• US consumer prices increased by 0.2% in October.

• Traders expect Trump’s policies to drive inflation and pause or significantly slow Fed rate cuts.

• BoE’s Catherine Mann noted that inflation might be higher than expected in the medium term.

The GBP/USD forecast shows the dollar at new peaks as the Trump trade overshadows recent inflation figures. As a result, the pound remained weak against the greenback despite hawkish remarks from policymakers.

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On Wednesday, the US released its CPI report, which aligned with expectations. Consumer prices increased by 0.2% in October, while core prices increased by 0.3%. Meanwhile, the annual figure rose by 2.6%. Since the increase in inflation was expected, the Fed will likely lower borrowing costs in December.

The dollar initially retreated before climbing as market participants shifted their focus to Trump’s win. Traders expect Trump’s policies to drive inflation and pause or significantly slow Fed rate cuts.

The next significant reports will include wholesale inflation and retail sales. Producer prices are a leading indicator of future consumer prices. Therefore, rate-cut bets might ease if producer prices are higher than expected. The opposite is also true. Meanwhile, retail sales will show consumers’ financial health. High sales will show robust consumer spending, reducing rate-cut bets. On the other hand, low sales will indicate weak consumer spending, solidifying bets for a December rate cut.

Meanwhile, in the UK, Bank of England policymaker Catherine Mann noted that inflation might be higher than expected in the medium term. Mann is the only policymaker who voted against a rate cut at the last BoE meeting. Market bets for rate cuts in the UK have dropped since the reading of the new government budget. The BoE might only cut rates twice next year. 

GBP/USD key events today

• Core PPI m/m
• PPI m/m
• Unemployment Claims
• Fed Chair Powell Speaks

GBP/USD technical forecast: Bearish momentum head for the 1.2650 level

On the technical side, the GBP/USD price has broken below the 1.2750 key support to make a new low in the downtrend. Moreover, the price trades well below the 30-SMA, showing bears have a strong lead. At the same time, the RSI is in the oversold region, indicating solid bearish momentum. 

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The next target for the pair is at the 1.2650 support level. However, after such a steep collapse, bulls might be preparing to return for a pullback to the 1.2750 level or the 30-SMA.

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• The yen has lost around 30% of its value against the dollar since 2020.

• US Treasury yields and the dollar have risen since Trump won.

• US consumer inflation rose as expected in October.

The USD/JPY outlook shows sharp declines in the yen as the dollar scales new peaks due to optimism about Trump’s election win. Meanwhile, top officials in Japan are getting concerned about a weak yen, with some urging the BoJ to hike rates.

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According to data from the Bank of Japan, the yen has lost around 30% of its value against the dollar since 2020. This decline has come from low interest rates in Japan, which has created a wide rate differential with the US. However, the BoJ recently shifted to rate hikes before pausing amid concerns about market volatility. 

Meanwhile, US Treasury yields and the dollar have risen since Trump won the election. At the same time, Fed rate cut expectations have dropped. Therefore, the hope of quickly shrinking the rate gap is fading. 

On Thursday, a top opposition leader said that the Bank of Japan should raise rates to 1% to support the weak yen. Moreover, he added that the central bank should be vocal about its plans.

Meanwhile, data on Wednesday revealed that US consumer inflation rose as expected in October. On a monthly basis, it increased by 0.2%, while annually, it rose by 2.6%. Therefore, the Fed will likely lower borrowing costs by 25-bps in December. 

However, the outlook for rate cuts in 2025 has changed with Trump as the new president. His policies on taxes and trade will likely be inflationary. Therefore, the Fed might have to pause or cut rates more slowly than expected. 

Elsewhere, the US will release wholesale inflation and retail sales figures, which will continue to shape bets on a December Fed rate cut. Moreover, market participants will pay attention to Powell’s speech.

USD/JPY key events today

• US core PPI m/m
• US PPI m/m
• US unemployment claims
• Fed Chair Powell speaks

USD/JPY technical outlook: Uptrend continues above 156.02

On the technical side, the USD/JPY price has reached a new peak near the 156.02 key level. The price trades well above the 30-SMA, indicating a strong bullish move. Moreover, bullish momentum is strong, with the RSI in the overbought region. 

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Initially, the price had struggled to breach the 154.00 resistance level. However, when it did, bulls confirmed a continuation of the previous bullish trend.

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• EUR/JPY edges higher to near 164.40 in Thursday’s early European session. 
• Further consolidation cannot be ruled out amid the neutral RSI indicator. 
• The key resistance level emerges at the 164.95-165.00 region; the initial support level is located at 163.64.

The EUR/JPY cross gains traction to around 164.40 during the early European trading hours on Thursday. A lack of clear direction regarding the timing of a rate hike from the Bank of Japan (BoJ) weighs on the Japanese Yen (JPY) against the Euro (EUR). 

Traders brace for the flash Eurozone Gross Domestic Product (GDP) number for the third quarter (Q3), which is due later on Thursday, along with the speech from the European Central Bank (ECB) President Christine Lagarde.

Technically,  EUR/JPY hovers around the key 100-period Exponential Moving Averages (EMA) within the descending trend channel on the 4-hour chart. The cross could resume the upside if it can break above the 100-period EMA. However, further consolidation cannot be ruled out as the Relative Strength Index (RSI) stands near the midline, suggesting the neutral momentum of the cross.

The crucial resistance level for EUR/JPY emerges in the 164.95-165.00 zone, representing the upper boundary of the descending trend channel and the psychological level. Any follow-through buying could see a rally to 166.00, the high of November 7. 

On the downside, the low of November 13 at 163.64 acts as an initial support for the cross. Decisive trading below the mentioned level could expose 162.90, the lower limit of the trend channel. Extended losses could pave the way to 162.00, the low of October 21 and the round number. 

EUR/JPY 4-hour chart

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Created on November 13, 2024

• The stronger US dollar policy is bringing more losses to the EUR/USD currency pair, which has reached the support level of 1.0595, the lowest for the currency pair in the forex market during 2024.
• The gains of the US dollar are approaching the levels of November 2022, driven by expectations of imposing higher customs tariffs under the Donald Trump administration.
• Accordingly, these customs tariffs are expected to lead to raising prices, which limits the ability of the Federal Reserve to cut US interest rates.

Why has the euro been negatively affected since Trump’s victory in the US election?

The financial markets in general and the eurozone in particular have a bad history under Trump’s leadership. Therefore, a new victory for Trump in the US presidential election brings back memories of imposing comprehensive tariffs on imports to strengthen the US manufacturing base, and according to economists, the European Union is particularly vulnerable, as the United States is the European Union’s largest export market. The tariffs of the incoming Trump administration may focus on goods such as cars and steel. This coincides with the economic and political slowdown of the German economy, the largest in the eurozone, which weakens investor appetite for the single European currency – the euro – in the forex trading market.

Furthermore, and according to the results of economic data, the ZEW survey – a key measure of investor sentiment in Germany and the eurozone – showed a sharp decline in sentiment in November with the possibility of imposing tariffs.

Will the euro decline further?

If Trump activates the “America First” trade policy, which poses a particular problem for the eurozone’s economic outlook, the EUR/USD could remain under downward pressure and focus may shift away from reaching oversold levels. Markets and investors will continue to monitor the plans of the new US administration and their impact on global economic growth. consequently, on the policies of central banks worldwide over the next four years.

EUR/USD Technical analysis and signals:

The EUR/USD price breaking the support level of 1.0600 gives Forex traders the idea of ​​whether to buy the Euro after that or wait. According to the performance on the daily chart, the psychological resistance of 1.1000 will remain the most important for the Euro/USD pair to change its direction upwards. Technically, the Euro/USD will remain under downward pressure until the US inflation figures are announced and the vision of the new US administration becomes clear.

• Expected Euro/USD buying levels: 1.0575, 1.0480 and 1.0390 respectively.
• Expected Euro/USD selling levels: 1.0720, 1.0800 and 1.0865 respectively.

Finally, considering the need to exercise caution and place stop-loss and take-profit orders to ensure the preservation of recommendation levels and benefiting from profit without incurring losses that exceed the trading account’s capabilities.

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Created on November 13, 2024

• As you can see, the US dollar has rallied again against the Japanese yen as we continue to see a lot of upward pressure in general.
• That being said, the 155 yen level is an area that a lot of people would be paying close attention to as it is a large round psychologically significant figure and an area that should cause a little bit of noise.
• If we can get above there, then we can really take off to the upside, perhaps to the 158 level. If we pull back from here, I think there are plenty of buyers underneath willing to get involved. 

I think you have to keep in mind that the 152.50 yen level then becomes something that could be crucial as well. So, with all of this being said, I do think that we either see a move to the upside, or we see a pullback that offers value that traders should be willing to take advantage of. Keep in mind that the interest rate differential continues to favor the US dollar, and it will for the foreseeable future.

Do Not Fight the Trend

So, I just don’t see any reason why you would fight the trend. Underneath, we have the 150 yen level offering a floor in the market, especially now that the 50 day EMA and the 200 day EMA indicators both are sitting right there and they are crossing, forming the so-called Golden Cross. Either way, I think this is a market that continues to go higher over the longer term and short-term pullbacks, like I said, should end up being thought of as opportunities to pick up cheap US dollars. This will more likely than not continue to be the case, so at this point in time I think it’s only a matter of time before we break out and go much higher. All things being equal, I have no interest in shorting this USD/JPY pair anytime soon, as there are so many reasons for it to go higher.

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The GBP/USD pair is trading at $1.27321, showing a minor decline of 0.12% on the 4-hour chart. Currently sitting below the pivot point at $1.27542, the pair leans bearish, with immediate support at $1.27210. If prices dip further, we could see additional support at $1.26775 and $1.26446.

On the upside, breaking above $1.27542 could invite bullish momentum, with resistance levels at $1.27935 and $1.28311. The 50-day EMA at $1.28064 and 200-day EMA at $1.28937 suggest overhead resistance, adding to the bearish outlook for now.

EUR Pressured by Weak German Sentiment Data

The Euro struggles as German economic sentiment indicators fall short. The German ZEW Economic Sentiment index dropped to 7.4, below the expected 13.2, reflecting weaker investor confidence.

Additionally, the broader Eurozone ZEW sentiment slipped to 12.5, missing forecasts of 20.5. While the German CPI held steady at 0.4% month-over-month, the softening sentiment underscores ongoing economic challenges in the Eurozone.

Markets now await the German 10-year bond auction results for further direction.

EUR/USD Technical Forecast

Created on November 13, 2024

• The Euro has gone back and forth during the early hours on Tuesday against the Japanese Yen as we are hanging around the 50 day EMA.
• It’s worth noting that this pair does have a positive swap.
• So of course, a lot of people are looking at this through the prism of the carry trade.
• If we do break higher from here, it looks like we are at least going to try to break above there.

The 165 yen level is the gateway to the market going higher. We had recently broken out of a significant consolidation range. And we, in the last 24 hours, have tested the 50-day EMA as well as the 200-day EMA indicators. So, I think it all lines up for a bit of a bottoming and bouncing pattern.

If we were to break above the inverted hammer, during the trading session on Monday, that would also reinforce the idea of a break above the 165 yen level breaking above the 167 yen level then opens up the possibility of a much bigger move. And I do think that happens given enough time. The interest rate differential does favor holding this EUR/JPY pair, although I’m the first to admit that the euro is not as enticing as something like the US dollar or the British pound against the Japanese yen.

JPY-related Pairs Move Together Normally

Nonetheless, the yen related pairs all do tend to move in the same direction. And that’s something that needs to be paid close attention to. With this, I’m looking for some type of momentum in this market to send the euro higher. At that point, I’m more than willing to start buying. If we were to break down below the 161.50 yen level, then that could be fairly negative, but I would anticipate you would see the yen strengthening against almost everything at that point.

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The Euro to Dollar exchange rate (EUR/USD) could be on course to hit the 1:1 marker, according to an increasing number of analysts. Others say such talk is overblown.

“The sell-side researchers are upgrading the USD across the board. The EUR/USD calls are getting the most attention, with many calling for a move to parity for EUR/USD,” says W. Brad Bechtel, Global Head of FX at Jefferies.

EUR/USD entered a downtrend in October, with the selloff intensifying following the unexpectedly strong showing of Donald Trump and the Republicans in the November 05 vote.

Trump wants to raise tariffs on U.S. imports, which will hit exporter economies, such as that of the Eurozone. At the same time, Germany’s ruling coalition has collapsed, and Europe’s largest economy now faces a winter of political uncertainty ahead of a February election.

“In sum, if the Trump agenda is implemented in full force and quickly without a countervailing policy response from Europe or China, we could see EUR/USD drop through parity to 0.95 cents or even below,” says George Saravelos, Global co-Head of FX Research at Deutsche Bank.

Trump said he wants to place a 10% global import tariff on all imports to the U.S., with a 60% tariff reserved for China.

The U.S. is the Eurozone’s main export market for manufactured goods, while any economic hit to China from tariffs will also impact another crucial market.

“The euro has suffered more than most in the wake of Trump’s victory and we doubt that will let up anytime soon. Given our view that tariffs will be imposed next year and the ECB will ease by more than investors expect, we forecast the euro to slide to parity against the greenback by the end of 2025,” says James Reilly, Senior Markets Economist at Capital Economics.

Deutsche Bank says that for EUR/USD to go below parity, a number of negative scenarios must play out in Europe and China, in addition to a strong set of USD-supportive developments.

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EUR/USD at 0.95 “would be an overshoot that takes the real trade-weighted dollar to record highs, exceeding the Volcker period. A more balanced approach to the various scenarios would suggest a EUR/USD drop to 1.00 that matches the dollar’s historical record highs but does not exceed it,” explains Saravelos.

Trump has far more experience going into his second term and is keen to hit the ground running, meaning he will be fast to deliver on his agenda.

It appears euro exchange rates came under pressure on Monday as Trump announced a series of ‘hawkish’ appointments to top positions, with analysts saying he is filling his top team with people who share his view on China and global trade.

This means he was not bluffing with his ‘hawkish’ trade agenda.

“The Dollar is rising almost exactly in line with what it did after the 2016 election. This is – so far – a conventional Dollar move driven by expectations of fiscal easing, the impact on growth and thus rate differentials. If tariffs come, this Dollar rise will get MUCH bigger,” says Robin Brooks, Senior Fellow at Brookings Institute and previously the Chief Economist at the IIF and Chief FX Strategist at Goldman Sachs.

However, other analysts are not convinced and say it is too soon to talk about parity in the Euro-Dollar.

“EUR/USD parity? Not so fast,” says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

Crédit Agricole acknowledges that Trump’s victory and the growing chances for a ‘red sweep’ in the U.S. Congress have added to the downside risks to their current EUR/USD forecasts.

However, there are reasons why this might not happen. These include the fact that markets have already made significant adjustments to the outlook of relative interest rate policy in the Eurozone and the U.S.

“Investors have pared back some of their Fed easing bets while pricing in very aggressive ECB rate cuts ahead, which suggests that many negatives are in the price of EUR/USD,” says Marinov.

Furthermore, Marinov explains that U.S. tariffs could add to headwinds for growth but also fuel imported inflation in the Eurozone if EUR weakens further and the EU retaliates against the U.S., which could slow down the ECB easing cycle.

A potential boost to the Eurozone, according to Crédit Agricole, could come if Trump succeeds in his stated aim of ending the Ukraine war.

“All of these considerations would argue for more muted EUR/USD losses from here,” says Marinov.