• US inflation data showed an increase in price pressures in November.

• Market participants scaled back expectations for Fed rate cuts in 2025.

• Traders expect policy meetings in the UK and the US.

The GBP/USD weekly forecast indicates a decline in 2025 Fed rate cut expectations, which is supporting the greenback.

Ups and downs of GBP/USD

The GBP/USD pair had a bearish week as the dollar soared on rate-cut expectations and the pound fell due to downbeat economic data. Notably, markets absorbed US inflation data showing an increase in price pressures that was in line with estimates. The report also showed that inflation had stalled its progress to the 2% target. As a result, market participants scaled back expectations for rate cuts in 2025, boosting the dollar.

–Are you interested to learn more about forex options trading? Check our detailed guide-

Meanwhile, the UK released data showing an unexpected 0.1% contraction in the economy, further weighing on the pair. 

Next week’s key events for GBP/USD 

Next week will be a busy week for the pound with policy meetings in the UK and the US. At the same time, traders will watch data from the UK, including manufacturing business activity, employment, inflation, and sales. Meanwhile, the US will release figures on GDP and retail sales. 

Markets are almost fully pricing a Fed rate cut on Wednesday. Therefore, data next week might have little impact on rate cut expectations. However, the report might shape the outlook for 2025. Moreover, market participants will watch policymakers’ tone on future rate cuts.

On the other hand, UK data, especially inflation, might play a big role in shaping the outlook for the Bank of England meeting. Nevertheless, markets expect a pause.

GBP/USD weekly technical forecast: Bears resurface after false breakout

On the technical side, the GBP/USD price trades below the 22-SMA with the RSI under 50, suggesting a bearish bias. The price has been on a downtrend, making lower highs and lows. However, bulls have made several attempts to break above the SMA without success.

–Are you interested to learn more about forex tools? Check our detailed guide-

In the most recent attempt, the price broke above the 22-SMA and its resistance trendline. However, price action showed weakness when the price reached the 1.2800 resistance level. 

Furthermore, bears returned with strong enthusiasm to push the price back below the trendline and the SMA. As a result, the price made a false breakout. However, bears seem ready to continue the downtrend. To do this, the price must break below the 1.2500 support to make a lower low. 

Looking to trade forex now? Invest at eToro!

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

US Dollar Outlook: USD/JPY

USD/JPY climbs to a fresh monthly high (153.75) as it stages a five-day rally for the first time since June, but the Federal Reserve interest rate decision may sway the exchange rate as the central bank is expected to further unwind its restrictive policy.

USD/JPY Stages Five-Day Rally for First Time Since June

USD/JPY appears to be mirroring the rise in long-term US Treasury yields as it extends the advance from the start of the week, and the exchange rate may continue to retrace the decline from the November high (156.75) on the back of US Dollar strength.

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

US Economic Calendar

Looking ahead, the Federal Open Market Committee (FOMC) is expected to deliver another 25bp rate-cut at its last meeting for 2024, and more of the same from the Fed may produce headwinds for the US Dollar as the central bank continues to move toward a neutral stance.

At the same time, the FOMC may adjust the forward guidance for monetary policy as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP), and the central bank may project a more gradual path in unwinding its restrictive policy should the SEP reveal an upward revision in the Fed’s interest rate dot-plot.

With that said, a hawkish Fed rate-cut may keep USD/JPY afloat as the central bank insists that ‘monetary policy decisions were not on a preset course,’ but a further shift in the carry trade may curb the recent in the exchange rate as major central banks continue to switch gears.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

• USD/JPY extends the advance from the start of the week to register a fresh monthly high (153.75), and a close above 153.80 (23.6% Fibonacci retracement) may push the exchange rate towards 156.50 (78.6% Fibonacci extension).
• A breach above the November high (156.75) opens up 160.40 (1990 high), but USD/JPY may struggle to retain the advance from the monthly low (148.65) should if fail to trade back above 156.50 (78.6% Fibonacci extension).
• A breach below 151.95 (2022 high) may push USD/JPY back towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone, with the next area of interest coming in around 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension).

Additional Market Outlooks

Gold Price Forecast: Bullion Remains Below Pre-US Election Prices

Canadian Dollar Forecast: USD/CAD Climbs to Fresh Yearly High

GBP/USD Outlook Hinges on Break of December Opening Range

Australian Dollar Forecast: AUD/USD Falls to Fresh Yearly Low

— Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

• EUR/USD remains tethered to the 1.0500 mark, rebounding slightly to 1.0498 after testing weekly lows.
• Technical analysis shows the pair is in a delicate balance, with potential to challenge resistance if it sustains above 1.0500.
• Key resistances are set at 1.0530 and 1.0600, while supports loom near 1.0452 and the YTD low of 1.0331.

The EUR/USD remains reluctant to remain far from the 1.0500 figure for the fifth consecutive day, even though the ECB decided to cut rates on Thursday, which pushed the pair toward its weekly low of 1.0452. Nevertheless, buyers stepped in and lifted the exchange rate toward the current level of 1.0498.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart suggests the pair hovers near 1.0500, unable to edge lower decisively and retest year-to-date (YTD) low figures at 1.0331. Even though the pair is carving successive series of lower and lower highs, it might be difficult to extend its downtrend.

Momentum, as measured by the Relative Strength Index (RSI), suggests that buyers gain steam. If they achieve a daily close above 1.0500, this can give them a leg-up.

In that outcome, EUR/USD’s key resistance levels lie at the December 12 high of 1.0530, followed by 1.0600 and last week’s peak of 1.0629.

On the other hand, if EUR/USD remains below 1.0500, the major could extend its losses, past 1.0452. A breach of the latter will expose the November 26 low of 1.0424, followed by the November 22 swing low of 1.0331.

EUR/USD Price Chart – Daily

• The Pound Sterling hit three-week highs against the US Dollar but then corrected.
• GBP/USD gears up for the Fed and BoE policy announcements, the grand finale for 2024.
• Pound Sterling buyers will likely stay reluctant below the key 200-day SMA at 1.2820.

The Pound Sterling (GBP) failed to sustain at three-week highs against the US Dollar (USD), sending GBP/USD back under the 1.2700 threshold.

Pound Sterling gave into persistent US Dollar demand

It was a mixed week for GBP/USD traders. In the early part of the week, the Pound Sterling defended the previous week’s upswing only to surrender into persistent USD demand in the second half. A hawkish shift in the expectations of the US Federal Reserve’s (Fed) future interest rate path and the sustained advance in US Treasury bond yields kept the Greenback’s bullish undertone alive throughout the week. 

At the start of the week, the US Dollar picked up fresh haven demand as renewed geopolitical tensions emerged in the Middle East and amid China’s economic worries. This stalled the GBP/USD recovery at 1.2800. The sudden collapse of Syria’s government occurred over the weekend after Syrian rebels seized the capital, Damascus, ousting President Bashar al-Assad, who fled to Russia with his family seeking asylum. The toppling of Assad’s government ended a 13-year civil war and raised concerns over the political stability in the region.

Moving on, US Consumer Price Index (CPI) data on Wednesday aligned with market expectations, while Thursday’s Producer Price Index (PPI) inflation data came in hotter-than-expected and fuelled expectations that the Fed could turn to a wait-and-see policy approach after the expected 25 basis points (bps) interest-rate reduction next week.

Data showed that the US annual headline and core CPI rose by 2.7% and 3.3%, respectively, while on a monthly basis, both figures increased by 0.3%. On the other hand, The annual PPI rose 3.0% in November, above the market expectation of a 2.6% growth. Meanwhile, the annual core PPI rose 3.4% in the same period, surpassing the estimate of 3.2%. The headline PPI and the core figure rose 0.4% and 0.2% over the month, respectively. 

Exacerbating the pain in the GBP/USD pair, ample supply in the US bond market kept the US Treasury bond yields northbound and the Greenback at the monthly top against its major rivals. The US Treasury Department saw good demand for a $39 billion sale of 10-year notes, the final sale of $119 billion in coupon-bearing sales after a solid $58 auction of three-year notes on Tuesday. Furthermore, the latest data showed that the US government posted a $367 billion budget deficit for November, up 17% from a year earlier.

The fresh leg higher in the USD triggered a corrective decline in the Pound Sterling heading into the weekend, with the UK Gross Domestic Product (GDP) report for October adding to the GBP downside. The UK economy unexpectedly contracted 0.1% month-over-month (MoM) in October, compared to the expected 0.1% growth. The UK Industrial and Manufacturing Production also declined 0.6% MoM in the same period.

The Fed and BoE grand finale awaited

The final full week of this year appears nothing short of a blockbuster one, filled with top-tier UK and US economic data and central banks’ policy announcements.

Monday starts with the preliminary S&P Global Manufacturing and Services PMI data from both sides of the Atlantic, while Chinese activity data will also be closely eyed.

The UK labor market report will be published on Tuesday, followed by the US Retail Sales and Industrial Production data.

Wednesday will feature the UK inflation report, followed by the all-important Fed interest rate decision, Dot Plot chart and Chairman Jerome Powell’s press conference.

The BoE policy verdict will stand out on Thursday amid the weekly Jobless Claims and Existing Home Sales data releases.

The UK Retail Sales and the US core Personal Consumption Expenditure (PCE) Price Index will wrap up an eventful week.

Also of note will remain the Middle East geopolitical developments and global trade updates.

GBP/USD: Technical Outlook

GBP/USD sellers refused to give up as the previous week’s recovery attempt fizzled out shy of the 200-day Simple Moving Average (SMA) at 1.2820.

An impending death and the previous dual Bear crosses will likely continue to cause headwinds in the Pound Sterling in the coming days. 

The 50-day SMA is on the verge of crossing the 200-day SMA from above, which, if it occurs, will validate the Death Cross. 

Further, the 14-day Relative Strength Index (RSI) has returned to negative territory at around 40, backing the case for additional downside.

The Pound Sterling must crack the 200-day SMA at 1.2820 to reverse the renewed downward momentum.

The next relevant upside target aligns near 1.2850, the confluence of the psychological level and the 50-day SMA.

Fresh buying interest could emerge on a sustained move above the latter, opening the door for a test of the 1.2900 round figure, followed by the 100-day SMA at 1.2958.

Contrarily, if the selling intensifies, the previous week’s low of 1.2617 will be tested, below which the six-month low of 1.2488 will be put to the test.

The line in the sand for buyers is seen at the 1.2400 round figure.

• EUR/USD stays under bearish pressure in the European morning on Friday.
• The technical outlook suggests there is more room on the downside before the pair turns oversold.
• The dovish ECB tone and persistent USD strength weigh on the pair.

EUR/USD stays on the back foot and trades near 1.0450 on Friday after closing the fifth consecutive day in negative territory on Thursday. The pair’s near-term technical outlook shows that there is more room on the downside before the pair turns oversold.

The European Central Bank (ECB) lowered key rates by 25 basis points (bps) following the December meeting, as expected. In its policy statement, the ECB said that most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-target on a sustained basis. In the post-meeting press conference, ECB President Christine Lagarde noted that they have discussed a 50 bps cut at the meeting and acknowledged that the recovery in the Euro area was slower than expected. The Euro came under selling pressure following the ECB event.

In the meantime, the US Dollar (USD) benefited from rising US Treasury bond yields in the American session on Thursday and didn’t allow EUR/USD to stage a rebound. The data published by the US Bureau of Labor Statistics showed that the annual Producer Price Index rose by 3% in November, at a stronger pace than the market expectation and October’s increase of 2.6%.

The economic calendar will not feature any high-tier data releases on Friday. Ahead of next week’s highly-anticipated Federal Reserve meeting, profit-taking and position adjustments heading into the weekend could ramp up EUR/USD’s volatility and trigger irregular movements.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40, reflecting a buildup of bearish momentum. On the downside, immediate support is located at 1.0440 (static level) ahead of 1.0400 (end-point of the latest downtrend) and 1.0330 (November 22 low).

Looking north, first resistance could be spotted at 1.0520 (100-period Simple Moving Average (SMA), 50-period SMA, Fibonacci 23.6% retracement of the latest downtrend) before 1.0600 (Fibonacci 38.2% retracement).

Key Events

• Markets are bracing for final central bank decisions and insights for 2024 ahead of the holiday season
• UK GDP contracted by -0.1%, raising questions ahead of Thursday’s BOE decision
• FOMC and BOJ meetings next Wednesday and Thursday are expected to heighten market volatility
• Key GBP events to watch: Flash PMI (Monday), employment data (Tuesday), and the BOE decision (Thursday)

US Data

Following the uptick in US CPI and PPI data, and the market’s priced in a Fed rate cut for next week, the US Dollar index stabilized above the 107-mark again. If the 108-resistance zone is breached, currencies may face critical lows, prompting central banks to adopt aggressive measures to stabilize their economies. Banks like the SNB, BOC, and PBOC have already announced drastic actions, with the ECB potentially following suit ahead of risks tied to Trump’s policies in 2025.

UK Data

Expectations of a BOE rate hold have been driven by inflationary pressures from the UK’s new labor law. However, the contraction in GDP to -0.1% heightens concerns about economic growth and complicates the BOE’s decision-making process. Increased volatility in the British pound is expected next week, influenced by flash PMI data on Monday and employment figures on Tuesday, which will play a final pivotal role in shaping BOE insights.

Technical Analysis: Quantifying Uncertainties

GBPUSD Forecast: Weekly Time Frame – Log Scale

Source: Tradingview

Using the Fibonacci extension tool between the 2021 high, 2022 low, and 2024 high, the recent drop in GBPUSD has found support at the 0.272 extension level. The next significant support level lies at the 0.382 extension. Should GBPUSD fail to sustain its rebound above the critical 1.2480 level, further declines could test support zones between the October 2023 and February 2023 lows, with support zones 1.21 and 1.19.

On the upside, the current candlestick pattern forming above the 1.25 support indicates a weekly bullish engulfing pattern, signaling strong reversal potential. Key resistance levels to watch to resume a bullish scenario include 1.30 and 1.3170.

— Written by Razan Hilal, CMT on X: @Rh_waves and Forex.com You Tube

• Fed and BoJ rate decisions land hours apart, driving USD/JPY volatility
• A 25bps Fed cut is widely expected, focus shifts to updated rate projections
• BoJ’s rate move remains uncertain, with a hike over 15bps likely yen-positive
• Rising US Treasury yields continue to support USD/JPY upside momentum

Overview

The final working week of 2024 shapes up as pivotal for USD/JPY traders, with the Federal Reserve and Bank of Japan interest rate decisions landing just hours apart. These twin events overshadow all other data, including the Fed’s preferred inflation measure, the core PCE deflator, released on Friday. How the market reacts to these decisions will likely define USD/JPY’s trajectory as we enter 2025.

Central bank decisions collide

Before digging into the detail, here’s the major events calendar for the United States and Japan next week. Note times shown are US Eastern.

Source: TradingView

While Tuesday’s retail sales and Friday’s PCE reports will offer key updates on the health of the US consumer – the largest driver of the US economy – the week will be dominated by the Fed’s interest rate decision rather than its preferred inflation gauge, the core PCE deflator. The latter rarely surprises these days, leaving the Fed decision as the far more significant event for USD/JPY traders.

Hawkish Fed cut incoming?

With a 25bps cut now seen as a near-certainty, the Fed’s updated economic and interest rate projections are expected to drive market movements. These projections will not only influence the front end of the US interest rate curve but also the belly and back end, which have been pivotal in driving USD/JPY moves.

Source: TradingView

Jerome Powell’s remarks last month – highlighting that downside risks to the labour market had diminished while inflation remained more persistent than anticipated – have traders on edge for a potential hawkish cut. The Fed’s forward guidance will therefore be key.

Unemployment is likely undershooting, and inflation overshooting, the Fed’s September forecasts. With 100bps of rate cuts set to be delivered in 2024, as outlined three months ago, the question now is how much easing the Fed signals for next year, and where members see the neutral funds rate, where inflation pressures and unemployment stabilise.

Source: Federal Reserve

In September, the Fed anticipated 100bps of cuts and a neutral rate of 2.9%. Both now seem overly dovish given recent data flow. This opens the door to a more restrained signal, perhaps as few as two, or even one, rate cut for 2025 in the updated dot plot. If the Fed maintains a projection for four 25bps cuts, it could stoke concerns about its willingness to finish the inflation fight.

The long-run dot, reflecting the median FOMC estimate for the neutral policy rate, may also shift higher. While members have been cautious about revising these projections, a minor adjustment to 3% or slightly above seems likely. A larger revision to 3.2% or more could trigger a sharp rise in US Treasury yields, with the Japanese yen likely to feel the heat.

Bond traders think so

Source: TradingView

Positioning for a hawkish adjustment is evident in US interest rate futures. Two- and 10-year contracts have broken down over the past week, signalling expectations for higher yields.

The 10-year Treasury note future has rolled over decisively, with momentum shifting sharply to the downside. With uptrend support wiped out, further price weakness looks likely in the near term, pointing to rising US Treasury yields and potential US dollar strength against the yen.

One roadblock standing in the way of continued USD/JPY upside is the BoJ interest rate decision on Thursday.

BoJ impact set to fade fast

It’s likely to spark volatility in USD/JPY as soon as the outcome is released, with traders divided on whether the BoJ will lift overnight rates and, if so, by how much. Will it opt for a 10, 15, or 25bps hike, or hold off until February or March?

While the outcome is uncertain, one thing is clear: a hike exceeding 15bps would likely trigger a downside move in USD/JPY as the yen strengthens. On the other hand, if the BoJ keeps rates unchanged, there’s a solid chance of a kneejerk upside reaction.

That said, the US rate outlook remains the dominant driver of USD/JPY movements for now. Once the initial volatility from the BoJ decision fades, expect US Treasury yields to reassert their influence.

Higher US yields powering USD/JPY upside

Source: TradingView

The impact of higher US Treasury yields on USD/JPY is obvious on the daily chart, with the pair resuming its push higher just as yields bottomed. Having cleared the important 200-day moving average, and with momentum indicators like RSI (14) and MACD generating bullish signals, for the first time in weeks, a bullish bias is preferred.

Resistance is located at 153.80, 155.89 and 156.75, the latter the high struck immediately before the US presidential election. On the downside, support is found at the 200DMA, uptrend support around 151 and 148.65.

Good luck with your trading and thanks to everyone who has read these weekly outlook guides in 2024. Coverage in 2025 will resume midway through January.

— Written by David Scutt

Follow David on Twitter @scutty

Created on December 13, 2024

• During my analysis of the EUR/USD pair on Thursday, the first thing that I would have to bring to the forefront is the fact that the statement coming out of the European Central Bank was dovish.
• While the ECB did of course cut rates by 25 basis points as expected, the reality is it’s the statement that everybody was paying attention to.

It is worth noting that according to the European Central Bank, they expect the European economy to recover over the next several years, but they also recognize that there could be a bit of sluggish short-term growth due to geopolitical risks and consumer confidence issues. While I agree with that assessment, I think Europe has major structural issues that they will have to come to terms with, and there could be a bit of a crisis when it comes to sovereign debt before this is all said and done, but I digress.

Technical Analysis

The market initially tried to rally during the day but was squashed as it entered a fairly significant area of consolidation. That being said, it is probably worth noting that we are still in that consolidation, albeit just barely. The market is seemingly using the 1.05 level for a bit of an anchor at the moment, and as long as that’s the case, I think range bound traders will be attracted to this market. However, there’s really nothing to suggest that the euro is suddenly going to take off to the upside against the US dollar. While we do have the Federal Reserve meeting next week, it’s expected that the Americans will probably sit still with their monetary policy until at least March.

This sets up the possibility of more “fade the rally” type of set ups in this market. If we were to break that 1.03 level underneath though, we will hit parity before it is all said and done. While I don’t know if that happens right away, that’s exactly what I expect to happen before the trend reverses.

Ready to trade our Forex EUR/USD daily forecast? We’ve shortlisted the best forex broker list for you to check out. 

Created on December 12, 2024

• Stronger US inflation figures have contributed to selling pressure on the EUR/USD pair, with losses extending below the 1.0500 support level to around 1.0480, where it is currently trading.
• This comes amid cautious anticipation of another major event that will impact the performance of the Euro-Dollar, namely the announcement of the European Central Bank.

Euro-Dollar Awaits ECB Announcement

According to reliable trading platforms, the EUR/USD pair may remain in a cautious downward waiting position until the announcement of the European Central Bank today. In general, financial markets expect another 25-basis point cut from the European Central Bank, which would reduce the rate from 3.25% to 3.00% following a similar 25 basis point cut in October. Overall, if the European Central Bank implements another interest rate cut this month, the Euro is likely to weaken against other major currencies due to further monetary policy easing within the bloc. Ahead of today’s event, the Euro’s performance has struggled to attract investor interest due to a mix of mixed economic data and generally positive market sentiment, which tends to diminish the attractiveness of the single European currency.

As a safe-haven asset, the Euro often loses strength when market conditions are optimistic, making it less attractive compared to higher-risk currencies.

Gains in European Stock Markets Did Not Support the Euro for Long

According to stock trading company platforms, the Euro Stoxx 50 (SX5E) index has seen an eight-day consecutive upward trend. This has been helping to support the Euro against the US Dollar. According to trades, the SX5E index has risen for eight consecutive days, outperforming the SPX index throughout those days, a feat we have seen only once before in more than 25 years. Overall, the rise in European equities has led to an exceptionally high information ratio for the SX5E index, indicating strong risk-adjusted returns. The rise was broad-based, encompassing most European sectors and positively impacting the exchange rate of the Euro against the Dollar (EUR/USD).

Why Have European Stocks Risen Recently?

The rise in European stock prices has been observed despite the economic and political uncertainty of the largest economies in the Eurozone. Barclays attributed this rise in Eurozone equities to several key factors:

• Significantly bearish position: The European market had a pessimistic outlook on European equities in the period leading up to this period. It is likely that these negative sentiments, resulting from concerns about tariffs, growth prospects, and political instability, created an environment where many of the potential downside risks had already been priced into the market.
• Technical pressure: The SX5E’s eight-day winning streak, coupled with its outperformance of the S&P 500 over the same period, is a statistically rare phenomenon, having only been observed once before in over 25 years. This suggests a technical pressure, amplified by short selling, particularly by commodity trading advisors (CTAs).
• Possibility of interest rate cuts by the European Central Bank: Barclays highlights the increasingly dovish stance of the European Central Bank as a supportive factor for European equities. Accordingly, the possibility of interest rate cuts, amid political uncertainty and weak growth, provides a hedge against downside risks in the near term. For the EUR/USD exchange rate, interest rate cuts are typically seen as a headwind because they mean lower Eurozone bond yields. However, a decline in European stock prices may limit any decline.
• Positive response to news: While the positive news was gradual, the market responded positively, likely due to previous bearish sentiments. The avoidance of worst-case scenarios and any positive developments, even if minor, contributed to the upward momentum.

Trading Tips:

The EUR/USD price is increasing in the bearishness ahead of today’s ECB announcement. Furthermore, be cautious and do not rely on what is expected from the bank and wait for the reaction to the announcement to move towards strong trading opportunities.

EUR/USD Analysis Today:

By examining the performance of the Euro-US Dollar EUR/USD price, it is confirmed that the general downward trend is stronger and may remain as long as the price is stable around and below the psychological support level of 1.0500. As we mentioned before and I confirm now, expectations for the future parity price of the Euro Dollar may strengthen if the bears move first towards the support levels of 1.0435 and 1.0320 respectively. At the same time, the technical indicators will move towards strong oversold levels. Led by the Relative Strength Index and the MACD indicator. In contrast, to achieve an initial break of the downward trend, the bulls must move the currency pair towards the resistance levels of 1.0670 and 1.0830 respectively. Also, the Euro Dollar will focus on US data led by the weekly jobless claims and the inflation reading of the Producer Price Index.

Ready to trade our daily EUR/USD Forex analysis? We’ve made this forex brokers list for you to check out.