The US dollar (DXY) is pulling back today, but what does that mean for pairs like EURUSD, GBPUSD, and USDJPY next week?

Find out in today’s weekly forex forecast for the week ending October 25, 2024.

US Dollar Index (DXY) Forecast

The DXY is pulling back slightly today, but US dollar bulls remain in control following the 102.60 reclaim this month.

The October 9th close above 102.60 signaled a significant turning point for the USD.

It put the dollar index back inside of its 2023 ascending channel, and a well-established horizontal area from August of last year.

The DXY also reclaimed the 103.00 to 103.30 area this week, flipping it back to key support.

However, dollar bulls face a monumental challenge next week in the 104.00 to 104.50 region.

Although we’ll likely get a pullback from there, I’d be careful to expect much dollar weakness this year while areas like 103.00 and 102.60 are holding as support.

EURUSD Forecast

The EURUSD has played out nicely for us this month following the close below 1.1110 and the 1.1000 breakdown

Turning bearish on the euro was straightforward after the DXY’s break above levels like 102.00 and especially 102.60

However, Friday’s session is threatening to close back above the 1.0840 pivot, which could offer some relief next week

That said, the EURUSD would need to secure a daily close above that level to expose 1.0900

As long as the DXY is above 103.00 and 102.60, I favor looking for EURUSD shorts at resistance with a target in the 1.0800 range

GBPUSD Forecast

GBPUSD has been more challenging to trade than its euro counterpart due to the choppy price action this month

However, the failure to hold above 1.3200-1.3250 at the beginning of the month signals a potentially significant turning point for the pound

That was the first weekly break of structure since the rally began in April

As mentioned earlier in the week, 1.3050 has flipped to resistance for GBPUSD, with support coming in at 1.2900

There’s also a daily imbalance in the 1.2900 region based on the August 16th candle

USDJPY Forecast

USDJPY has been relatively choppy this week despite continuing the rally that began in September

However, the recent break above levels like 146.50 has opened up resistance levels like 151.00 to 152.00

Given today’s price action from USDJPY and even the DXY, I would expect a pullback early next week

One area to watch is 148.50, with a failure there opening up 146.50

Remember that the 151.00 to 152.00 area will attract significant selling pressure if tested

• GBP/JPY has formed a right-angle triangle which indicates a likely breakout higher. 
• The MACD momentum indicator is diverging bearishly with price, however, suggesting a mild downside risk.  

GBP/JPY has formed a right-angle triangle which indicates a breakout higher is likely. 

Price is more likely to break above the flat edge, according to technical analysis (TA) theory, which in this case runs along the topside of the pattern. 

GBP/JPY 4-hour Chart 

A decisive breakout above the top of the triangle would activate the pattern’s first upside target at 199.59, the 61.8% Fibonacci extrapolation of the height of the triangle (at its widest point) higher. This is the usual TA method for forecasting such moves. 

One bearish sign is that the Moving Average Divergence Convergence (MACD) momentum indicator has been diverging bearishly with price during the formation of the triangle. Whilst price has made a higher high, MACD has declined. This is a mildly bearish sign. 

A decisive breakout would be one accompanied by a long green candlestick that pierced cleanly through the top of the triangle at 196.00 and closed above near its high. This, or three green candlesticks in a row that broke cleanly above the flat top of the pattern. 

• The Pound Sterling hit two-month lows against the US Dollar, then rebounded.
• GBP/USD looks to S&P Global PMIs and Bailey’s speeches for fresh trading impetus.
• Technically, any Pound Sterling upswings could be short-lived as long as the daily RSI stays bearish.

The Pound Sterling (GBP) fell for the third consecutive week against the US Dollar (USD), as the GBP/USD pair tested levels below the 1.3000 round level for the first time since mid-August before staging a late recovery.

Pound Sterling pounded on increased BoE rate cut bets

Markets turned more dovish on the Bank of England’s (BoE) monetary policy outlook while sealing in a smaller interest-rate cut by the US Federal Reserve (Fed), thus strengthening the US Dollar’s advance at the expense of the Pound Sterling.

The annual UK Consumer Price Index (CPI) inflation fell sharply to 1.7% in September from 2.2% in August, the lowest reading since April 2021 and driven down by lower airfares and petrol prices, the Office for National Statistics (ONS) said on Wednesday. The data came in below the expected 1.9% figure. On Tuesday, the ONS said that the UK pay growth, as measured by the Average Earnings Excluding Bonus, fell below 5.0% in the three months to August.

Falling inflation and softening labor market conditions made the case for rate reductions by the BoE at a faster pace. Following these data, interest rate futures showed investors were pricing a 90% chance of two BoE quarter-point rate cuts by the end of this year, up from roughly 80% at the start of the week.

Meanwhile, the unabated demand for the US Dollar exerted downward pressure on the pair. The bets for a 25 basis points (bps) Fed rate cut next month remained unfazed despite several dovish speeches from Fed policymakers and strong US Retail Sales data, allowing the buck to build on its recovery rally. US Retail Sales rose 0.4% in September after an unrevised 0.1% gain in August, the US  Census Bureau said on Thursday. 

The USD’s upsurge has lately been sponsored by the market’s optimism that Republican nominee and former US President Donald Trump is set to win the 2024 US presidential elections. Trump’s fiscal and trade policies are seen as inflationary and positive for the Greenback.

Further, rife Middle East geopolitical tensions also contributed to the bullish momentum in the safe-haven US Dollar.  Amongst the latest Mideast developments, the Iran-backed militant group Hezbollah said it will escalate war with Israel after Israel’s Foreign Minister confirmed the killing of Hamas leader Yahya Sinwar on Thursday.

On Friday, the GBP/USD pair staged a rebound from two-month lows of 1.2974, as US Dollar buyers resorted to profit-taking after the solid performance during the week. Stronger-than-expected Britain’s Retail Sales data also aided the Pound Sterling recovery. United Kingdom Retail Sales unexpectedly rose by 0.3% in September, compared to a 0.3% decline expected, according to the latest figures from the ONS.

Week ahead: Eyes on PMIs and policymakers

Pound Sterling traders brace for a relatively data-light week, as the first half of the week is devoid of any high-impact data releases from both sides of the Atlantic.

However, the Fed and the BoE policymakers are scheduled to make their appearances, with BoE Governor Andrew Bailey due to speak on Tuesday and late Wednesday.

Thursday will feature the S&P Global preliminary Purchasing Managers Index (PMI) data for October from the US and the UK. The US Jobless Claims data will also be published on the same day. The BoE hawk Monetary Policy Committee member Catherine Mann is due to speak after Cleveland Fed President Beth Hammack’s speech.

The mid-tier US Durable Goods Orders data for September will be released on Friday, making it a quiet calendar heading into Saturday’s speech by BoE Governor Bailey.  

Apart from the data releases and the central banks’ commentaries, investors will pay close attention to the market’s pricing of the outcome of the US elections while Mid-East geopolitical developments will also be in focus.

GBP/USD: Technical Outlook

The GBP/USD pair extended the previous week’s downside break of the critical 50-day Simple Moving Average (SMA), then at 1.3101.

The extended decline tested the 100-day SMA support near 1.2960, with more downside likely on the cards, as the 14-day Relative Strength Index (RSI) holds comfortably below the 50 level, currently near 44.

Therefore, any recovery attempt in the pair is likely to be sold off unless the Pound Sterling recaptures the 50-day SMA support-turned-resistance, now at 1.3132.

The next topside barrier is seen at the 21-day SMA at 1.3188. A meaningful uptrend could unfold on a sustained move above that level, opening the door for a test of the 1.3250 psychological barrier.

Pound Sterling will then target the 1.3300 round level should the bullish momentum gain traction.

On the flip side, a daily candlestick closing below the 100-day SMA at 1.2960 could expose the 200-day SMA cap at 1.2796.

Ahead of that, the June 12 high of 1.2861 could offer temporary respite to buyers. 

Created on October 18, 2024

• The US dollar was very stout during the trading session on Thursday as we have now broken above the crucial 150 yen level.
• The 150 yen level has been a headache for a couple of weeks now and now looks as if it is going to be in the review mirror.
• If that’s the case, this is a market that will continue to rally and strengthen over time.
• Keep in mind that we look at the yen through the lens of the carry trade.

Because of this, I’ve become a little bit more aggressive in my bullishness, and I think at this point in time, we are on the precipice of another surge higher. With that being the case, I am a buyer of dips, and quite frankly, don’t have a scenario in which I’m willing to sell this pair, but truthfully, I really haven’t had that scenario for a while. The interest rate differential will continue to be a major factor in this pair, as the of the idea of tightening monetary policy. Because of this and the fact that the economic numbers in the United States just continue to show strength, after all, the retail sales numbers came out much hotter than anticipated during the Thursday session, it’s likely that we will continue to see more upward momentum.

Where We Could Be Going

I, at this point in time, believe that this pair could very well end up going to the 153 yen level, perhaps even higher than that. The Bank of Japan simply cannot raise interest rates much more or even any further than they have because of the massive debt problems that the Japanese economy would face. With that being said the carry trade looks very much in vogue again, and I think it’s not only the US dollar that’s going to rally against the Japanese yen, but probably most currencies. This makes a lot of sense, as the Japanese yen tends to move in the same way against all other currencies.

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• The ECB cut interest rates by 25-bps on Thursday after a similar move during the September meeting.

• The Eurozone economy has performed poorly compared to the US.

• Data revealed that US retail sales jumped by 0.4% in September.

The EUR/USD outlook shows increased downward pressure as European Central Bank rate cut bets surge after Thursday’s meeting. Meanwhile, the dollar held near an 11-week high against the euro amid rising bets for a Trump win and upbeat US data. 

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The ECB cut interest rates by 25-bps on Thursday after a similar move during the September meeting. Although markets had fully priced the move, the outcome led to a surge in bets for future rate cuts. As a result, the euro collapsed. 

The Eurozone economy has performed poorly compared to the US, putting pressure on the ECB to lower borrowing costs. At the same time, inflation in the bloc has eased to 1.8%, below the central bank’s target. Consequently, traders expect another rate cut in December and more in 2025. 

Meanwhile, the US dollar rallied after an upbeat retail sales report. Data revealed that sales jumped by 0.4% in September, beating estimates of 0.3%. At the same time, core retail sales rose by 0.5% compared to forecasts of 0.1%. The upbeat figures indicated robust consumer spending and a healthy economy. Moreover, it eased bets for a November Fed rate cut while increasing the likelihood of a pause.

Meanwhile, market participants are pricing a possible Trump win during next month’s presidential election. The last time he won, the dollar rallied as traders priced in higher inflation. Therefore, there is a chance another win will boost the greenback.

EUR/USD key events today

Market participants do not expect key events today, so the pair might end the week quietly. 

EUR/USD technical outlook: Renewed bearish momentum

On the technical side, the EUR/USD price is wallowing near the 1.0801 support level after reaching a new low in the downtrend. The price sits below the 30-SMA, with the RSI near the oversold region. 

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Initially, the RSI had made a bullish divergence, which failed to play out. This shows that bears regained momentum. If they keep up the pace, the pair will soon challenge the 1.0801 support level. However, it might revisit the SMA before seeking new lows.

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Created on October 17, 2024

• The GBP/USD exchange rate is testing the key level of 1.30, with a break potentially opening the door to the 1.2820 level.
• Recently, the pound sterling has declined in mid-week trading after the release of softer UK inflation data that raised the possibility of further interest rate cuts by the Bank of England in 2024.
• At the time of writing, the pair reached a two-month low of 1.2977 and is currently stabilizing around 1.2990 at the time of writing.
• Commenting on the pair’s performance, Alex Kopcewicz, Senior Market Analyst at FXPRO, said, “The British pound has fallen below the 1.30 level against the US dollar after weak inflation data across the board.
• This sent the pound to a two-month low on speculation that the Bank of England will cut interest rates in the coming months.”

The psychological support level of 1.30 for GBP/USD is closely watched by analysts and market participants as an important level. However, analysts believe that sellers will emerge strongly and enter selling trades if 1.30 gives way. In this regard, JP Morgan’s trading desk says, “Through the 1.30 support, the next level of interest is the 100D (moving average) at 1.2950 and then the 1.2820/50 support range would be a fare initial target.”

According to Forex Market Trading, the pound fell against the dollar, the euro and all of its G10 peers after the UK headline inflation rate fell to 1.7% year-on-year in September. Meanwhile, the Bank of England’s inflation rate fell from 5.6% to 4.9%. Accordingly, Robert Howard, market analyst at Reuters, said: “The pound could extend lower towards the 1.28 support if the UK inflation data is cooler than expected, as this would raise the risk of two BoE rate cuts before Christmas.”

Now, 25 basis point cuts are fully priced in for the November 07 Bank of England interest rate meeting, with a 70% chance of another 25-basis point cut now priced in for December. Nick Andrews, chief FX analyst at HSBC, says, “However, the Bank of England’s endpoint is still relatively high at 3.51%, which means that GBP-USD could weaken in the coming months.”

Joe Maher, Associate Economist at Capital Economics, said, “We expect the pound to weaken by around 4% against the euro and around 1% against the US dollar by the end of 2025. We expect the yield gaps to move against the pound, especially against the euro, over the next year. Accordingly, we believe that the Bank of England will cut interest rates by much more than what is currently being discounted in the financial markets.

Technical forecasts for the GPB/USD pair today:

Based on the daily chart performance attached, the overall downward trend of the GBP/USD pair is gaining strength. As mentioned earlier, a move below the psychological support level of 1.3000 will confirm the bears’ strong control of the trend and signal a stronger downward move, especially if the US dollar gains additional positive momentum from today’s US retail sales and weekly jobless claims figures. If this happens, the next support levels will be 1.2920 and 1.2840, respectively. Furthermore, these levels are sufficient to push technical indicators towards oversold levels. Conversely, the first break of the current trend requires stabilization above the resistance level of 1.3160. 

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Created on October 17, 2024

• Today is an important day for the euro against other major currencies, especially against the US dollar, which has plummeted to a support level of 1.0850, the lowest for the EUR/USD pair in more than two months.
• Ahead of the European Central Bank’s announcement, eurozone inflation figures will be released amid expectations of keeping rates low.
• On another front, and according to forex market trading and expectations for the US dollar under a new US administration after next month’s elections, Donald Trump, the Favorite to win the White House in November, has strengthened a number of policies seen as supportive of the US dollar.
• In a new interview, Trump rejected economists’ warnings that the tariffs he proposes would have a negative impact on the economy and raise inflation.

“For me, the most beautiful word in the dictionary is ‘tariff.’”

He wants to impose a 60% tax on imports from China and a flat 10% fee on the rest of the world. Economists say that raising the cost of imports will have a negative impact, raising domestic retail prices. In this regard, Tom Kenny, senior international economist at ANZ Bank, says, “The proposed 10-20% increase in tariffs across the board has the potential to be inflationary.”

“Tariffs tend to be inflationary, which would boost the value of the US dollar, and that’s why we expect the US dollar to be stronger in the first months of a Trump presidency compared to a Harris presidency,” Rabobank said. However, it warned that tariffs could eventually reduce productivity and growth potential. Furthermore, inflationary tariffs mean the Federal Reserve will need to exercise more caution in cutting US interest rates.

Trump’s response? Convince the Fed that it needs to cut rates anyway.

In his interview with Bloomberg, Trump indicated that he seeks greater influence at the Federal Reserve. However, he did not have a direct response to a question about whether he would seek to fire Fed Chairman Jerome Powell. He said he believes it is up to the president to tell the Fed chairman how he thinks interest rates should be changed. He added, “If you’re a very good president and you have common sense, you should be able to at least talk to him,”.

However, Trump stressed that the president should not be able to dictate policy to the Fed.

According to stock trading platforms, European stocks declined amid weak earnings. European stocks closed sharply lower on Wednesday, continuing the previous session’s losses amid pessimistic earnings from the eurozone’s largest companies. The Stoxx 50 index for the single currency area fell 0.7% to 4911, and the Stoxx 600 European index fell 0.2% to 520, with the latter supported by positive UK inflation. Also, ASML shares fell 5.1% to extend the previous session’s 15.6% decline after the chipmaker issued disappointing sales forecasts following its third-quarter earnings report.

Additionally, LVMH shares fell 3.7% after recording a decline in revenue during the third quarter, its first negative change since the COVID-19 pandemic, confirming concerns about declining demand in China. As a result, shares of Hermes and Kering fell 1.3% and 0.8%, respectively, while L’Oreal lost more than 2% after being downgraded by JP Morgan.

EUR/USD Technical analysis and forecast:

Ahead of today’s important events, the EUR/USD pair is stabilizing in a downward trend, and with the break of the 1.0880 support, it has previously shown that it supports the bears’ strong control of the trend and at the same time moves technical indicators towards oversold levels. Obviously, today’s reaction to the announcement of inflation figures in the eurozone and the European Central Bank’s announcement will determine the fate of performance in the coming days. The closest support levels to the current performance may reach support levels of 1.0820 and 1.0770, respectively. Conversely, and according to the daily chart performance, the resistance of 1.1000 will remain the key to the bulls regaining control. 

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Created on October 17, 2024

• The Aussie dollar initially pulled back just a bit during the trading session on Wednesday to test the 200 day EMA.
• The 200 day EMA, of course, is a long term indicator that a lot of people pay attention to and therefore, it’s not a huge surprise to see a little bit of a bounce from there.
• This would be the exact kind of action I would be watching, as the carry trade could be coming back at this point.

That being said, the 100 yen level just above is an area that I think continues to attract a lot of attention. So, with that being said, if we turn around and rally above there, then I think we have a real shot at heading back to the 101 yen level. If we get back above there again, then I think it’s time for the Australian dollar to finally take off against the Japanese yen. Yet again, we recently have broken out above a little bit of resistance and formed a massive W pattern, so now I think we are in a consolidation phase in order to build up the necessary momentum to keep going higher.

On a Move Higher

If and when we break above the 101 yen level on a daily close, we could find ourselves going as high as 108 yen before it’s all said and done. Simply put, it would be a massive move waiting to happen. If you just take the measured move from the W pattern, you could be looking at about a 7% move, which puts you right around 107 yen. So, either way, it looks extraordinarily bullish. Furthermore, keep in mind that the interest rate differential continues to favor the Australian dollar, so you get paid at the end of every day to hold this pair anyway. And I think that’s what a lot of people are looking at in this market, as well as other “yen-related pairs.”

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Created on October 17, 2024

• The Japanese yen rose to around 149.3 against the US dollar on Thursday, but remained close to an 11-week low as investors reacted to disappointing trade figures.
• The data showed that Japan’s trade balance swung to a deficit in September as exports unexpectedly fell, while import growth slowed.
• On the monetary policy front, Bank of Japan board member Seiji Adachi said earlier this week that conditions were already in place to normalize monetary settings, but stressed that the BOJ should raise interest rates at a “very moderate” pace.
• Also, he warned that the BOJ should avoid a radical change in policy given the uncertainty over the global economic outlook and domestic wage growth.

Externally, the Japanese yen continues to face pressure from a stronger US dollar on bets that the Federal Reserve will be less aggressive in cutting US interest rates. The so-called Trump trade also lifted the dollar as his policies are seen as inflationary, which would prevent the Federal Reserve from cutting interest rates further.

In Asian markets, Chinese stocks experienced early volatility and dipped as investor impatience grew over the pace of stimulus measures by the central government. The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, fell 0.2% by midday after initially declining by 1.3% during morning trading. This latest decline represents a total drop of more than 10% since reaching its peak on October 8. Meanwhile, Hong Kong-listed Chinese stocks managed a modest recovery, with the Hang Seng index rising 0.7%.

The volatile market driven by stimulus optimism fades

The recent market volatility highlights the volatility in Chinese stocks since late September, when a wave of stimulus measures by the central bank briefly sparked optimism among investors. But this initial enthusiasm has now quickly faded as Beijing has yet to provide further details on fiscal spending plans. Moreover, this uncertainty fuels doubts about whether the Chinese authorities are ready to roll out more aggressive measures to stabilize the economy and support stock markets.

“Given how quickly markets have risen, they can fall just as fast. But the overall policy measures are moving in the right direction, and when things calm down, Chinese stocks may still trade in a higher range than before.” Although a 10% decline may typically indicate a technical correction for the CSI 300 index, the recent extreme volatility in Chinese markets has diminished the significance of such landmarks. After rising more than 30% over three weeks from mid-September, the index has now lost its momentum, reflecting mixed investor sentiment about whether the rally has peaked or if more gains are still possible.

USD/JPY Technical analysis and Expectations Today:

Bulls are still watching the possibility of USD/JPY breaking the psychological resistance level of 150.00 to confirm control and thus prepare for stronger upward breaches. Technically, any positive reaction to the announcement of US retail sales figures and the number of weekly jobless claims today will bring bulls more momentum to move towards the resistance levels of 150.70 and 151.40 respectively, which are levels that strengthen the uptrend. On the other hand, and in the same time frame, there will be no break of the uptrend without returning to the support level of 145.90. The currency pair will remain subject to signals from central bank officials regarding the path of tightening, in addition to the extent of investors’ risk appetite or not. 

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• GBP/USD trades in a narrow channel below 1.3000 on Thursday.
• The bearish stance remains unchanged in the near term.
• The US economic calendar will feature Initial Jobless Claims and Retail Sales data.

GBP/USD struggles to stage a recovery and stays below 1.3000 in the European session on Thursday after suffering large losses on Wednesday. The pair remains technically bearish as the market focus shifts to the mid-tier macroeconomic data releases from the US. 

Softer-than-forecast September inflation readings from the UK on Wednesday caused investors to start pricing in multiple Bank of England (BoE) rate cuts this year, triggering a Pound Sterling selloff.

Early Thursday, the cautious market mood helps the US Dollar (USD) stay resilient against its rivals and makes it difficult for GBP/USD to gain traction. In the second half of the day, September Retail Sales and the weekly Initial Jobless Claims data from the US will be watched closely by market participants.

The number of first-time applications for unemployment benefits is forecast to stay unchanged at 258,000 in the week ending October 12. A noticeable decline in this data, with a print below 220,000, could boost the USD and force GBP/USD to stretch lower. On the other hand, a reading near or above the market expectation could pave the way for a weaker USD. In this scenario, GBP/USD could retrace a portion of its weekly decline.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, suggesting that the bearish stance holds. On the downside, 1.2950-1.2940 (100-day Simple Moving Average (SMA), static level) forms a strong support area ahead of 1.2900 (static level, round level).

In case GBP/USD manages to rise above 1.3000 (round level, static level) and stabilizes there, sellers could be discouraged. In this scenario, 1.3050 (static level) could be seen as next resistance before 1.3100 (round level, static level).