The EUR/JPY is our featured technical chart, for not only a technical breakdown is looking increasingly likely, but the macro back backdrop makes for a bearish fundamental backdrop. In short, the euro is undermined because of Europe’s persistent economic and political challenges, while a potential rate hike from the Bank of Japan magnifies the yen’s appeal.  Against this backdrop, our short-term EUR/JPY forecast is bearish.

EUR/JPY forecast: Political and economic uncertainty risks loom for euro 

The euro rebounded slightly across the board amid a firmer risk tone with the DAX and S&P hitting new record highs this week. Still, FX traders are treading cautiously ahead of significant political developments in France and a packed week of US economic data, which could have indirect influence on the JPY through the bond market (i.e., should US data surprise to the upside, this should push US and global bond yields higher, which would be negative for the low-yielding assets like JPY).

Meanwhile, geopolitical tensions are still at the forefront. Donald Trump’s recent threat of trade tariffs, slated for implementation once he assumes office in January, adds an obvious layer of pressure on the euro. Over the weekend, Trump also warned of tariffs targeting BRIC nations not aligned with the US dollar as a reserve currency. In Europe, French Prime Minister Michel Barnier faces mounting pressure, with his coalition government on the verge of collapse. A no-confidence vote is scheduled for tomorrow, and analysts anticipate he will struggle to retain his position. This could usher in further political instability in the eurozone’s second-largest economy, potentially weighing on the EUR/JPY forecast and undermining other euro crosses.

Adding to the bearish sentiment for the euro are weak economic fundamentals. Yesterday’s release of updated Eurozone PMIs showed no improvement, underscoring the region’s deepening manufacturing recession, with little sign of recovery in sight. 

Yen gains momentum amid BoJ rate hike speculation

The yen has been strengthening as speculation grows that the Bank of Japan could raise interest rates this month. This anticipation is not only boosting the yen against the dollar but also pressuring other pairs like the GBP/JPY and AUD/JPY.

And it looks like speculators appear eager to capitalize on the yen’s rally, according to the latest CFTC positioning data. Last week, large speculative traders significantly increased their long positions on the yen, driven by renewed expectations of a 25 basis point rate hike by the Bank of Japan this month. Notably, these traders reduced their short positions while boosting long exposure by over 23%, adding nearly 15,000 contracts to their bullish wagers.

Technical EUR/JPY forecast: Key levels and factors to watch

Source: TradingView.com

As far as the technical EUR/JPY forecast is concerned, well this pair slid below the pivotal 160.00 level last week and is now hovering near the 158.00 old support level. Once support, this level could turn into resistance and potentially trigger another drop in this pair. The next level of support comes in around 156.50 to 157.00, which also marks the trend support in place since August. Should the EJ break below this area, then this could pave the way for a potential drop to take out liquidity resting below the lows of September and August at 155.15 and 154.41, respectively.

So, not only is the EUR/JPY under pressure because of a stronger yen, but the euro’s ongoing weakness, driven by Europe’s persistent economic and political challenges, further magnifies the yen’s appeal.  Against this backdrop, our short-term EUR/JPY forecast is bearish, and we expect to see a breakdown below the summer low of 154.41.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

• The Bank of England will likely stick to a gradual pace for rate cuts next year.

• US job vacancies rose more than expected.

• Markets are pricing a 75% chance of a Fed cut in December.

The GBP/USD forecast indicates a strong pound after slightly hawkish Bank of England remarks. Meanwhile, the dollar gained after upbeat data in the previous session, and markets awaited more crucial US employment figures.

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BoE governor Andrew Bailey on Wednesday noted that the Bank of England would stick to a gradual pace for rate cuts next year. Markets are pricing four rate cuts in 2024. However, they do not expect any more cuts this year. 

Meanwhile, the greenback rose on Tuesday after figures showed that US job vacancies rose more than expected. The JOLTs report revealed 7.74 million job openings, above estimates of 7.51 million. The numbers indicated a high demand for labor. However, there was little impact on rate cut expectations as traders awaited the more crucial nonfarm payrolls report. 

According to estimates, the economy might add 195,000 new jobs in November. Meanwhile, the unemployment rate might increase to 4.2%. The last report showed dismal job growth at 12,000.

However, experts chalked it up to hurricane disruptions. Another month of poor job growth could be a red flag for the labor sector. Moreover, it would increase bets for a rate cut in December, weighing on the dollar.

On the other hand, an upbeat report could lower the chances of a rate cut, boosting the greenback.  At the same time, traders will pay attention to Powell’s speech later in the day for clues on the outlook for rate cuts. Currently, markets are pricing a 75% chance of a cut in December. 

GBP/USD key events today

• US ADP non-farm employment change
• US ISM services PMI
• Fed Chair Powell Speaks

GBP/USD technical forecast: Struggling to break 1.2701 resistance

On the technical side, the GBP/USD price has bounced off the 30-SMA but failed to breach the 1.2701 resistance level. Bulls took over when the downtrend paused at the 1.2500 support level. The price broke above the 30-SMA and made a new high slightly above the 1.2701 resistance level. 

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From here it retested the 30-SMA as support and remained attached to the line. A surge in bullish momentum will allow the price to break above 1.2701 to continue the uptrend. Otherwise, it might break below the SMA to retest the 1.2500 support.

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Key Events

• Israel-Lebanon Potential Ceasefire Deal for 60 Days
• December 1 OPEC Meeting Anticipations
• Japan’s Corporate Services Inflation rising toward 2.9%
• Trump Tariff Policies supporting dollar strength against market trends
• Japanese Inflation Metrics, including Tokyo Core CPI

GBP Outlook

UK inflation surged from 1.7% to 2.3% in November, but GBPUSD remains under pressure due to the Bank of England’s gradual interest rate cut plan. The dollar’s continued strength weighs heavily on the pound, alongside recent drops in manufacturing and services PMI metrics, which have fallen below the critical 50-expansion mark. This combination creates a strong bearish outlook on broader charts. However, key support levels outlined below may influence near-term moves.

JPY Outlook

For the yen, critical levels against the dollar are once again in focus, with BOJ intervention risks rising if the yen surpasses the 157 and 160 marks. Volatility risks are anticipated with key upcoming events such as the FOMC minutes, US Core PCE, unemployment claims, GDP, and Tokyo Core CPI.
As per BOJ Governor Ueda’s remarks, policies will adjust in response to economic developments. Notably, the services producer price index has risen back to 2.9%, near its yearly high of 3%, aligning with nine-year highs. This keeps speculation alive for a potential rate hike drift. Meanwhile, Tokyo CPI dropped below 2% to 1.8% in October, its first dip since May, and further confirmation from Friday’s data will be closely watched.

Oil Outlook

Ceasefire resolutions and escalating war headlines have fluctuated for months, with painful reversals on each deal attempt. The path toward resolving conflicts involving Russia-Ukraine and Israel-Lebanon remains uncertain. This uncertainty sustains upside risk potential for oil within the $72-$76 range until feasible solutions emerge.
The upcoming OPEC meeting on Sunday is expected to leave production quotas unchanged, reflecting risk assessments for 2025 demand-supply levels and weak oil price trends.

Technical Analysis: Quantifying Uncertainties

Crude Oil Forecast: Weekly Time Frame – Log Scale

Source: Tradingview

While headlines can spur critical oil price movements, current price action remains bound within the $72-$76 resistance range and $68-$64 support range.

2025 Sentiment

The overall chart leans bearish due to risks from US oversupply, Chinese contracting demand, and OPEC production quota adjustments. However, unless there is a decisive break and close below the $64 support, upside risk remains present.

Scenarios

Bullish: A firm close above $72 and $76 could extend the rally to $80 and $84, possibly establishing a longer-term uptrend

Bearish: A firm close below $64 could drive the bear trend, targeting $58 and $49, continuing the decline since the 2022 highs.

GBPJPY Forecast: Monthly Time Frame – Log Scale

Source: Tradingview

The GBP/JPY pair is currently exhibiting a bearish inclination, influenced by a weakening British pound and potential intervention by the Bank of Japan (BOJ) to support the yen. The 3-month price action is leaning towards bearish dominance, with an overbought RSI retesting levels previously seen in 2007 and 1998.

The overall breakout of the GBPJPY pair from the consolidating pattern across its history leans towards a longer-term bull run, yet a pullback down towards the borders of the consolidation may be possible.

The scenarios are the following

Bearish Scenario: a close below the 183-support zone can ignite a pullback towards support levels 172 and 155

Bullish Scenario: a close above the 208 high can extend the bull run towards potential resistance levels 223 and 251

— Written by Razan Hilal, CMT – on X: @Rh_waves

JPY, USD/JPY EUR/JPY Talking Points:

The Bank of Japan is expected to release a policy review later this month, just a day after the FOMC rate decision, and JPY-strength has started to show more prominently against most major currencies.

In USD/JPY, the US Dollar hasn’t been very weak over the past few weeks, but JPY strength has started to take on greater prominence of late. The pair set a fresh high on November 15^th as USD-strength drove after the U.S. Presidential election. Resistance eventually showed at the 76.4% Fibonacci retracement of the July-September sell-off; but a week later, as USD jumped up to a fresh two-year-high in DXY, USD/JPY lagged, setting a lower-high and building within the confines of a descending triangle formation.

I looked at that formation in last week’s webinar, just ahead of the U.S. holiday, and that formation filled in later that day and continued to see bears go to work as USD/JPY drove below 151.95, 150.77 and, eventually, the 150.00 handle.

And even today, to start the week, DXY is showing a bounce up to the 106.51-106.88 zone and USD/JPY is much less decisive, showing currently as a doji on the daily. This illustrates Yen-strength against the USD.

USD/JPY Four-Hour Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

USD/JPY Daily

From the daily chart, we can see where there’s been quite a few inflections from the July-September Fibonacci retracement. The current high shows right at the 76.4% retracement, and last week’s support for the descending triangle was right around the 61.8% marker. The 50% level from that same retracement setup was support last Wednesday and then resistance to start this week, and that also points out the 38.2% retracement level as a deeper support, plotted around the 148.13 level.

But the bigger question is whether USD/JPY is an optimal venue to seek out that Yen-strength as the US Dollar has been strong against many currencies recently, especially the Euro which is back below the 1.0500 handle.

USD/JPY Daily Price Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

EUR/JPY

While the USD remains very near recently-established two-year-highs, it’s been a far tougher road for the Euro.

I focused in on the difference between EUR/JPY and USD/JPY a couple weeks ago and at the time, USD/JPY still had bullish scope. EUR/JPY, on the other hand, had just set a fresh lower-low and was holding resistance at a big spot on the chart. There was also a relationship with the 200-day moving average, where EUR/JPY was trading below its 200-dma while USD/JPY and even GBP/JPY held above their own.

But since then, Yen-strength has returned in a big way and now all three pairs are now operating below their 200-day moving averages. As the descending triangle in USD/JPY broke down last week, EUR/JPY had even more steam as Euro-weakness was meshed with Yen-strength. And while the trend has been clean and aggressive, the pair is now showing oversold conditions on the daily chart, which can make it difficult to chase, at this point. Support is currently showing at the trendline projection, taken from August and September swing lows.

EUR/JPY Daily Price Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

EUR/JPY Shorter-Term, Strategy

Oversold conditions on the daily chart do not necessarily preclude bearish continuation scenarios. It does make the prospect of chasing prices lower a bit more daunting, but a look at the trend over the past couple of weeks shows healthy two-way price action, and that’s something that can be tracked for those looking to take the trend-lower.

There was a support bounce around the 158.04-158.24 zone, and that remains of note as there hasn’t yet been a resistance test at that prior support. Inside of that, a Fibonacci level plots at 157.31 and that’s similarly of note, as that’s the 76.4% retracement from a major move that showed support at the 38.2, 50 and 61.8% retracements.

That 61.8% retracement of prior support is also of interest if bulls can stretch a pullback, and that plots at 159.10. Even the 160.00 level could be of interest and as I highlighted in the video, the key there would be bears defending the prior swing high at 160.34. If they fail to hold the lows below that price, then the prospect of a larger retracement or pullback move will look more prominent and at that point, bears will likely want to re-assess.

EUR/JPY Four-Hour Price Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

— written by James Stanley, Senior Strategist

• GBP/USD edges higher toward 1.2700 in the European morning on Wednesday.
• ADP Employment Change and ISM Services PMI data from the US will be watched closely.
• Fed Chairman Powell will be delivering a speech in the American session.

Following Monday’s sharp decline, GBP/USD recovered modestly on Tuesday. The pair continues to edge higher toward 1.2700 in the early European session on Wednesday.

The data from the US showed on Tuesday that JOLTS Job Openings for October rose to 7.74 million from 7.37 million in September. This reading came in above the market expectation of 7.48 million and helped the US Dollar (USD) stay resilient against its rivals, limiting GBP/USD’s upside.

Bank of England Governor Andrew Bailey will speak at the Financial Times Live Global Boardroom at 09:00 GMT on Wednesday. Later in the day, ADP Employment Change and ISM Services PMI data for November will be featured in the US economic docket.

Investors expect the private sector employment to rise by 150,000. A positive surprise, with a reading at or above 200,000, could boost the USD with the immediate reaction. On the other hand, a print below 100,000 could revive concerns over worsening conditions in the labor market and hurt the USD.

In the American session, Federal Reserve Chairman Jerome Powell will participate in a moderated discussion at the New York Times DealBook Summit, starting at 18:45 GMT. The CME FedWatch Tool shows that markets are currently pricing in a nearly 75% probability of a 25 basis points (bps) rate cut in December. In case Powell leaves the door open for a policy hold, the USD could gather strength against its rivals and force GBP/USD to turn south.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 and GBP/USD managed to hold above the 100-period Simple Moving Average (SMA) after testing this level several times since Tuesday, highlighting sellers’ hesitancy.

Looking north, resistances could be spotted at 1.2700 (Fibonacci 38.2% retracement of the latest downtrend), 1.2750 (Fibonacci 50% retracement) and 1.2810-1.2800 (Fibonacci 61.8% retracement, 200-period SMA). On the downside, immediate support is located at 1.2650 (100-period SMA) before 1.2630-1.2620 (50-period SMA, Fibonacci 23.6% retracement) and 1.2600 (round level, static level).

Our featured currency pair of the week is the USD/JPY. The pair fell in November even as the dollar index rose for the second consecutive month. Last week saw the dollar come under pressure, as major pairs such as the EUR/USD and GBP/USD staged a relief bounce. The yen was the biggest performer last week, underscoring expectations about a potential rate hike from the Bank of Japan, just as the world’s other central banks are now on the easing path. But now it has arrived at a key technical support area of around 150.00 ahead of critical US economic releases this week. With a jam-packed calendar including, ISM Manufacturing and Services PMIs, the closely watched JOLTS Job Openings report, and the monthly Non-Farm Payrolls report to come, traders are bracing for volatility. These data points are expected to influence the USD/JPY forecast, especially with both the Fed and BoJ policy decisions looming in December.

BOJ rate hike buzz lifts yen’s appeal

The yen is gaining traction as speculation mounts that the Bank of Japan might raise rates in December. This expectation isn’t just bolstering the yen against the dollar; it’s also pressuring other pairs like EUR/JPY, which recently dropped below 160.00 and is now flirting with the 157.00 zone. The euro’s struggles, tied to Europe’s ongoing economic and political issues, amplify the yen’s strength.

But it looks like speculators are trying to ride the yen rally. Last week, large speculators piled into long positions on the yen amid renewed expectations of a 25 basis point hike from the Bank of Japan this month. Notably, large speculators reduced short positions and ramped up long exposure by more than 23%, adding nearly 15K contracts to their bullish bets. 

Key US data to shape USD/JPY forecast

Looking ahead to this first week of December, all eyes are on pivotal US economic indicators. While ISM PMIs will provide clues about the health of the world’s largest economy, the JOLTS report could take centre stage as the Federal Reserve zeroes in on employment trends. Signs of weakness in these reports might tilt the odds toward a December rate cut, currently priced with a 65% probability. 

Meanwhile, the November jobs report, due Friday, will be the headline event. After last month’s unexpectedly strong figures and the political shift from Trump’s re-election, expectations for aggressive Fed cuts in 2025 have waned. Whether the Fed decides to cut rates in its final 2024 meeting could hinge on this critical data, setting the tone for USD/JPY’s trajectory into the new year.

Here is a list of key data highlights from the US and what to expect:

Technical USD/JPY forecast:  Potential for a pullback if THIS support gives way

Source: TradingView.com

Last week’s drop in USD/JPY underscores a possible key swing low for the yen, potentially setting the stage for further recovery in the yen. But for that to happen, the USD/JPY will need to stage a decisive break below the key 150.00 support level.

Previously a strong resistance area, this level now serves as a battleground. A rebound here could see the pair testing the 200-day moving average and targeting resistance around 151.30-152.00.

However, if support fails—marked by a decisive daily close below the 149.40-150.00 range—a sharper decline towards 147.20 or even 144.53 (the next potential support levels) may follow. This scenario would paint a more bearish-leaning technical USD/JPY forecast heading into the two central bank meetings later this month.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

EUR/USD falls amid French political uncertainty

• French government is on the verge of collapse
• Eurozone manufacturing PMI contracts further
• USD rises as Trump threats trade tariffs
• EUR/USD looks to test 1.05

EUR/USD is falling at the start of the week after strong gains last week as the US dollar rebounds and amid French political uncertainty.

France’s far-right National Party has given Prime Minister Michel Barnier until today to accept the party’s demands for concessions in the proposed Budget, which Barnier is attempting to push through the fragile coalition government.

Barnier is between a rock and a hard place. If he fails to give in, the RN threatens to call a vote of no confidence, which will almost certainly collapse the government. However, if he does give in, high spending will keep the country in an economically fragile position.

French borrowing costs have risen to the highest level against German borrowing costs since the 2012 crisis. The CAC is also falling sharply lower.

Meanwhile, eurozone manufacturing PMI data was confirmed at 45.2, deepening contraction in the sector. The downturn remains widespread, with manufacturing activity deteriorating across major economies, including Germany and France, which recorded the lowest readings.

Separately, the US dollar is rebounding on safe-haven flows after President Trump threatened BRICS countries with 100% trade tariffs should they threaten the USD’s dominance.

Attention is also on the Federal Reserve ahead of a busy week for U.S. economic data, terminating with the nonfarm payroll report on Friday. The data comes as the Fed weighs up whether to cut rates this month after two consecutive rate reductions. The market is pricing in a 66% probability of a 25 basis point rate cut in December.

In addition to data, several Fed officials are due to speak this week, including Fed Chair Jerome Powell, on Wednesday.

EUR/USD forecast – technical analysis

EUR/USD rebounded from a low of 1.0330 but failed to retake the 1.06 or 1.07 levels necessary to negate the steep downtrend from 1.12 reached at the end of September. This, combined with the RSI below 50, keeps sellers in the driving seat.

Sellers will look to break below 1.05 to retest 1.0450, the 2023 low.  A break below 1.0330 is needed to create a lower low.

Buyers need to retake 1.06 to have any chance of building a base higher.

FTSE inches higher after strong Chinese manufacturing data, but UK data disappoints

• China’s manufacturing PMI rises to 51.5 & new orders soar
• UK manufacturing PMI falls to 48 in November from 49.9
• FTSE trades within a holding pattern

The FTSE is trading flat as investors weigh off encouraging Chinese manufacturing data, political instability in France, and disappointing UK manufacturing PMIs.

Data from China showed that manufacturing activity grew at the strongest pace in five months. The cakes in manufacturing PMI rose to 51.5 in November when I had a forecast of 50.5. Manufacturers’ new orders are growing at the fastest pace in three years, suggesting that recent stimulus efforts are already seeping into the economy.

The good news is helping to lift miners, with Anglo American and Rio Tinto trading around 1% higher.

Meanwhile, the UK manufacturing PMI was slightly more disappointing, sinking to 48 in November, down from 49.9 in October, marking a nine-month low as new orders dry up. Headwinds from a rise in employment taxes following the New Labour government’s budget, a 7% rise in the minimum wage, disruption to shipping in the Red Sea, and threats to global goods tariffs have created a challenging environment for manufacturers.

Also, keeping a lid on any gains or concerns over the political situation in France, where Barnier’s government holds on by a thread.

FTSE forecast – technical analysis

The FTSE continues to trade within a familiar range, capped on the upside by 8325 and 8150 on the lower side.

While the FTSE has recovered from the November low of 8000, rising above the 200 SMA and the 50 SMA, buyers will need to break out above 8325 to bring 8400 into target and 8480, the all-time high.

Immediate support is seen at 8230 the 50 SMA. Below here 8150 comes back into play, which is also the 50 SMA.

• EUR/USD trades in a tight range near 1.0500 early Tuesday.
• Political uncertainty in France, Fed-ECB policy divergence limit the pair’s upside.
• Technical sellers could remain interested while 1.0520 holds as resistance.

EUR/USD started the week on a bearish noted and dropped below 1.0500 on Monday. The pair holds its ground early Tuesday but shows no signs of a steady recovery.

The risk-averse market atmosphere helped the US Dollar (USD) gather strength against its rivals and weighed on EUR/USD on Monday. Additionally, political woes in France further weighed on the Euro. “The French government is all but certain to collapse later this week after far-right and left-wing parties submitted no-confidence motions on Monday against Prime Minister Michel Barnier,” Reuters reported.

Meanwhile, the potential monetary policy divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) doesn’t allow the pair to gain traction.

Atlanta Fed President Bostic said late Monday that he is undecided on whether a rate cut is needed in December. On a similar note, “one could argue a case for skipping a rate cut in December, will be watching data closely to decide,” NY Fed President John Williams noted. On the flip side, ECB policymaker Martins Kazaks argued that the inflation problem will soon end and added that rate cuts must continue. 

In the second half of the day, the US Bureau of Labor Statistics will publish JOLTS Job Openings data for October. A significant negative surprise, with a reading at or below 7 million, could hurt the USD with the immediate reaction and help EUR/USD edge higher.

EUR/USD Technical Analysis

EUR/USD dropped below 1.0520, where the Fibonacci 23.6% retracement of the latest downtrend is located. While this level holds as resistance, technical sellers could remain interested. On the downside, supports could be seen at 1.0440 (static level) and 1.0400 (end-point of the downtrend, static level).

In case EUR/USD rises above 1.0520, next hurdle is located at 1.0545 (100-period Simple Moving Average (SMA) on the 4-hour chart) ahead of 1.0600 (Fibonacci 38.2% retracement).

Created on December 03, 2024

• In my daily analysis of the GBP/USD currency pair, the first thing that comes to mind is that the British pound has taken it on the chin.
• At this point, it looks like we have seen a lot of resistance near the 1.2750 level. If we can break above there, it would obviously change things but right now it looks like it’s a massive brick wall.
• Because of this, I’ll be paying close attention to the 1.2750 level for any significant change.

Consolidation

The consolidation has been somewhat obvious between the 1.25 level on the bottom, and the 1.2750 level on the top. The size of the candlestick on Monday is rather ugly, and that does suggest that a lot of people will be running to the US dollar again. Quite frankly, the downtrend has been formally ensconced, so at this point in time I don’t see any reason to think that the trend will change easily. However, like I said, if we were to break above the 1.2750 level, then I would have to reconsider some things.

If we were to break down below the 1.25 level, then it opens up the possibility of a significant drop down to the 1.23 level. Interest rates continue to be an issue for the United States, despite the fact that a lot of market participants believe that the Federal Reserve is going to be cutting interest rates by 25 basis points during the month of December. Because of this, the market is likely to be very noisy, but I do think that eventually we will have to come to some type of conclusion. The conclusion could be in either direction, but as I think we have seen recently, it’s very difficult for this market to break out to the upside. Because of this, the market is likely to continue to see a lot of volatility, but sooner or later, we could see a rather large move.

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