

USD/JPY: Forecasted to drop into the 140-150 range in H1.

USD/CAD: Trading above 1.45, reflecting trade risks.

EUR/GBP: Expected to stabilize between 0.83-0.87.

MXN, BRL, TRY: Emerging markets currencies expected to rebound.

9. Summary of Major Forecast Changes

USD remains strong but faces more volatility and fragility.

JPY is the most positively revised G10 currency due to BoJ tightening.

Emerging Market FX (especially MXN, BRL) expected to recover.

EUR/USD volatility to increase due to tariff risks and US monetary policy.

Tariffs are weighing on AUD, NZD, CAD.

SEK could outperform in Europe, while CHF weakens.

TRY depreciation will be gradual, while ZAR faces downside risks.

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The EURUSD price shows bullish bias after the decline that it witnessed yesterday, to settle above the breached resistance again, which supports the chances of resuming the expected bullish trend for the upcoming period, which targets testing 1.0455$, reminding you that breaching it will push the price towards 1.0600$ as a next main target.

Created on February 06, 2025

• The USD/JPY currency pair has been under selling pressure, dropping to a two-month low of 151.80 before stabilizing around 152.60 at the time of writing.
• Furthermore, the Japanese Yen has gained significant strength due to risk-off sentiment and signals from the Bank of Japan.

Japanese Yen Benefits from BoJ Tightening

According to the forex market trading. The Japanese yen gained strong positive momentum against the rest of the major currencies amid strong signals of the Bank of Japan’s readiness to tighten. In this regard, a member of the Board of Directors of the Bank of Japan, Naoki Tamura, stated that the Japanese central bank should raise the interest rate to at least 1% in the latter part of the fiscal year 2025. Also, Finance Minister Katsunobu Kato warned that inflation may continue to rise.

Moreover, recent economic data has highlighted strong wage growth, providing momentum to expectations that the Bank of Japan will continue to raise interest rates this year. According to the results of the economic calendar data, real wages in Japan rose for the second consecutive month in December, with nominal wage growth reaching its highest level in nearly three decades, driven largely by higher winter bonuses.

For its part, the Bank of Japan raised interest rates in January and indicated its willingness to raise them further if economic trends and prices are in line with its expectations. Also, the yen’s rise was supported by broad weakness in the US dollar, lower Treasury yields, amid mixed US economic data and easing concerns about a global trade war.

Trading Tips:

The Japanese yen is one of the most prominent safe havens, and increasing uncertainty may increase its gains.

Japanese stocks are the strongest today

During Thursday’s trading, and through stock trading platforms, the Nikkei 225 index of Japanese stocks rose by 0.6% to close at 39066, while the broader Topix index rose by 0.25% to 2752, marking the third consecutive day of gains for Japanese stocks. Obviously, these moves followed positive trends in US stock markets on Wall Street as concerns about a global trade war eased amid cautious measures by the US and China. Nvidia and other AI-related stocks also recovered losses associated with the DeepSeek disaster.

USD/JPY Technical analysis and Expectations Today:

According to the daily chart, the USD/JPY pair is moving within a recently formed downward channel. Technically, the bears’ success in moving towards the psychological level of 150.00 will reinforce the downward trend, and with it the technical indicators are moving towards strong oversold levels. We still prefer to buy USD/JPY from every downward level, but without risk, and the closest support levels currently are 151.60 and 150.90, respectively. On the other hand, and in the same time frame, moving towards and above the resistance of 156.00 will reinforce the bulls’ control over the trend again.

The currency pair will remain in a cautious wait-and-see mode until the US jobs numbers are announced, which will have a reaction to the future of the US Federal Reserve’s policies, in addition to the reaction to Trump’s continued imposition of more tariffs.

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