• EUR/USD trades marginally higher in the European session on Thursday.
• Sellers could be discouraged in case the pair stabilizes above 1.0800.
• Weekly Initial Jobless Claims and preliminary October PMI will be featured in the US economic docket.

After closing the third consecutive day in negative territory on Wednesday, EUR/USD holds its ground and clings to small gains near 1.0800 early Thursday. Once the pair stabilizes above this level, sellers could be discouraged, paving the way for an extended recovery.

The broad-based US Dollar (USD) strength forced EUR/USD to stay on the back foot midweek. The USD benefited from the risk-averse market atmosphere and received an additional boost from rising US Treasury bond yields on Wednesday.

Early Thursday, the data from Germany and the Eurozone both showed that the business activity in the private sector contracted at a softening pace in early October. The preliminary HCOB Composite PMI for Germany improved to 48.4 from 47.5, while the Composite PMI for the Eurozone edged higher to 49.7 from 49.6.

Assessing the PMI surveys’ findings, “for the European Central Bank (ECB), the latest figures come with an unwelcome surprise. Inflation in the services sector seems likely to stay elevated, as costs and selling prices in October rose faster than the previous month,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank and added:

“All this backs the idea that the ECB is likely to cut key interest rates by just 25 basis points in December, rather than the 50 basis points some have been talking about.”

In the second half of the day, the US economic calendar will feature the weekly Initial Jobless Claims and S&P Global PMI data. In case the number of first-time applications for unemployment benefits rise toward 250,000, the USD could come under bearish pressure with the immediate reaction. On the other hand, if the Composite PMI comes in near September’s reading of 54, the USD could stay resilient against its peers. 

EUR/USD Technical Analysis

The upper limit of the descending regression channel coming from late September aligns as immediate resistance near 1.0800. The 20-period Simple Moving Average (SMA) on the 4-hour chart reinforces this level as well. Once the pair flips that level into support, it could extend its recovery toward 1.0850 (50-period SMA) and 1.0900 (round level, static level).

If EUR/USD fails to clear 1.0800, technical sellers could look to retain control. In this scenario, 1.0770 (mid-point of the descending channel) and 1.0730 (lower limit of the descending channel) could be seen as next support levels.

STORY LINK Pound Euro Exchange Rate Forecast: GBP/EUR Touches Five-Day Best

The Pound Euro (GBP/EUR) exchange rate touched a five-day high on Wednesday, although it wavered in a narrow range, as a risk-off mood and UK budget hopes impacted the pairing.

At the time of writing, GBP/EUR traded at €1.2034, having hit a five-day high of €1.2043 earlier in the session.

The Euro (EUR) had a mixed performance on Wednesday, influenced by a risk-off market mood and a strengthening US Dollar (USD).

While the risk-averse market sentiment supported the safer Euro against its riskier counterparts, the Euro’s strong negative correlation with the rising US Dollar exerted downward pressure on EUR.

The US Dollar and the risk-off mood were both driven by ‘Trump trade’. Investors have been betting on a Donald Trump victory in next month’s US presidential election, with the policy implications impacting USD and wider markets.

Analysts suggest that Trump’s protectionist policies and tax cuts could drive up US inflation and negatively impact the global economy, with these expectations boosting the USD and souring the market mood.

Meanwhile, the increasingly risk-sensitive Pound (GBP) maintained its strength against the Euro on Wednesday, even in the face of a gloomy market mood.

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GBP’s resilience was bolstered by hopes of pro-growth measures in the UK government’s upcoming Autumn Budget.

The anticipation surrounding the budget has caused some volatility in the Pound over recent weeks, with fears of tax hikes and spending cuts weighing on GBP, while hopes of pro-growth measures have provided support.

On Wednesday, hopes of pro-growth measures appeared to bolster Sterling, enabling it to hold steady against the safer Euro despite the prevailing risk-off market mood. The optimism came as the Lloyds Banking Group voiced its confidence in the budget.

Lloyds Chief Financial Officer William Chalmers stated:

‘Whatever the tax changes might be, we believe that they will be pursued in the context of a constructive, pro-growth agenda. And it’s that overall balance that we’re really looking for, and indeed it’s that overall balance, that pro-growth agenda, that we would seek to be a part of going forward.’

Looking forward, Thursday’s PMI surveys may influence the Pound Euro pair’s movement. The Eurozone’s surveys are predicted to indicate another contraction in overall business activity this month, though at a slower rate than in September.

Conversely, the UK’s PMIs are expected to remain steady, with both manufacturing and the key services sector staying in positive territory.

These outcomes might lead investors to prefer the Pound over the Euro. However, any unanticipated results could generate volatility.

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STORY LINK EUR/GBP Forecast: Euro Woes Continue to Support the Pound

The Pound to Euro (GBP/EUR) exchange rate found support below 1.2000 on Tuesday and strengthened to 1.2030 on Wednesday, close to 30-month highs.

The Pound has been relatively quiet in global markets while the Euro has remained under pressure amid expectations of faster interest rate cuts.

According to Danske Bank; “GBP continues to benefit from UK growth outperformance relative to the Eurozone.

The bank sees the potential for GBP/EUR to extend gains to 1.2350 on a 6-month view. That would be the strongest level for over 8 years.

Euro vulnerability is likely to continue, but uncertainty surrounding UK fiscal policy could serve to limit the scope for near-term GBP/EUR gains.

Rabobank commented on the Euro; “It is likely that a large part of the single currency’s resilience through much of this year has been drawn from the view that the ECB would be cautious in cutting interest rates. However, this view is changing.”

ING noted; “Even the most hawkish members like Austria’s Holzmann decided not to push back against market pricing for back-to-back ECB cuts into mid-2025, and President Christine Lagarde reiterated her generally dovish tone at a TV interview yesterday.”

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According to Holzmann; “the deflationary process was much faster than we had thought.”

On rate cuts he added; “I’m sure there will be others following in the future, and not too far.”

Portugal’s central bank head Centeno has continued to warn about inflation falling too low.

He commented; “I see more risks in undershooting target inflation than the other way around and most of the risks that we see, the downside risks that we see right now in our projections, they are endogenous.”

Rabobank added; “Even though Rabo’s central view is that the ECB will stick to 25 bps rate cut increments, it is possible that a more dovish ECB will remove the support which appears to be preventing the EUR from facing up to Germany’s structural economic woes.”

There have been no major UK data releases this week, although the latest survey evidence suggested a further easing of wage pressures.

According to human resources data company Brightmine, pay rises slowed to 4.0% in the third quarter from 4.8% in the second quarter while expectations surrounding increases for the coming year slowed sharply to 3% from 6% last year.

Sheila Attwood, senior content manager at Brightmine did note that there were still areas where the labour market is tight; “While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent.”

Markets remain very confident that rates will be cut at the November Bank of England (BoE) meeting, but inflation doubts will potentially deter a more aggressive BoE stance.

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TAGS: Euro Pound Forecasts

Created on October 24, 2024

• The Euro was fairly noisy during the early hours on Wednesday as we continue to dance around just below the 1.08 level.
• By doing so, it looks like we are starting to struggle yet again and breaking down below the 1.08 level is a big deal.
• The question now is whether or not we continue to free fall from here. I suspect it all comes down to the bond market and what things are happening there as interest rates continue to climb despite the fact that the Federal Reserve is trying to knock them back down.
• At the end of the day, the bond market has more influence for the longer-term move.

In other words, there is a real concern that the Federal Reserve is about to lose control of the bond market, and if that’s the case, things could get wild. At this point, a turnaround is possible, though. We do have PMI numbers coming out of Germany and the United States during the trading session, but I think that Thursday’s probably going to be a question of whether or not we can recover. The 200-day EMA sits right around the 1.09 level, and it’s not until we break above there that I would consider buying this pair. Between now and then, we could see a little bit of a rally, only to see exhaustion and start selling again.

Keep in mind, there’s also the risk appetite part of the equation, because if risk appetite starts to fall apart, then the US dollar typically attracts a lot of inflows via the treasury market. Keep in mind that as rates go higher and people are concerned about the world, they will typically need to buy US dollars in order to get involved in the bond market, which is exactly what we are seeing right now. If this continues, the US dollar will become a major issue for not only this currency, but most markets around the world to begin with.

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Created on October 24, 2024

• The British pound continues to fall against the US dollar.
• And as you can see, it looks as if we are trying to break down rather significantly.
• If we do continue to fall, it’s very likely that we will look to the 200 day EMA as a potential support level followed by the 1.28 level.

Now keep in mind that the Thursday session features PMI numbers coming out of multiple countries, including both of these, we will initially get the United Kingdom manufacturing and services PMI figures. But later in the day, we will also get the same coming out of the United States. If we turn around and rally from here, especially at the end of the day on Thursday, and break above the 1.30 level, it could be the beginning of a recovery.

The real test will be the 50 day EMA above that could cause a significant amount of resistance. If we break down from here, again, I think we go looking to the 200 day EMA and then eventually the 1.28 level. The market has seen rather massive selling. But when you look at the structure of the price action in the British pound, it looks very similar to a lot of other currency pairs, such as the Euro against the dollar, the Australian dollar against the US dollar, the New Zealand dollar against the US dollar, and so on. So this is clearly all about the US dollar and the fact that interest rates in America continue to rise. If that remains the same, the US dollar could very well swallow everything.

This has been the case for multiple times over the course of the year, and for the same reason, the fact that interest rates are rising in the United States. Now that the bond market is essentially telling the Federal Reserve that they are wrong, things could get rather ugly but also, we need to keep in mind that those PMI figures could cause a lot of noise.

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• USD/JPY turns bullish after clearing the Ichimoku Cloud and 200-day SMA, with momentum suggesting further upside towards the 160.00 target.
• Key resistance levels include the October 23 high of 153.19, followed by 154.00 and the July 30 peak at 155.21.
• A bearish scenario would require a break below the 200-day SMA at 151.38, with further support at 150.79 inside the Kumo.

The USD/JPY extended its gains sharply during Wednesday in the North American session, sponsored by the close positive correlation with the US 10-year T-note yield, while traders remain concerned about US elections. At the time of writing, the pair exchanges hands at 152.60, up by more than 1%.

USD/JPY Price Forecast: Technical outlook

The USD/JPY rose above the Ichimoku Cloud (Kumo) and the 200-day Simple Moving Average (SMA), turning bullish for the first time since early August 2024.

Momentum clearly indicates that buyers are in charge, and targeting the 160.00 figure, once they cleared key technical levels. In addition, the Relative Strength Index (RSI) cleared the latest peak, meaning that further USD/JPY upside is seen.

The USD/JPY first resistance would be the 153.19 October 23 daily high, followed by the 154.00 mark. On further strength, the USD/JPY could challenge the July 30 peak at 155.21, before etending its gains to July 19 peak at 157.86.

For a bearish scenario, sellers must clear the 200-day SMA at 151.38, before pushing the exchange rate below the Tenkan-Sen at 150.79, and inside the Kumo at 150.70.

USD/JPY Price Chart – Daily

Created on October 23, 2024

• The Canadian dollar has rallied a bit against the Japanese yen during the trading session on Tuesday, as we have broken to the upside, but really at this point in time, I think we are still in a very tight 200 point range.
• The main reason for that, of course, is the fact that Wednesday we have the bank of Canada releasing its latest interest rate statement and it is expected that they will cut by 50 basis points. This does set up a potential big move on any shock.

Interest Rate Decision Will Be Massive

For example, if the Bank of Canada cuts 25 basis points, that could send this pair rocketing to the upside.

Furthermore, there’s the press conference and statement a little later, both of which have the potential to send the market in one direction or the other. So, I have the 110 yen level marked on the chart and the 108 yen level marked on the chart as well. I’m just simply waiting for this market to break out of this area to determine which way to go.

One thing is for sure, if the Bank of Canada decides to cut interest rates by 50 basis points and then suggests that they are done cutting, if the market believes them, that will send the CAD/JPY exchange pair higher due to the carry trade.

Furthermore, you have to pay attention to oil because this is a highly sensitive market to the oil markets as the Japanese have to import 100% of their petroleum. And of course, Canada is known as an exporter of crude oil. With that being the situation, this sets up as a very interesting potential trade.

I will be watching very closely, as this could be a situation where we are watching a big move set up, and potentially open the possibility of a bigger move that has some sustained momentum.

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Created on October 23, 2024

• The Japanese Yen depreciated to 152.25 yen against the US dollar on Wednesday, reaching its lowest level in nearly three months and breaching the psychological barrier of 150 yen against the US dollar, which financial markets fear may prompt Japanese authorities to intervene again in the forex market.
• However, Deputy Chief Cabinet Secretary Yoshihiko Okada declined to comment on currency movements, in contrast to Atsushi Mimura, the top currency diplomat, who affirmed last week that they are closely monitoring foreign exchange rate movements, and that excessive volatility is undesirable.

Japanese authorities had intervened in the currency markets earlier this year when the Yen breached the 160-yen level against the US dollar, with markets watching the 150-yen level as a potential new line in the sand.

According to forex market trading, the Japanese Yen began to weaken in mid-September due to increasing uncertainty about the path of interest rate hikes at the Bank of Japan. The local currency also came under pressure from the rising US dollar, which benefited from strong US economic data and increased odds of a Trump presidency again.

Overall, the US dollar has maintained its gains thanks to strong Treasury yields. The US Dollar Index traded slightly below the 104 marks on Tuesday, remaining at its strongest levels since early August, tracking the rise in Treasury yields amid strong US economic expectations and increased odds of a Trump presidency again.

A series of economic data on the Labor market, consumer inflation, and retail sales had indicated that the economy remains resilient, reducing the need for aggressive interest rate cuts by the Federal Reserve.

Given the series of strong US economic data, Minneapolis Federal Reserve President Neel Kashkari said the long-term path for interest rates may be higher than in the past. Dallas Federal Reserve President Lorie Logan also supported rate cuts but called for a patient approach.

Meanwhile, the so-called “Trump trade” has further boosted the US dollar as the former president’s tariff and tax policies are seen as inflationary. Investors are now looking forward to the release of preliminary Purchasing Managers’ Index data on Thursday, which will provide an updated view of the private sector’s performance in October.

According to the performance on the daily chart, the USD/JPY bullish trend is strengthening. As we mentioned before, a break of the psychological resistance of 150.00 will strengthen the bulls’ control over the trend and herald a stronger upward move with higher gains than the resistance of 152.25. furthermore, technical indicators are moving towards strong overbought levels. I expect the general trend of USD/JPY to remain bullish until the results of the US presidential elections early next month.

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Created on October 23, 2024

• As I look at the Euro, the first thing I see is that we tried to rally a bit during the early hours on Tuesday, only to give up those gains and show signs of hesitation.
• At this point, we continue to dance around the 1.05 level, an area that of course has been crucial for some time.
• And I think we need to pay close attention to what we do in this general vicinity. The candlestick certainly shows just how feckless the euro is at the moment, but I do think that if we turn around and rally from here, if we can break above the 1.09 level, that would be very bullish.

But that being said, it doesn’t look like that’s going to happen. We have to take a look at the 1.0775 level, and if we break down below there, then I think the market goes looking to the 1.07 level.

The Fed Still Matters

Keep in mind, a lot of this comes down to the Federal Reserve and the way it may have to react to stronger than anticipated economic data.

Furthermore, the European Union looks as if it is in a little bit of trouble. So, I think it all ties together for a potentially negative turn of events. All things being equal, I am more of the thought process of waiting to see whether or not this level actually holds.

I wouldn’t necessarily go into the market right now, but I think you have that binary decision. In other words, above the 1.09 level, you probably have to be a buyer. On the other hand, below the 1.0775 level, you probably have to be a seller.

Keep in mind how volatile this pair can be choppy, but I also recognize that once it starts moving, it does tend to trend for quite a while. Because of this, a certain amount of patience makes sense, and I think would be rewarded over the longer term.

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Created on October 23, 2024

• The US dollar is still the strongest against the rest of the major currencies due to factors that reduce expectations regarding further US interest rate cuts, in addition to the possibility of Trump winning the US presidential elections.
• Additionally, there is increasing demand for buying the US dollar as a safe haven amid rising global geopolitical tensions.
• Accordingly, the downward trend for the GBP/USD pair remained the strongest and its recent losses may continue to reach the support level of 1.2944, the lowest level for the currency pair in more than two months.
• The GBP/USD pair is stable around the 1.2990 level at the time of writing the analysis.

What is expected for the GBP/USD pair if Trump wins the US elections?

According to Forex market trading. The price of the US dollar is rising with the increasing chances of Donald Trump winning on November 4, and accordingly, analysts say that there are more possibilities in the following weeks for the victory. In this regard, US betting markets, including Polymarket, Kalshi and PredictIt, have raised the implied probability of a Trump win to more than 60%. The high expectations of a Trump victory are reflected in the continued outperformance of the US dollar, which includes another drop in the GBP/USD exchange rate to below 1.30. In the forex market, the euro/dollar exchange rate has also fallen by half a percent over the past 24 hours to trade at 1.0827.

Meanwhile, polls suggest the presidential race is much closer than the betting markets suggest. According to the Bookmakers Review, betting odds have accurately predicted a win for 77% of the expected candidates over the past 35 years.

Analysis from Barclays finds that at least 2% of the recent advance of the US dollar against the euro and the pound is due to positioning for the upcoming vote. As a result, a Kamala Harris win would see the premium fade while the status quo remains intact, sending the likes of GBP/USD and EUR/USD soaring.

In the event of a Trump victory, Barclays assumes markets will price in a 60% tariff on China as a near certainty and a 70% tariff on countries with large trade surpluses with the US. Earlier this week, analysts at Deutsche Bank said the likelihood of a “red victory” was also increasing, with Republicans gaining control of Congress and the White House. “We see the most bullish outcome for the US dollar being a red sweep and the most bearish outcome for the dollar being a blue sweep, but the magnitude of the moves is likely to be larger in the former case,” said George Saravelos, an analyst at Deutsche Bank. “We see the dollar rising across all currency pairs in a red sweep.” Trump, for his part, insisted last week that he has not changed his mind about pursuing a number of policies that are expected to support the dollar. In a new interview, Trump dismissed economists’ warnings that his proposed tariffs would have a negative impact on the economy and raise inflation. He said, “To me, the most beautiful word in the dictionary is tariffs,”.

A potential Trump president wants to impose a 60% tax on imports from China and a flat 10% levy on the rest of the world. This would be a repeat of the first-ever tariff-heavy agenda, and markets are taking notice. “It’s interesting that the dollar’s ​​trajectory since its August lows closely follows the pattern that preceded the 2016 US election,” the analyst added.

Historically, the US dollar had surged in the wake of Trump’s victory in 2016. if history repeats itself, a significant rally could be in store in the coming weeks. Barclays’ model shows that the GBP/USD exchange rate is expected to fall to 1.23 in the event of a Trump victory. For EUR/USD, the target is set at 1.03. However, in case of Harris’ victory, EUR/USD is expected to recover to 1.11 in the following weeks. As for GBP/USD, the recovery is expected to extend to 1.33.

Technical forecasts for the GPB/USD pair today:

According to the performance on the daily chart, the general trend for the GBP/USD pair is still bearish. Technically, the stability below the psychological level of 1.3000 strengthens the bears’ control over the general trend and warns of a stronger downward move if the USD’s strength factors continue. The next support levels for the currency pair will be 1.2920 and 1.2800, respectively, which are sufficient to push the technical indicators towards strong oversold levels. On the other hand, and over the same time frame, there will be no initial break of the downtrend without first moving above the resistance of 1.3150.

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