• GBP/USD trades in positive territory above 1.2950 on Monday.
• The US Dollar started the week under strong selling pressure.
• The cautious market mood could limit the pair’s upside.

After closing the fifth consecutive week in negative territory, GBP/USD opened with a bullish gap and rose toward 1.3000 early Monday. 

The broad-based selling pressure surrounding the US Dollar (USD) fuelled GBP/USD’s rally at the beginning of the week. The uncertainty surrounding the outcome of the US presidential election seems to be weighing on the USD, especially after betting site PredictIt has placed a 51% odd of a Kamala Harris win on Tuesday, marking the vice president’s first lead over Donald Trump since October 9. 

Meanwhile, US stock index futures trade mixed in the early European session, reflecting a cautious market mood. Investors could refrain from taking large positions until they have a clear picture of who the next president of the US will be. In case there is a selloff in US stocks following the opening bell, GBP/USD could have a difficult time stretching higher.

The US economic calendar will feature Factory Orders figures for September but markets are unlikely to react to this data. On Friday, The US Bureau of Labor Statistics (BLS) announced that Nonfarm Payrolls (NFP) in the US rose by only 12,000 in October. This reading followed the 223,000 increase (revised from 254,000) recorded in September and missed the market expectation of 113,000 by a wide margin. In its press release, the BLS explained that it was likely that payroll employment estimates in some industries were affected by the hurricanes.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 50 but GBP/USD struggles to hold above 1.2980, where the 100-day Simple Moving Average (SMA) is located, reflecting buyers’ hesitancy.

In case 1.2980 holds as resistance, 1.2940 (static level) could be seen as next support before 1.2900 (round level). Once GBP/USD stabilizes above 1.2980, 1.3000 (static level, 20-day SMA) could act as interim resistance ahead of 1.3040 (static level).

Japan’s Election Result Leaves the BoJ Facing Political Uncertainty

The October 27 general election left Japan in political limbo. The Liberal Democratic Party (LDP) – Komeito coalition fell short of the 233 seats needed for a majority.

The result leaves the BoJ facing political party uncertainty as the LDP considers lesser parties to form a government. Cost of living remains a primary issue for voters, and the LDP may make concessions that could impact BoJ monetary policy plans.

Potential political pressure on the BoJ to maintain loose monetary policy may adversely impact Japanese Yen demand.

Expert Views on the Bank of Japan Rate Path

In a recent Reuters poll, economists expect Japan’s economy to slow sharply, from an annualized 2.9% in Q2 2024 to 0.7% in Q3 2024. Economists attributed the projection to softer private consumption as higher prices offset wage growth.

The prospect of weaker growth could further reduce expectations of a near-term BoJ rate hike and Japanese Yen demand.

US Services PMIs, the Presidential Election, and the Fed

On Tuesday, November 5, the all-important ISM Services PMI will influence US dollar demand. Economists expect the ISM Services PMI to decline from 54.9 in September to 53.3 in October. A larger decline toward 50 could boost bets on a December Fed rate cut as the services sector accounts for around 80% of the US economy.

However, the November 5 US Presidential Election will likely overshadow the data, potentially fueling USD/JPY volatility. A Trump victory could drive the USD/JPY through last week’s 154 resistance.

On Thursday, November 7, the Fed will deliver its penultimate interest rate decision of 2024.

Economists expect the Fed to cut rates by 25 basis points. A 25-basis point Fed rate cut would shift the focus to forward guidance, which may hinge on the US election result. Support for a 25-basis point December rate cut may drag the USD/JPY below 151.5. Conversely, a more hawkish Fed rate path may signal a USD/JPY move through 154.

Short-term Forecast:

Near-term USD/JPY trends will depend on Japan’s economic indicators, the US Presidential Election, and the Fed’s interest rate decision. Softer-than-expected data from Japan, a Trump victory, and a less dovish Fed interest rate outlook could drive US dollar demand and a USD/JPY move through 154.

Conversely, a Kamala Harris win and Fed support for a December interest rate cut could pull the USD/JPY below 151.5.

Investors should stay alert in a pivotal week for the USD/JPY pairing. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay informed with our latest analysis and news to navigate the FX markets.

USD/JPY Price Action

Daily Chart

The USD/JPY remains well above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY breakout from the trend line could signal a move toward last week’s high of 153.877. A return to 153.877 could allow the bulls to target the 155 level.

Investors should consider Japan’s economic indicators, the US Presidential Election, and the Fed’s interest rate decision for USD/JPY price trends.

Conversely, a drop below the trend line could bring the 151.685 support level into play. A fall through the 151.685 support level may signal a drop toward 150 and the 200-day EMA.

The 14-day RSI at 64.50 indicates a USD/JPY return to 153.877 before entering overbought territory.

• The US economy expanded by 2.8%, below estimates of 3.0%. 

• The US reported dismal job growth in October.

• Market participants will focus on the Bank of England policy meeting.

The GBP/USD weekly forecast supports further downside with the looming BoE rate cut and the US presidential election. 

Ups and downs of GBP/USD

The pound had a slightly bearish week as the dollar fluctuated amid mixed economic reports. The US economy expanded by 2.8%, below estimates of 3.0%. The weaker-than-expected economic performance temporarily weighed on the dollar. 

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Another report on Thursday revealed that inflation accelerated by 0.3%, meeting forecasts. Meanwhile, on Friday, the US reported dismal job growth. The economy only added 12,000 jobs compared to estimates of 106,000. Meanwhile, the unemployment rate held steady at 4.1%. The dollar initially sunk but recovered before the day ended as focus shifted to the upcoming presidential election. 

Next week’s key events for GBP/USD

Next week, market participants will focus on the Bank of England policy meeting on Thursday. According to a Reuters poll, the central bank will likely cut borrowing costs by 25-bps. Notably, inflation in the UK has eased below the 2% target, putting more pressure on policymakers to cut rates. However, economists believe this might be the last rate cut for the year. 

Similarly, the Federal Reserve might cut rates by 25-bps on the same day. Recent data from the US has shifted the outlook for Fed rate cuts to a more gradual pace. Nevertheless, market participants will pay attention to messaging for future policy moves. Furthermore, the US will release data on initial jobless claims and nonfarm productivity. 

GBP/USD weekly technical forecast: Lower low strengthens bearish bias

On the technical side, the GBP/USD price has broken below and retested the 1.3002 key level. With this move, bears have confirmed a new downtrend by breaking below the previous low to make a lower low. The reversal started at the 1.3400 resistance level. Here, the price started making strong bearish candles, which later punctured the 22-SMA support and the bullish trendline. 

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Currently, GBP/USD is bouncing lower after retesting the 1.3002 level. The price has pushed below the SMA, and the RSI is in bearish territory. In the coming week, bears will target the 1.2701 support level. Moreover, the bearish bias will remain if the price stays below the SMA and the RSI below 50. 

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Can the US dollar break key resistance next week, and how might markets react to the November 5th US presidential election?

Watch today’s forex forecast video for all of the details, including how I’m trading the DXY, EURUSD, GBPUSD, USDJPY, and USDCAD next week.

US Dollar Index (DXY) Forecast

The DXY remains below its 104.50 resistance level, but is showing considerable strength today following a dismal US jobs number.

However, the US dollar needs to get above 104.50 on the higher time frames to signal a continuation toward levels like 106.00.

Until then, dollar bulls need to be careful, as the potential for a pullback remains.

I’ve mentioned for weeks that I expect any pullbacks from the DXY to be relatively shallow.

But with the upcoming US presidential election next week, traders should brace for volatility from the US dollar and markets at large.

EURUSD Forecast

EURUSD worked out beautifully for us today on the latest non-farm payroll (NFP) numbers.

If you saw Thursday’s EURUSD video, you know I was watching for a short on a sweep of the 1.0880 high and a 1.0900 retest.

Today’s high for the euro is 1.0906, just six pips above my ideal entry.

Not only that, but the pair is down over 50 pips since that retest, and is on track to carve a potential bearish engulfing day.

However, traders should know that 1.0840 is likely to attract buyers next week.

So, unless the EURUSD can close below 1.0840 today, we could see a bounce from that region next week.

That makes sense when you consider that the DXY is below 104.50 resistance.

But as I discussed throughout October, I do not favor US dollar shorts following the 102.00 and 102.60 reclaims.

In my opinion, that’s probably enough to keep the USD bullish through the rest of 2024.

We will see pullbacks from the DXY, but I’d rather be a US dollar buyer on those pullbacks than try to short an aggressive dollar uptrend.

GBPUSD Forecast

GBPUSD has looked increasingly weak against the US dollar and its euro counterpart.

The pair retested 1.3050 again this week, which triggered a 150-pip drop back to our 1.2900 support level.

So far, this is still the trading range for GBPUSD.

However, with next week’s US presidential election, we have to entertain the possibility of a breakout from this range.

Note that “breakout” can refer to bullish and bearish moves.

A sustained break above 1.3050 on the daily time frame would expose recent highs near 1.3100 and 1.3175, while a daily close below 1.2850 would open up 1.2700.

USDJPY Forecast

In my latest USDJPY video, I discussed the potential for a bullish reclaim of the 151.00-152.00 region and what that could mean for the pair.

So far, we’ve seen USDJPY bulls reclaim that area on the high time frames, and defend it as new support on Friday.

If this continues through next week’s US election, we could see USDJPY target 155.60 and even 160.00.

That said, remember that the DXY needs to take out 104.50 resistance for the US dollar to strengthen across the board.

Until then, bulls should tread carefully.

USDCAD Forecast

USDCAD is working on its sixth daily close above a multi-year resistance.

It’s also a second higher weekly close above the 1.3880 level, which dates back to October 2022.

If USDCAD can hold this breakout through next week’s US presidential election, it could send the pair significantly higher toward 1.4200 and 1.4700.

As always, be careful with the upcoming volatility, and remember that even the strongest uptrends have pullbacks.

November 1, 2024 – Written by John Cameron

STORY LINK Pound to Euro Exchange Rate Strikes Four-Week Low as Eurozone Inflation Beats Forecasts

The Pound Euro (GBP/EUR) exchange rate plunged on Thursday after hotter-than-forecast Eurozone inflation saw the single currency surge.

At the time of writing, GBP/EUR traded at €1.1856, down 0.6% on the day.

The Euro (EUR) surged on Thursday following the release of the Eurozone’s latest consumer price index, which surpassed expectations.

Preliminary CPI data for October revealed that Eurozone inflation accelerated more than anticipated, climbing from 1.7% to 2%, outpacing forecasts of 1.9%. Core inflation remained unchanged at 2.7%, defying predictions of a slight decrease to 2.6%.

This unexpected rise in inflation came on the heels of a stronger-than-expected GDP report on Wednesday, which indicated that Eurozone growth picked up in the third quarter, increasing from 0.2% to 0.4%.

Consequently, markets reduced their expectations for interest rate cuts by the European Central Bank (ECB), driving the Euro higher.

The increasingly risk-sensitive Pound (GBP) slipped against the safe-haven Euro on Thursday amid market fears that global borrowing costs would remain elevated for longer than hoped.

This sentiment was bolstered by the Eurozone’s CPI exceeding expectations and the US core PCE price index, the Federal Reserve’s preferred inflation gauge, also coming in higher than anticipated.

Additionally, the UK government’s Autumn Budget, announced on Wednesday, sent UK gilt yields soaring. Chancellor Rachel Reeves announced a significant increase in borrowing, and upward revisions to inflation forecasts led many to speculate that the Bank of England (BoE) might slow its pace of policy easing.

While the reduced expectations for BoE rate cuts could be seen as a positive for the Pound, worries about high UK government borrowing and the broader risk-averse market sentiment both put downward pressure on GBP on Thursday.

Looking forward, the Pound Euro exchange rate may experience a calm finish to an otherwise turbulent week on Friday. Significant market-moving data becomes scarce on both sides, potentially leaving GBP and EUR investors to pause and reassess their positions.

However, next week is expected to be eventful again, with key German data scheduled for release and the Bank of England poised to announce its latest interest rate decision. Although the BoE is anticipated to cut rates, their forward guidance could provide a lift to the Pound if policymakers express more caution about future rate cuts in light of the recent budget.

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The Dollar should weaken if Kamala Harris wins next week’s U.S. election, but a balance of probabilities favours strength.

According to a new analysis from Crédit Agricole, the U.S. Dollar will retest 2024 highs in the event of a Donald Trump win next week but fall if Kamala Harris wins.

“A soft landing in the U.S. in 2025 could further suggest that the USD rate appeal could persist in the months after the elections. We subsequently see the USD moving closer to its 2024 highs in the wake of a Trump victory while suffering only limited losses following a Harris win,” says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

Losses for the Dollar in the event of a Harris win would nevertheless put the GBP/USD comfortably back above the 1.30 marker, provided Sterling stabilises following its post-budget wobble.

“EUR/USD and GBP/USD could slump to their Q124 lows or head lower still in response to a Trump victory accompanied by a ‘red wave’ in the US Congress. In contrast, their upside could be limited to 1.10 and 1.33 in the event of a Harris victory and a divided US Congress,” says Marinov.

Analysts at Barclays say a Harris win would see the USD erase the Trump premium, which they think amounts to a 2% drop (i.e. 2% recovery in GBP/USD and EUR/USD).

The market is currently expecting a Trump win, with odds set at about 60%.

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Rising odds of a Trump victory are reflected in a strengthening U.S. Dollar through the course of October, which pushed the Pound to Dollar exchange rate to an October 31 low at 1.2843.

Also of significance to the market outlook is the outcome of votes for the Senate and House of Representatives. Should the Republicans win both houses, their control of Congress significantly boosts a Trump agenda.

A “red wave” outcome is increasingly likely, according to betting markets, where the odds of this outcome now sit at 44%.

“We see the most bullish dollar outcome as a red sweep and the most bearish dollar outcome as a blue sweep, but the magnitude of the moves is likely larger in the former,” says George Saravelos, an analyst at Deutsche Bank.

“We see the dollar rising across all currency pairs in a red sweep,” he says.

Analysts say Trump’s policy agenda is more radical than that of his Democrat rival Kamala Harris, putting a number of USD-positive policies and scenarios in play.

“We suspect Trump’s proposed curbs on immigration and new tariffs would be stagflationary,” says Paul Ashworth, Chief North America Economist at Capital Economics.

Trump intends to impose significant import tariffs, which would raise domestic inflation and prevent the Federal Reserve from cutting as far and as fast as previously assumed.

“The proposed 10–20% increase in tariffs across the board has the potential to be inflationary,” says Tom Kenny, Senior International Economist at ANZ Bank.

• EUR/USD stays in a consolidation phase below 1.0900 early Friday.
• Nonfarm Payrolls in the US are forecast to rise by 113,000 in October.
• 1.0870 aligns as a key pivot level for the pair.

EUR/USD closed the fourth consecutive day in positive territory on Thursday before going into a consolidation phase below 1.0900 on Friday. In the early American session, October employment data from the US will be watched closely by market participants.

EUR/USD benefited from the selling pressure surrounding the US Dollar (USD) following mixed macroeconomic data releases on Thursday and extended its weekly uptrend. The Initial Jobless Claims declined by 12,000 to 216,000 for the week ending October 26, while the Employment Cost Index rose by 0.8% in the third quarter, falling short of the market expectation for an increase of 0.9%. 

Nonfarm Payrolls (NFP) in the US are forecast to rise by 113,000 in October following the 254,000 increase recorded in September. A reading below 100,000 could trigger another leg of USD selloff and allow EUR/USD to push higher. On the flip side, a positive surprise, with an NFP print of 150,000 or higher, could support the USD and make it difficult for the pair to keep its footing heading into the weekend.

Investors could look to adjust positions ahead of the US presidential election and Federal Reserve policy meeting next week and trigger irregular movements in financial markets. Hence, it could be risky to bet on a directional move depending on the outcome of the US labor market data.

EUR/USD Technical Analysis

EUR/USD was last seen trading within a few pips of the pivot level at 1.0870, where the 200-day and the 20-day Simple Moving Averages (SMA) meet. Once the pair confirms this level as support, technical buyers could remain interested. In this scenario, 1.0900 (round level, static level) could be seen as interim resistance before 1.0940 (100-day SMA) and 1.1000 (round level, 50-day SMA).

If EUR/USD fails to clear 1.0870, it could come under renewed bearish pressure and retreat toward 1.0800 (round level) and 1.0750 (static level).

GBP/USD Price Forecast: Tumbles to two-month low, traders ditch GBP on UK’s budget

Pound Sterling declines after lower US Jobless Claims

GBP/USD depreciates to near 1.2950 due to market caution ahead of US presidential election

Created on October 31, 2024

• The euro rose slightly above $1.0860 after unexpectedly strong growth figures from the eurozone, prompting investors to reduce their expectations for a rate cut by the European Central Bank.
• According to the economic calendar results, the eurozone economy expanded by 0.4% quarter-on-quarter in the third quarter, double the second-quarter growth and beating market expectations of 0.2%.
• Germany surprised by avoiding recession and achieving a growth rate of 0.2%, while France and Spain also reported stronger-than-expected growth.

However, Italy’s economy stalled. This week, inflation figures were also in focus, with eurozone inflation expected to rise slightly to 1.9%. Traders still expect the European Central Bank to cut its main deposit rate by 25 basis points in December, which would be the fourth cut after cuts in October, September and June. However, the likelihood of a more significant 50 basis point cut has decreased to around 25% in light of the GDP reports.

On another note, according to the results of the economic diary, the eurozone industrial sector sentiment has fallen to its lowest level in more than two years. According to the announcement, the eurozone industrial confidence index deteriorated to -13 in October 2024 from a revised -11 in the previous month, which is below market expectations of -10.5, indicating the highest level of pessimism in the industry since the direct repercussions of the Russian invasion of Ukraine in July 2022.

Sentiments deteriorated for production expectations (0.2 versus 1.9 in September) and order books (-28.2 versus -25.6), which is in line with the decline in orders from foreign markets (-30.4 versus -26.9). In addition, pessimism rose for employment expectations (-5.6 versus -4.7), and selling price expectations rose to a three-month high (6.5 versus 6.3).

Meanwhile, economic sentiment in the eurozone fell to its lowest level in 8 months. The Eurozone Economic Sentiment Index (ESI) fell to 95.6 in October 2024 from an upwardly revised 96.3 the previous month, the lowest level since February and missing market expectations that it would remain at 96.3. The decline was largely due to increased pessimism in industry (-13 vs. -11 in September), the highest level in more than two years, amid declines in both output and order book levels. Meanwhile, the survey pointed to a rebound in consumer inflation expectations (13.3 vs. 11), rising to their highest level since February, potentially jeopardizing the progress in reducing inflation from the ECB’s tightening cycle. On the other hand, the positive trends were captured by stronger-than-expected results for the services sector (7.1 vs. 7.1).

On the US side, the US Bureau of Economic Analysis reported a 2.8% increase in real GDP for the third quarter of 2024, a slight decline from the 3.0% growth seen in the previous quarter and below market expectations. GDP growth was largely driven by higher consumer spending, exports, and federal government spending. However, higher imports also had an impact on the overall GDP calculation. Consumer spending increased on both products and services, particularly non-durable goods such as prescription drugs, automobiles, health care services, and food.

Exports also expanded, especially in capital goods, while federal spending increased significantly in defence-related areas. Clearly, the slowdown in GDP growth during the third quarter can be attributed to lower private inventory investment and residential fixed investment. However, this was offset by gains in exports, consumer spending, and government spending, despite higher imports. GDP in current dollars also rose by 4.7% to $29.35 trillion in the third quarter.

EUR/USD Technical analysis and forecast:

Despite attempts to rebound higher, they are still weak, and the general trend for the EUR/USD price will remain bearish as long as it stabilizes around and below the psychological support level of 1.0800. technically, the trend will remain bearish until the markets react to important announcements today.

Eurozone inflation figures will be announced, followed by the US inflation reading preferred by the US Federal Reserve. On the other hand, according to the performance on the daily chart, there will be no breach of the downtrend without stability above the psychological level of 1.1000.

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• GBP/USD breaks below the 100-day SMA at 1.2975, with further downside possible if it closes below the 1.2900 mark.
• Key support lies at 1.2885, with the 200-day SMA at 1.2807 as the next target for sellers.
• Resistance emerges at 1.2950/60, with RSI signaling bearish momentum approaching oversold conditions, potentially capping a rebound.

The Pound Sterling dropped to a new two-month low of 1.2885 against the Greenback during the session, as UK Gilts rose sharply following the budget release. However, the GBP/USD has recovered some ground yet is losing over 0.30% and trades at 1.2918.

GBP/USD Price Forecast: Technical outlook

The GBP/USD has broken below the 100-day Simple Moving Average (SMA) at 1.2975, extending its losses below the ascending channel support trendline, paving the way for further downside.

Although the 1.2900 figure was cleared, Pound sellers must achieve a daily close below it. In that outcome, the GBP/USD’s next support would be 1.2885, the day’s low, followed by the 200-day SMA at 1.2807.

Conversely, if buyers keep the GBP/USD afloat above 1.2900, the first resistance would be a previous support trendline at around 1.2950/60 before bulls can test 1.2999.

Oscillators favor further GBP/USD downside, as the Relative Strength Index (RSI) deepened its fall in bearish territory, about to reach oversold conditions.

GBP/USD Price Chart – Daily