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The Euro to Dollar exchange rate is forecast to see further losses in the coming days and weeks, with one saying a return to 1.0780 is not impossible.

The Dollar’s resurgence brings an end to the Euro’s 2024 rally, at least in the near term, according to Tanmay Purohit, a technical analyst at Société Générale.

“EUR/USD struggled to overcome the peak of August near 1.1200 in a recent attempt to form a double top,” says Purohit.

Subsequently, the Euro-Dollar gave up the 50-DMA (1.1050) and dipped below the neckline of the pattern, denoting the risk of a deeper pullback.

The developments follow a strong of better-than-forecast U.S. data points that confirm the U.S. economy is not about to fall into recession, and that there is little pressing need for further interest rates cuts from the Federal Reserve.

To be sure, more cuts are coming, but not as thick and fast as once thought.

At the same time, the European Central Bank (ECB) will be under pressure to act again given the slowdown in the Eurozone economy, with a potential consecutive rate cut coming at next week’s meeting.

The divergence in rate path expectations puts Euro-Dollar back under pressure, and technical analysts are tasked with assessing the market levels that will come into play.

“If EUR/USD fails to reclaim the MA near 1.1050, the down move is likely to extend. Next potential supports could be located at 1.0900/1.0870, the 50% retracement from April and 1.0780,” says Purohit.

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“The technical EUR/USD forecast has turned bearish,” says Fawad Razaqzada, FX analyst at City Index.

He explains that EUR/USD has now broken a support area between 1.1000 to 1.1025, meaning it has therefore created an interim lower low.

“Unless the exchange rate gets back above this area, the path of least resistance remains to the downside despite the small uptick in rates so far this week,” says Razaqzada.

The next key support level to watch is around 1.0900, followed by the 200-day average around 1.0875, he adds.

• EUR/USD trade marginally higher on the day near 1.1000 in the European session.
• ECB officials voice support for further policy easing at next week’s meeting.
• The pair could extend recovery once it manages to stabilize above 1.1000.

EUR/USD continues to edge higher toward 1.1000 after posting small gains on Monday. Relatively dovish comments from European Central Bank (ECB) officials and the sour market mood, however, could cap the pair’s upside in the near term.

The US Dollar (USD) struggled to build on the previous week’s gains on Monday and allowed EUR/USD to hold its ground. Nevertheless, the risk-averse market atmosphere, as reflected by sharp declines seen in Wall Street’s main indexes, made it difficult for the pair to push higher. 

In an interview with the Slovenian daily, Delo, on Tuesday, Frank Elderson, Vice-Chair of the Supervisory Board at the ECB, warned of economic growth risks materializing, adding that he is open-minded about the next policy action ahead of the October meeting. Meanwhile, ECB policymaker Martins Kazaks argued that inflation is not fully defeated but said that data point to an interest rate cut next week.

The US economic calendar will not offer any high-impact data releases in the second half of the day. Hence, investors are likely to pay close attention to the risk perception. In the European session, US stock index futures trade virtually unchanged. In case the safe-haven flows dominate the market action in the American session, EUR/USD could struggle to extend its rebound.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart recovered above 40 early Tuesday, pointing to a weakening in bearish pressure. Looking north, immediate resistance could be spotted at 1.1000 (round level, Fibonacci 50% retracement of the latest uptrend) before 1.1040 (Fibonacci 38.2% retracement) and 1.1100 (Fibonacci 23.6% retracement).

On the downside, supports align at 1.0950 (Fibonacci 61.8% retracement), 1.0900 (round level) and 1.0870 (Fibonacci 78.6% retracement).

• GBP/USD trades in a narrow channel below 1.3100 in the European session on Tuesday.
• The pair’s near-term technical outlook suggests that the bearish bias remains intact.
• The US economic calendar will not offer any high-impact data releases.

After closing in negative territory on Monday, GBP/USD staged a modest recovery early Tuesday but lost its traction after meeting resistance near 1.3100. The pair’s technical outlook suggests that sellers look to retain control in the near term.

The negative shift seen in risk mood at the start of the week caused GBP/USD to edge lower. Early Tuesday, investors adopt a cautious stance amid growing concerns over an economic downturn in China.

The National Development and Reform Commission (NDRC), China’s state planner, said on Tuesday that the downward pressure on China’s economy is increasing, adding that they are facing more complex internal and external environments.

Reflecting the souring mood, the UK’s FTSE 100 Index is down more than 1% on the day. Meanwhile, US stock index futures trade virtually unchanged.

In case the market atmosphere remains risk-averse in the second half of the day, GBP/USD could come under renewed bearish pressure.  NFIB Business Optimism Index for September and RealClearMarkets/TIPP Economic Optimism Index data for October will be featured in the US economic docket on Tuesday, which are unlikely to trigger a noticeable market reaction.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, suggesting that sellers look to retain control. Interim support seems to have formed at 1.3070 before 1.3050 (static level) and 1.3000 (round level, static level).

If GBP/USD manages to rise above 1.3100 (Fibonacci 78.6% retracement level of the latest uptrend) and starts using this level as support, sellers could be discouraged. In this scenario, next resistance could be spotted at 1.3170 (Fibonacci 61.8% retracement).

Created on October 08, 2024

• The Euro has found a little bit of support near the 1.0950 level, an area that has been important multiple times in the past.
• As a result, I do think that we may get a little bit of a bounce.
• After all, it would make a certain amount of sense due to the fact that we have seen so much in the way of selling pressure that sooner or later, we need to get some type of bounce from here.

That being said, if we were to break down below the 1.09 level, then I think you have real issues at this juncture where we could see the US dollar really take off. That being said, I do think that it’s overdone and a bounce makes a certain amount of sense. Perhaps reaching the 50 day EMA, which is at the 1.1050 level. Ultimately, this is a market that is going to reflect risk appetite and if we start to see risk appetite really fall apart, then you probably see the US dollar strengthen. In general, this is a market that I think continues to be range bound overall. As a result, I think you continue to see a lot of choppiness and therefore you need to be cautious with your position sizing. But with this, I do think that we’re getting a little supported.

On the Breakdown

If we were to break down below the 200-day EMA on a breakdown, that really could send this market reeling, perhaps down to the 1.0775 level, which I think at that point in time you would see most RIS assets getting absolutely hammered. It’s not necessarily that the euro is extraordinarily risky, it’s just that it isn’t the dollar, and that’s probably the big thing to take away. All things being equal, this is a market that I think continues to dictate what you want to do with the US dollar against many other currencies, not just this one.

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Later in the Tuesday session, the RCM/TIPP Economic Optimism Index could impact US dollar demand. Economists predict the Index will increase from 46.1 in September to 47.2 in October. A higher-than-expected reading could bolster expectations of a resilient US economy, reducing bets on a recession.

Stronger consumer sentiment toward the US economy could lead to increased consumer spending. Upward trends in consumer spending may push consumer prices higher, possibly dampening bets on multiple Q4 2024 Fed rate cuts.

Better-than-expected data may signal a USD/JPY move closer to 150.

Additionally, FOMC member speeches could also move the dial. Investors should consider reactions to the latest US US Jobs Report and forward guidance on monetary policy.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on Japan’s data, including today’s stats, producer prices (Thurs), the Reuters Tankan Index (Fri), and BoJ commentary. Better-than-expected figures could reignite bets on a Q4 2024 BoJ rate hike. However, the upcoming US CPI Report is crucial. Softer-than-expected US inflation may renew bets on aggressive Fed rate cuts, possibly sending the USD/JPY toward 147.5.

Traders should stay vigilant as monetary policy chatter and Japan’s economic data will impact trading USD/JPY strategies. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY remains above the 50-day EMA while hovering below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals.

A USD/JPY breakout from the 148.529 resistance level would support a move toward the 200-day EMA. Furthermore, a break above the 200-day EMA could give the bulls a run at 150.

Japan’s household spending, wages, and central bank commentary require consideration.

Conversely, a drop below the 147.500 level could give the bears a run at the 50-day EMA and the 145.891 support level.

The 14-day RSI at 62.08 indicates a USD/JPY move to the 200-day EMA before entering overbought territory.

Created on October 07, 2024

• In recent trading sessions, the GBP/USD exchange rate has fallen to its lowest level since mid-September at the 1.3070 support level after reports indicated that the US economy added 254,000 non-farm jobs in September, exceeding expectations of a reading of 147,000 jobs.
• The report from the US Bureau of Labor Statistics was strong across the board, with August’s report showing a significant improvement from 142,000 jobs to 159,000 jobs.
• Also, the unemployment rate fell from 4.2% to 4.1%.

Currently, financial markets are having their doubts as the Bureau of Labor Statistics’ expectations gauge shows that investors now see only a 5% chance of a 50-basis point cut in November. Overall, softening expectations for cuts, in turn, boosts US bond yields and the dollar.

The US jobs data comes a day after Bank of England Governor Andrew Bailey indicated that the central bank could now accelerate the pace of interest rate cuts. We noted that his shift came despite the scarcity of data supporting it. Instead, it seemed as if the governor saw the Federal Reserve’s 50-basis point cut in September and the recent hint from the European Central Bank to cut interest rates for the second time in October as providing the necessary cover to accelerate interest rate cuts. Overall, this US data and subsequent market developments expose the cover of Bank of England Governor Bailey.

What will the Bank of England do next?

The Bank of England will have to continue raising interest rates at a quarterly pace, even if its governor wants to speed up the process. A day after Bank of England Governor Andrew Bailey signalled that he wants to speed up the pace of the central bank’s rate cuts, the US economy has reacted strongly. The US economy added 254,000 nonfarm jobs in September, beating expectations of 147,000, and dashing expectations of another 50-basis point rate cut by the Federal Reserve in November.

This 50-basis point cut is considered important for the Bank of England and other global central banks that are looking for cover from the Federal Reserve to cut their own interest rates. Commenting on this, Karl Schamotta, chief market analyst at Corpay, said: “The ‘no landing’ scenario for the United States has suddenly become more likely, suggesting that expectations of aggressive monetary easing in most major economies should be scaled back.”

The US jobs data comes a day after Bailey signalled that the bank could step up the pace of rate cuts, saying the bank could be more “active” on the matter. The shift came despite a lack of fresh economic data that would prompt such a comment. Instead, it appeared that the governor saw the Fed’s 50 basis point cut in September and the recent signal from the European Central Bank that it would accelerate cuts as providing cover for a change of tactic.

Earlier on Friday, the Bank of England’s chief economist said he thought it was prudent for the bank to proceed with caution. Bell said he remained “concerned about the possibility of structural changes that support more sustained inflationary pressures” in the UK economy. Speaking to accountants at the Institute of Chartered Accountants in England and Wales, Bell said his latest economic modelling told him there were “reasons for caution in assessing the dissipation of persistent inflation”. He added, “further cuts in bank interest rates remain possible if the economic and inflationary outlook evolves broadly as expected”, but that “it will be important to guard against the risk of interest rates being cut either too much or too quickly”. he concluded, “For me, the need for such caution suggests a gradual withdrawal of the constraints on monetary policy,”

Technical forecasts for the GBP/USD pair today:

According to the performance on the daily chart, there is a real break in the direction of the GBP/USD price and the bearish shift will be strengthened if prices move towards the support levels of 1.3090 and 1.2980 respectively. Technically, breaking the psychological support of 1.30 is possible if the US inflation figures this week come stronger than all expectations, as happened with the US jobs figures last week. Thus, the recent performance confirms the strength of our recommendations to sell the GBP/USD from every upward level. Currently, the closest resistance levels are 1.3230 and 1.3300 respectively.

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STORY LINK Pound to Euro Forecast for Week Ahead: 1.20 Fades, Where Next?

Credit Agricole remains comfortable with an end-2025 Pound to Euro (GBP/EUR) exchange rate forecast of 1.2050.

MUFG expects a retreat to 1.1765 by the third quarter of next year.

GBP/EUR posted sharp losses to 2-week lows near 1.1850 before a recovery to near 1.1950.

The Pound was undermined by dovish comments from Bank of England Governor Bailey during the week, although this was partially reversed after commentary from chief economist Pill.

Bailey stated that if the news on inflation continued to be good there was a chance of the Bank becoming more “a bit more activist” in its approach to cutting interest rates.

Pill was significantly more cautious “While further cuts in Bank Rate remain in prospect should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast.”

Rabobank; “the perception that the BoE may cut interest rates more cautiously than the Fed and potentially the ECB have been a source of support for the pound. This view has been deeply shaken by comments made by BoE Governor Bailey in an interview with the Guardian newspaper.”

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Markets are very confident that rates will be cut in November and potentially December.

Strong expectations of an October ECB rate cut limited any potential Pound selling.

Credit Agricole commented; “The EUR could remain vulnerable to any potential data disappointments in the near term as well as evidence that there is a growing number of Governing Council members that support a policy rate cut in October.”

MUFG has shifted its stance on UK rates; “As global inflation continues to fall and as the economy slows after the strong first half of the year, the BoE’s confidence in bringing inflation back to target over the medium-term will rise. We expect that to open up the scope for a faster pace of easing and we now expect back-to-back rate cuts in November and December.”

Markets are also continuing to debate the impact of fiscal policy.

According to Bank of America; “Overall, we think the October budget is likely to be net growth positive relative to March. Fiscal policy is still likely to be in consolidation mode, but the extent of tightening should be lower.”

It added; “Less fiscal tightening adds to the case for a cautious rate-cutting cycle from the BoE.”

Credit Agricole expects growth dynamics will be crucial; “of key importance for the market participants would be any indications that the restrictive BoE policy stance together with the looming fiscal austerity planned by the Labour government have ground the nascent economic recovery to a halt in Q3.”

The headline Euro-Zone inflation rate declined to 1.8% for September from 2.2% previously, increasing confidence that inflation pressures are subsiding rapidly. With a series of weak Euro-Zone data releases, markets were increasingly confident that the ECB would cut interest rates again at the October policy meeting.

HSBC added; “The fact that much of the weakness lies in the core economies of the Eurozone is perhaps of even greater concern.

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• Demand for the dollar increased last week due to geopolitical tensions.

• The US economy added 254,000 jobs, well above estimates of 140,000.

• Markets are pricing a 95% chance of a 25-bps November Fed rate cut.

The GBP/USD forecast shows a solid downtrend after Friday’s upbeat US jobs report boosted the dollar. Meanwhile, the pound remained fragile after mixed rate cut signals from Bank of England policymakers. 

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Demand for the dollar increased last week due to geopolitical tensions and better-than-expected US economic data. Notably, the conflict in the Middle East escalated last week after Iran attacked Israel, leading to fears of retaliation. 

Meanwhile, in the US, data last week showed a resilient labor market and strong business activity in the services sector. The major event was the nonfarm payrolls, which beat estimates. The US economy added 254,000 jobs, well above estimates of 140,000.

At the same time, the unemployment rate eased from 4.2% to 4.1%. Economists had expected it to hold steady at 4.2%. The US Central Bank has kept a close eye on the labor market and cut rates by 50-bps to keep it from deteriorating. Moreover, market participants were pricing another significant rate cut in November. 

However, this outlook changed on Friday, with markets now pricing a 95% chance of a 25-bps cut. The prospects of a gradual Fed easing cycle will support the dollar in the near term. 

Meanwhile, the pound collapsed last week after BoE governor Bailey said the central bank might cut rates aggressively if inflation eases. On the other hand, BoE chief economist Huw Pill advocated for gradual rate cuts.

GBP/USD key events today

Investors do not expect any key economic reports today. Therefore, the pair might extend Friday’s moves.

GBP/USD technical forecast: Bears pause for breather near 1.3051

On the technical side, the GBP/USD price is approaching the 1.3051 support level after a sharp bearish move. The previous bullish trend paused near the 1.3400 resistance level. Here, bears took charge by breaking below the 30-SMA. The new bearish move was strong and impulsive, breaking below solid support levels. 

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However, after the sharp decline, the RSI has made a bullish divergence with the price. This is a sign that bears are exhausted. Therefore, the price might rebound to retest the 30-SMA or the 1.3251 resistance level. Nevertheless, since the bearish bias remains strong, the price might eventually breach the 1.3051 support. 

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On the downside, support is at $1.30688, with further levels at $1.30374 and $1.30023. The 50-day EMA at $1.31450 currently acts as a cap on gains.

A break above $1.31330 would shift the outlook to bullish, while staying below could signal continued pressure on the pair.

For now, the trend remains neutral, but a decisive move above $1.31330 would be key for any further gains.

Euro Falls as German Factory Orders Drop Sharply

The Euro (EUR) weakened after German Factory Orders plunged 5.8% in September, significantly below the expected -1.9%, reflecting a slowdown in industrial demand. Sentix Investor Confidence also improved slightly to -13.8 but remains in negative territory.

Markets are now eyeing Eurozone Retail Sales data and comments from German Buba President Nagel to gauge the outlook for the Euro amidst ongoing economic concerns.

EUR/USD Technical Forecast

The EUR/USD is trading at $1.09697, sitting just below the $1.09714 pivot point on the hourly chart. Immediate resistance is at $1.09841, followed by $1.09938 and $1.10039.

A break above these levels could indicate further bullish momentum, especially if the price holds above the 50-day EMA at $1.10017.

• GBP/USD stays under bearish pressure and trades below 1.3100 on Monday.
• The US Dollar preserves its strength following last week’s impressive rally.
• The pair could face the next technical support at 1.3050.

GBP/USD registered large losses in the previous week despite holding its ground on Friday. The pair struggles to gain traction at the beginning of the new week and trades below 1.3100.

GBP/USD declined sharply on Thursday, pressured by dovish comments from Bank of England (BoE) Governor Andrew Bailey. Although the pair staged a rebound in the European session on Friday after BoE Chief Economist Huw Pill adopted a more cautious tone regarding further policy easing, it failed to stretch higher as the upbeat US employment data boosted the US Dollar (USD).

Nonfarm Payrolls in the US increased by 254,000 in September, surpassing the market estimate of 140,000 by a wide margin, the US Bureau of Labor Statistics reported on Friday. Furthermore, the Unemployment Rate edged lower to 4.1% from 4.2% in the same period, while the Labor Force Participation stood unchanged at 62.7%.

In the absence of high-impact macroeconomic data releases, the negative shift seen in risk mood, as reflected by falling US stock index futures, helps the USD stay resilient against its peers and doesn’t allow the pair to start retracing the previous week’s slide.

Investors will pay close attention to comments from Federal Reserve (Fed) policymakers in the second half of the day. Currently, the CME FedWatch Tool shows that markets are nearly fully pricing in a 25 basis points (bps) rate cut at the November policy meeting. Hence, the USD could have a hard time gathering further strength even if Fed officials note that another large rate cut won’t be needed.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 30 after holding above that level on Friday, suggesting that buyers refrain from committing to an extended technical correction.

On the downside, 1.3050 (static level) aligns as immediate support before 1.3000 (round level, static level) and 1.2940 (static level). In case GBP/USD rises above 1.3100 (Fibonacci 78.6% retracement level of the latest uptrend) and starts using this level as support, 1.3170 (Fibonacci 61.8% retracement) and 1.3200 (200-period Simple Moving Average) could be seen as next resistance levels.