GBP/JPY has fallen to a trendline for the August rally.
The pair is in a downtrend with odds favoring an extension lower.
GBP/JPY is trying to pierce the trendline for the uptrend since the August lows. If it is successful and decisively breaches the trendline, it will suggest a follow-through lower to a fresh downside target at 186.20, the 61.8% Fibonacci of the down move prior to the trendline (blue rectangle on chart).
The pair is now in a short and probably medium-term downtrend (since the October 31 high) and according to technical analysis lore trends have a tendency to extend, suggesting the odds favor even more downside to come.
GBP/JPY Daily Chart
GBP/JPY is making its way down to the next target for the pair at around 189.56, the low of the Right-Angled triangle that formed in late September and early October.
It is also possible it could bounce from the current level at the trendline which is a support level.
The Relative Strength Index (RSI) is not yet oversold which indicates the pair could still have further to fall before it gets oversold.
A decisive breach of the trendline would be one accompanied by a long red candlestick that closed near its lows and well clear of the trendline, or three consecutive red candles that breached the level.
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The Pound Sterling rebounded firmly against the US Dollar, snapping the losing streak.
For further direction, GBP/USD looks to central bank chiefs Bailey and Powell, as well as US Nonfarm Payrolls data.
Dual Bear Crosses and a bearish RSI could continue threatening the Pound Sterling recovery.
The Pound Sterling (GBP) snapped a two-week downtrend and staged a comeback against the US Dollar (USD), driving the GBP/USD pair back to the 1.2700 threshold.
Pound Sterling came up for air as USD buyers took a breather
GBP/USD returned to the green as a dramatic week drew to a close. Markets witnessed a steep correction in the USD, courtesy of the US fundamental catalysts, offering a much-needed respite to the Pound Sterling buyers.
Starting the week, they jumped in on Monday, helping the pair rebound from the six-month low of 1.2488, set on November 22. The Greenback saw a bearish opening gap in tandem with the US Treasury bond yields and extended the downside in response to the weekend news that US President-elect Donald Trump named billionaire Scott Bessent as his Treasury Secretary. Bessent’s appointment to the critical position in the Trump administration reassured the US bond market as he is seen as a fiscal conservative.
The GBP/USD recovery paused on Tuesday after the Greenback found fresh safe-haven demand following US President-elect Donald Trump’s announcement of a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China once he takes over his office on January 20. Intensifying risk aversion on the looming threat of a global trade war curbed appetite for high-beta currencies such as the British Pound.
However, USD sellers returned on Wednesday alongside risk appetite on easing geopolitical tensions between Israel and Lebanon. Reuters reported that “a ceasefire between Israel and Iran-backed group Hezbollah came into effect at 0200 GMT on Wednesday after US President Joe Biden said both sides accepted an agreement brokered by the United States and France.”
The US currency also suffered due to sustained expectations that the US Federal Reserve (Fed) will likely cut interest rates by 25 basis points (bps) in December. The weakness extended into Thanksgiving Thursday, especially after Wednesday’s US core Personal Consumption Expenditure (PCE) Price Index data failed to alter Fed rate cut expectations for next month.
The Fed’s preferred inflation gauge, the core PCE Price Index, increased at 0.3% on a monthly basis and an annual reading of 2.8%, aligning with market expectations. Thin trading conditions also left the Greenback miring in the weekly troughs, aiding the additional upswing in the Pound Sterling.
On Friday, nothing seemed different from the fundamental perspective as sentiment around the US Dollar remained tepid, pushing GBP/USD to the highest level in two weeks above 1.2700.
Meanwhile, there was no high-impact economic data from the UK during the week, while Bank of England (BoE) policymakers continued to voice caution about further rate cuts. Deputy Governor Clare Lombardelli said Tuesday that she needs to see more evidence of cooling price pressures before she backs another interest rate reduction, per Bloomberg.
The week ahead: Bailey, Powell and US payrolls in sight
An action-packed week unfolds after a relatively quiet one, with labor data from the US likely to dominate the week. In contrast, the UK economic calendar lacks any high-impact data releases in the upcoming week.
Apart from the data publication, risk sentiment will play a pivotal role in influencing the higher-yielding Pound Sterling as global trade war fears mount following US President-elect Donald Trump’s announcement of tariffs on Mexico, Canada, and China.
On Monday, the US Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) will stand out following the releases of the S&P Global final UK and US Manufacturing PMI reports.
The US JOLTS Job Openings Survey will be the only vital data published on Tuesday. Wednesday will feature the top-tier US ADP Employment Change and ISM Services PMI data. Additionally, appearances from BoE Governor Andrew Bailey and Fed Chairman Jerome Powell will hog the limelight that day.
Powell’s appearance will be his last public one before the Fed enters the ‘blackout period’ on December 7.
The usual weekly US Jobless Claims will be reported on Thursday, followed by BoE policymaker Megan Greene’s speech.
All eyes will be on Friday’s critical US Nonfarm Payrolls (NFP) for fresh signs on labor market conditions and the Fed’s rate outlook.
Speeches from several Fed policymakers will be listed throughout the week and could be significant as the ‘blackout’ period kicks on Saturday ahead of the December 17-18 policy meeting.
GBP/USD: Technical Outlook
From a short-term technical outlook, the GBP/USD pair’s downside risks remain intact as long as the 14-day Relative Strength Index (RSI) remains below the 50 level.
Despite the latest recovery, the leading indicators currently trade near 45.
Adding credence to the negative outlook, the pair charted dual Bear Crosses on the daily time frame.
On November 22, the 21-day Simple Moving Average (SMA) closed below the 200-day SMA, while the 50-day SMA cut the 100-day SMA from above on a daily closing basis on November 27.
The Pound Sterling needs a sustained break above the 200-day SMA at 1.2820 to initiate a meaningful uptrend toward the strong contention area near 1.2975, where the 50-day SMA and the 100-day SMA hang.
Further up, the 1.3000 psychological level could challenge the bearish commitments.
On the downside, strong support aligns at the 1.2600 round level, below which the weekly low of 1.2507 will be tested.
A failure to defend that level will open the downside toward the six-month low of 1.2487, followed by the May 9 low of 1.2446.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
GBP/USD trades in positive territory above 1.2700 in the European session.
Financial markets in the US will close early on Friday.
Improving risk mood could help the pair stretch higher ahead of the weekend.
After posting small gains on Thursday, GBP/USD gathered bullish momentum and climbed to its highest level in over two weeks at 1.2750 early Friday.
Following the Thanksgiving Day holiday in the US, the US Dollar (USD) came under renewed selling pressure amid a positive shift seen in risk mood in the Asian session and helped GBP/USD gain traction. Additionally, US Treasury bond yields continued to stretch lower, making it difficult for the USD to find a foothold.
British Pound PRICE This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-1.47%
-1.40%
-2.61%
0.37%
-0.15%
-1.04%
-1.26%
EUR
1.47%
-0.10%
-1.75%
1.25%
1.26%
-0.15%
-0.37%
GBP
1.40%
0.10%
-1.66%
1.37%
1.37%
-0.04%
-0.27%
JPY
2.61%
1.75%
1.66%
3.06%
2.97%
1.68%
1.58%
CAD
-0.37%
-1.25%
-1.37%
-3.06%
-0.36%
-1.38%
-1.64%
AUD
0.15%
-1.26%
-1.37%
-2.97%
0.36%
-1.39%
-1.61%
NZD
1.04%
0.15%
0.04%
-1.68%
1.38%
1.39%
-0.22%
CHF
1.26%
0.37%
0.27%
-1.58%
1.64%
1.61%
0.22%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
At the time of press, US stock index futures were up between 0.3% and 0.4%, while the UK’s FTSE 100 Index was trading flat on the day.
Later in the session, the Bank of England (BoE) will publish the Financial Stability Report, which is unlikely to trigger a significant market reaction. The US economic calendar will not offer any high-impact macroeconomic data releases. Moreover, stock and bond markets in the US will close early. Hence, the trading action is likely to turn subdued heading into the weekend. Month-end flows and position adjustments on the last business day of November, however, could ramp up market volatility and trigger irregular action in GBP/USD toward the end of the European session.
GBP/USD Technical Analysis
GBP/USD was last seen trading slightly above 1.2700, where the 100-period Simple Moving Average (SMA) on the 4-hour chart is located. While this level remains intact as support, technical buyers could remain interested. On the upside, 1.2760 (static level) aligns as next resistance before 1.2800 (round level, static level) and 1.2835 (200-period SMA).
In case 1.2700 support fails, 1.2640 (20-period SMA, static level) could be seen as next support ahead of 1.2600 (static level, round level).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The GBP/USD pair is trading at $1.27310, up 0.38%, supported by a bullish breakout above the pivot point at $1.26833. The pair finds immediate resistance at $1.27677, with further levels to watch at $1.28050 and $1.28463. On the downside, key support lies at $1.26455, followed by $1.25890 and $1.25318.
The 50-day EMA at $1.26422 strengthens near-term support, while the 200-day EMA at $1.27035 provides an intermediate threshold. A sustained move above $1.26833 keeps the pair’s bullish momentum intact, targeting higher resistance zones.
However, a break below this level could signal a reversal toward support at $1.25890. For now, the pair remains in an upward trajectory, with cautious optimism prevailing.
Euro Weakened as German Retail Sales Slump
The Euro faced pressure as German retail sales declined by 1.5%, well below the forecast of -0.5%. Meanwhile, German import prices rose 0.6%, signaling higher costs.
French data showed consumer spending fell 0.4%, with inflation slightly easing as the French prelim CPI dropped to -0.1%.
Core CPI Flash Estimate y/y is expected at 2.8%, with German unemployment change at 20K. All eyes are on Buba President Nagel’s remarks later today.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.24%
-0.05%
0.43%
-0.04%
-0.05%
0.28%
-0.23%
EUR
0.24%
0.36%
0.77%
0.32%
0.35%
0.64%
0.14%
GBP
0.05%
-0.36%
0.43%
-0.05%
-0.02%
0.27%
-0.24%
JPY
-0.43%
-0.77%
-0.43%
-0.48%
-0.41%
-0.09%
-0.58%
CAD
0.04%
-0.32%
0.05%
0.48%
0.01%
0.32%
-0.18%
AUD
0.05%
-0.35%
0.02%
0.41%
-0.01%
0.29%
-0.21%
NZD
-0.28%
-0.64%
-0.27%
0.09%
-0.32%
-0.29%
-0.50%
CHF
0.23%
-0.14%
0.24%
0.58%
0.18%
0.21%
0.50%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Since the beginning of this week, the USD/JPY currency pair has been on a downward correction path, with losses extending to the support level of 150.45, the lowest for the currency pair in five weeks.
Currently, it is stabilizing around the 151.60 level at the time of writing, amidst the US Thanksgiving holiday.
The technical downward correction of the USD/JPY currency pair was natural after its recent sharp gains, which reached the resistance level of 156.75, driven by the euphoria of Trump’s trade, which supported the strength of the US dollar against other major currencies.
Why Has the Japanese Yen Appreciated Recently?
The Japanese Yen price found strong momentum to achieve gains amid expectations that the Bank of Japan may raise interest rates again early next month. In this regard, Bank of Japan Governor Kazuo Ueda recently indicated the possibility of raising interest rates in December, citing concerns about the weakness of the Japanese Yen. Financial markets are now pricing in a roughly 60% chance of a 25-basis point rate hike in Japan next month, up from around 50% just a week ago. The Japanese yen will react to Friday’s release of inflation data in Tokyo, which could provide additional insights into the future direction of the Bank of Japan’s policy.
Japanese Bond Yields Decline
According to recent trading, the yield on the 10-year Japanese government bond fell to around 1.06% on Thursday, hitting a two-week low, tracking a decline in US Treasury yields as US inflation data came in in line with expectations, suggesting no major change in the path of US rate cuts. In Japan, investors are closely watching the Bank of Japan’s monetary policy stance, with speculation growing that the central bank could raise interest rates again at its meeting next month. Financial markets are pricing in a 60% chance of a 25bp rate hike next month, up from around 50% just a week ago.
USD/JPY Technical Analysis and Expectations Today:
The bearish momentum of USD/JPY has added to the overall decline in the US dollar as US PCE inflation data came in line with expectations, suggesting a slight change in the Fed’s approach to cutting US interest rates. Technically, and based on the performance on the daily chart, the 150.00 support level will remain a dividing line for USD/JPY in the coming days. Stability below the level will encourage bears to move towards stronger support levels, the closest of which are 148.80 and 147.00 respectively. On the other hand, in the same time frame, if USD/JPY returns above the 153.60 resistance, it will be important for bulls to control the pair.
USD/JPY Signals Today:
We recommend buying the US dollar/Japanese yen from every downward level. Always be careful not to take risks and activate profit limit and stop loss orders to ensure the safety of your trading account from any price reversals that may come suddenly.
The euro initially fell a bit against the US dollar during the trading session on Thursday as Thanksgiving would have caused a little bit of liquidity problems in the market.
That being said though, we have been more or less going sideways for a while and the 1.06 level above is a major resistance barrier.
If we can break above the 1.06 level and go looking to the 1.0750 level. I think that’s what is trying to happen.
But ultimately, this is a pair that I still think would favor the US dollar longer term. The fact is that the United States is about to enter a renaissance in the business world, at least as far as the way the government approaches it. And one would think that there will be a lot of investment in America.
Geopolitics Still Matter
At the same time, we have the land war in Ukraine, and it is getting hotter. So, I think the upside in the euro is a little somewhat limited in that sense as well. The EUR/USD market looks very much like one that is just bouncing from an oversold condition, which makes quite a bit of sense. The US dollar has swallowed everything over the last several months.
With this being said, I expect short-term traders to be buyers of euros and longer-term traders to look for some type of opportunity to pick up cheap dollars. It is a bit of a two-speed market. It just depends on what timeframe you’re looking at. But like I said, based on the action that we’ve seen over the last couple of days, we are doing everything we can to break above 1.06 and I am seeing similar action in other currency pairs, such as the British Pound. After all, it’s quite common for these pairs to move based on the US dollar itself, as in general, if you can get the trajectory of the US dollar correct, you can generally do okay when it comes to most forex pairs.
The first thing that I see is that the market has pulled back just a bit to show signs of weakness, only to turn around and show signs of life.
The 1.27 level has been a massive barrier over the last couple of weeks that I think will capture a lot of attention.
At this point, it looks like we are doing everything we can to break out above there, but we haven’t done so yet, and it is probably worth noting that the Thursday session was Thanksgiving, so there was only so much in the way of liquidity once New York opened.
On the other side, if we were to drop from here, I think there is a massive amount of support down near the 1.25 level. Ultimately, we are leaning toward the upside, and I do think that we are starting to see the US dollar give up some of its strength against certain currencies that are a little better suited to prevail at this point. The British pound has been very stubborn against the greenback in relation to other currencies, so it’s possible that we could see the British pound lead the way to any type of sell off when it comes to the greenback.
Going Forward
I think this comes down to whether or not the US dollar starts to strengthen. If it does, then that will more likely than not kill the idea of a breakout. We will probably drop from here to go down to the 1.25 level. Anything below the 1.25 level would be extreme US dollar strength, and you would probably just see the US dollar swallow almost everything, and at that point in time it’s possible that we could see the best traits being shorting other currency such as the euro or the Australian dollar. While the British pound would drop in that scenario, may not drop as quickly.
On the other hand, if the US dollar starts to weaken everywhere else, it’s likely that we would see the British pound lead the way and it could move much quicker than others. At that point in time, I think we will probably go looking to the 1.2850 level rather quickly. Keep in mind the 200 Day EMA is in that same vicinity.
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