Created on January 27, 2025

• You can see that the Euro has had a very big day during Friday as Trump has blathered in the news that he wants Chairman Powell to start cutting rates immediately.
• Oddly enough, Trump doesn’t make that decision, and it seems like the markets have forgotten about that, at least in the short term.
• So, at this point in time, I think we’ve got a situation where we have to determine whether or not there is enough momentum to make this market go higher.

I really don’t believe this until we break above 1.06, because that would be a real recovery. Right now, when you look at the overall drop that we have seen, we are still not even to the 38.2% Fibonacci retracement level.

We Will See…

So really with that being the case, I think this is a little bit of an oversold bounce and I will be selling into this unless of course, we break above the 1.06 level, then I’ll have to reassess things. The Euro is going to continue to suffer at the hands of the European economy and bureaucrats. That’s just the reality of the situation and I think ultimately, you’ve got a scenario where eventually people go looking for cheap US dollars again, and they may be finding them in the cluster just above current trading. Again, I’m looking for signs of exhaustion to sell into. I recognize that this is a nice little bounce, but it doesn’t really change the trend, at least not quite yet.

At this juncture, the market is likely to continue to be noisy, but if we can get some type of negativity, then it’s likely that the momentum could come unraveled for the Euro, and then we would see money running right back into the United States, as I expect to be the case of the longer-term anyway.

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Copper price failed to confirm breaching 4.3300$ barrier to form intraday decline and test the MA55 again by reaching 4.2300$, reminding you that the stability of the price above 4.1500$ support line and stochastic attempt to provide the positive momentum reinforce the chances of renewing the bullish attempts that might target 4.4400$ followed by reaching 4.5300$ on the medium term basis.

On the other hand, facing strong negative pressures and crawling below the mentioned support will confirm surrendering to the domination of the negativity, to expect suffering additional losses by moving towards 4.0900$ and 4.0200$ levels.

The expected trading range for today is between 4.2000$ and 4.4400$

Trend forecast: Bullish

Copper price failed to confirm breaching 4.3300$ barrier to form intraday decline and test the MA55 again by reaching 4.2300$, reminding you that the stability of the price above 4.1500$ support line and stochastic attempt to provide the positive momentum reinforce the chances of renewing the bullish attempts that might target 4.4400$ followed by reaching 4.5300$ on the medium term basis.

On the other hand, facing strong negative pressures and crawling below the mentioned support will confirm surrendering to the domination of the negativity, to expect suffering additional losses by moving towards 4.0900$ and 4.0200$ levels.

The expected trading range for today is between 4.2000$ and 4.4400$

Trend forecast: Bullish

The GBPUSD price continued to rise to breach 1.2415$ and settle above it, which represents 23.6% Fibonacci correction level for the decline from 1.3434$ to 1.2100$, which opens the way to achieve more bullish correction and head to visit 1.2609$ areas on the near-term basis.

Therefore, the bullish bias will be suggested for the upcoming sessions, taking into consideration that breaking 1.2415$ will stop the bullish wave and push the price back to the main bearish channel again.

The expected trading range for today is between 1.2375$ support and 1.2530$ resistance

Trend forecast: Bullish

The GBPUSD price continued to rise to breach 1.2415$ and settle above it, which represents 23.6% Fibonacci correction level for the decline from 1.3434$ to 1.2100$, which opens the way to achieve more bullish correction and head to visit 1.2609$ areas on the near-term basis.

Therefore, the bullish bias will be suggested for the upcoming sessions, taking into consideration that breaking 1.2415$ will stop the bullish wave and push the price back to the main bearish channel again.

The expected trading range for today is between 1.2375$ support and 1.2530$ resistance

Trend forecast: Bullish

January 26, 2025 – Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: GBP/EUR Turns Corner

The Pound Sterling (GBP) overall secured a tentative recovery against the Euro (EUR) during the week amid relief that the bond market stabilised.

From 4-week lows near 1.1800, the Pound to Euro exchange rate (GBP/EUR) advanced to around 1.1860.

Bank of America (BoA) is still forecasting that GBP/EUR will strengthen to 1.25 at the end of 2025.

BNPP has greater reservations over the Pound but forecasts GBP/EUR at 1.2050 at the end of 2025.

According to BoA , Pound selling has been overdone; “Price action at the start of the year has in some sense solidified our sense that a lot of negativity is now priced in.”

It added, “The UK is set once again to outpace European growth, with a healthier policy mix to offset the worst excesses of tariffs.”

The bank also expects yields to be positive for the pound throughout the year.

The latest UK business confidence data indicated a slight improvement from December, but the underlying components were weak, with business confidence at 2-year lows.

There was evidence of increased inflation pressures within the economy while consumer confidence dipped for the month.

The data overall increased concerns over the potential stagflation threat with difficulties for the Bank of England.

BNPP is more concerned over the Pound outlook; “Now, however, we no longer think higher UK yields are beneficial for the GBP, and we do not think the GBP is pricing in sufficient risk premium to reflect a range of potential negative scenarios.”

BNPP noted two potential threats; “On the first channel, the recent rise in UK yields has increased debt servicing costs to the extent that the government no longer has sufficient headroom against its debt rule. We think this raises the prospect of a change in fiscal policy – tax rises or spending cuts – that would be negative for growth.”

Markets remain confident that the BoE will cut in February, but the long-term outlook is opaque.

BNPP added; “Our base case is for four 25bp rate cuts this year and, as this is not sufficiently priced in by front-end UK rates, we see this undermining the GBP.”

HSBC noted the risk of growth downgrades; “the Office for Budget Responsibility (OBR) was forecasting 2.0% growth in 2025. If it revises that down in March, fiscal headroom could be eroded, meaning some tightening measures are needed. That tightening in turn might reduce growth prospects further – and increase the case for rate cuts.”

MUFG noted the potential significance of US trade policy; “Market participants are less concerned over the immediate risk of higher tariffs being put in place by the US against the EU, while the unease over rising Gilt yields temporarily undermined the attractiveness of the yield pick-up in the UK that encouraged EUR/GBP to trend lower throughout last year.”

There are strong expectations that the ECB will cut interest rates by a further 25 basis points at the January policy meeting, which would take the deposit rate down to 2.75%.

Nordea commented, “Inflation is converging towards the target, the economic outlook remains challenging, and rates clearly remain in restrictive territory, calling for more gradual rate cuts.”

Credit Agricole noted that market expectations surrounding ECB rates may be too low and added, “Any such confirmation could help the EUR to turn the corner from mid-2025.”

Euro-Zone business confidence data was slightly stronger than expected for January and there could be scope for a Euro-Zone rebound.

BNPP notes the potential for increased government spending and the possibility that the Ukraine war could end; “A resolution could benefit the EUR through both the sentiment and growth channel.”

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TAGS: Currency Predictions Pound Euro Forecasts

January 26, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Rate Forecast Warning: Risk for GBP/USD Slide to 1.15

Foreign exchange analysts at Nordea expect dollar strength to dominate for much of the year. It sees the risk of GBP/USD sliding to at least 1.15 with an end-2025 forecast of 1.17.

In contrast, Bank of America expects GBP/USD gains to 1.38.

US data did not have a significant impact during the week, although a weaker-than-expected business confidence report did undermine the US currency on Friday.

The primary attention was on President Trump’s policy agenda. His call for lower interest rates and no immediate move to impose tariffs helped trigger a correction for the dollar.

UK data was mixed with more substantial earnings growth offset by weaker consumer confidence and mixed business confidence data.

UK bonds were relatively stable, which helped underpin the Pound amid an element of short-covering

In this environment, the Pound to Dollar (GBP/USD) exchange rate posted significant gains to 1.2480 from 1.2170.

According to Nordea, “We expect that the strong US economy and weak economic activity in the rest of the world will lead to a strong dollar year. The economic gap might even grow larger and result in an even stronger dollar.”

Nordea also expects that US trade policies will support the dollar.

It added; We think EUR/USD will fall down to parity, but would not be surprised if the economic gap widens and the currency pair drops below parity.

GBP/USD will inevitably struggle if EUR/USD slides below parity.

ING noted that in real terms, the dollar is at 40-year highs, maintaining speculation that the Administration will look to drive the currency lower.

According to the bank, “We cannot see that happening this year, although Washington may try to find a way to get trading partners to strengthen their currencies under the threat of tariffs. Such a policy could just about be read as consistent with also wanting to maintain the dollar as the pre-eminent reserve currency.”

Nevertheless, it added, “For the time being, however, the narrative of US exceptionalism is alive and well, the tariff threat remains real and we doubt the Fed will knock the dollar off its perch.”

Morgan Stanley sees scope for a dollar reversal; “While dollar bulls are numerous and perhaps most vocal in expressing their views, there seems to be a more ‘silent’ plurality of investors looking to sell the dollar instead. Many have dry powder and are waiting for a sign to enter shorts.”

It added, “Investors may be far more willing to add dollar shorts sooner and with higher conviction than dollar bulls may anticipate,” wrote the strategists. “For them, it’s more a question of timing rather than direction.”

Bank of America considers that the Pound is oversold with scope for a solid recovery; “we believe that there appears to be a large dose of “never let the facts get in the way of a good story” to price action.

It added, “This potentially reflects a number of factors, some of which are beyond the remit of this note, but we do think that the “glass half-empty” approach to the UK outlook appears to be the default position for markets, perhaps a legacy from a decade of political and macroeconomic uncertainty and amplified by September 2022.”

The bank expects stronger relations with Europe to help trigger a rebound in pound confidence, especially with positive yields.

MUFG, however, expects the Pound will be vulnerable; “Further evidence of a softening UK labour market this week alongside the loss of growth momentum at the end of last year will keep pressure on the BoE to cut rates further.”

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TAGS: Currency Predictions Pound Dollar Forecasts

January 26, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Rate Forecast Warning: Risk for GBP/USD Slide to 1.15

Foreign exchange analysts at Nordea expect dollar strength to dominate for much of the year. It sees the risk of GBP/USD sliding to at least 1.15 with an end-2025 forecast of 1.17.

In contrast, Bank of America expects GBP/USD gains to 1.38.

US data did not have a significant impact during the week, although a weaker-than-expected business confidence report did undermine the US currency on Friday.

The primary attention was on President Trump’s policy agenda. His call for lower interest rates and no immediate move to impose tariffs helped trigger a correction for the dollar.

UK data was mixed with more substantial earnings growth offset by weaker consumer confidence and mixed business confidence data.

UK bonds were relatively stable, which helped underpin the Pound amid an element of short-covering

In this environment, the Pound to Dollar (GBP/USD) exchange rate posted significant gains to 1.2480 from 1.2170.

According to Nordea, “We expect that the strong US economy and weak economic activity in the rest of the world will lead to a strong dollar year. The economic gap might even grow larger and result in an even stronger dollar.”

Nordea also expects that US trade policies will support the dollar.

It added; We think EUR/USD will fall down to parity, but would not be surprised if the economic gap widens and the currency pair drops below parity.

GBP/USD will inevitably struggle if EUR/USD slides below parity.

ING noted that in real terms, the dollar is at 40-year highs, maintaining speculation that the Administration will look to drive the currency lower.

According to the bank, “We cannot see that happening this year, although Washington may try to find a way to get trading partners to strengthen their currencies under the threat of tariffs. Such a policy could just about be read as consistent with also wanting to maintain the dollar as the pre-eminent reserve currency.”

Nevertheless, it added, “For the time being, however, the narrative of US exceptionalism is alive and well, the tariff threat remains real and we doubt the Fed will knock the dollar off its perch.”

Morgan Stanley sees scope for a dollar reversal; “While dollar bulls are numerous and perhaps most vocal in expressing their views, there seems to be a more ‘silent’ plurality of investors looking to sell the dollar instead. Many have dry powder and are waiting for a sign to enter shorts.”

It added, “Investors may be far more willing to add dollar shorts sooner and with higher conviction than dollar bulls may anticipate,” wrote the strategists. “For them, it’s more a question of timing rather than direction.”

Bank of America considers that the Pound is oversold with scope for a solid recovery; “we believe that there appears to be a large dose of “never let the facts get in the way of a good story” to price action.

It added, “This potentially reflects a number of factors, some of which are beyond the remit of this note, but we do think that the “glass half-empty” approach to the UK outlook appears to be the default position for markets, perhaps a legacy from a decade of political and macroeconomic uncertainty and amplified by September 2022.”

The bank expects stronger relations with Europe to help trigger a rebound in pound confidence, especially with positive yields.

MUFG, however, expects the Pound will be vulnerable; “Further evidence of a softening UK labour market this week alongside the loss of growth momentum at the end of last year will keep pressure on the BoE to cut rates further.”

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TAGS: Currency Predictions Pound Dollar Forecasts

Created on January 24, 2025

• The euro drifted a little bit lower during the trading session on Thursday as we continue to hang around the 0.8450 level.
• The pound of course has given up some strength for a while, but I think a lot of this is just simple profit taking.

After all the market had been in a massive downtrend for what seemed like a lifetime and then dropped down toward the 0.8250 level to bounce that’s an area that’s been important as support all the way back to 2016 so the bounce is not a huge surprise. The question then becomes what happens next because we have to look at this through the prism of a market that is going to continue to see a lot of questions asked of both economies and with this, I would anticipate this overbought condition eventually breaks down, but I would not get short of the market until we break down below the 200 day EMA.

On a Potential Move Higher…

If we were to turn around and break above the 0.85 level, then the EUR/GBP market could go much higher, perhaps reaching the 0.86 level. The 0.85 level is an area that’s been important multiple times as well, so I think you need to pay close attention to it, but it is worth noting that just a few days ago, we ended up forming a shooting star, which of course is a sign of exhaustion. That exhaustion probably ends up being a nice cell signal if we do get a little bit more downward momentum. The overall trend, of course, is most certainly negative. I don’t wish to fight that. I think we are more likely than not to drop from here, as the euro itself is a bit of a basket case overall. Ultimately, I am still bearish, but don’t necessarily like either of these currencies.

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Created on January 24, 2025

• The US dollar had initially tried to rally during the trading session on Thursday but gave back gains showing signs of hesitation.
• At this point, the market looks very likely to continue to bounce around as it waits to see what the Bank of Japan does next.
• On Friday, the Bank of Japan is coming out with an interest rate decision, and therefore I think it comes down to the question of whether it does anything to tighten monetary policy.

At this point, we will likely see a knee-jerk reaction to whatever happens next. Therefore, I think if the Bank of Japan suddenly sounds like it is going to be tight, we could see this market plunge. Yet, the interest rate differential will continue to favor the US dollar quite drastically, so I think that would end up being a buying opportunity unless, of course, the Bank of Japan does something unprecedented. While rates have risen in Japan just a bit, the reality is that the differential still favors the greenback quite drastically. Of course, the US economy is by far one of the strongest in the world right now, in both hard and soft numbers. Quite frankly, if Trump gets even remotely close to what he’s trying to get done in America, the United States could be back to the 1980s.

Technical Analysis

The technical analysis for the USD/JPY market is somewhat sideways at the moment, but it’s also worth noting that we have been in an uptrend for quite some time. Therefore, I think we are working off some of the froth but also trying to sort out whether the Bank of Japan is going to be an issue. I suspect that by the end of the day on Friday, we should have quite a few questions answered, so I am cautious about getting overly aggressive one way or the other until the BoJ releases all of its noise.

If we were to break down below the 50 Day EMA, then I suspect that somewhere between there and the 200 Day EMA we would find buyers. On the other hand, if we break out to the upside, once the ¥158 level is overcome, as a barrier, it could open up a move to the ¥160 level.

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