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Created on November 13, 2024

• As you can see, the US dollar has rallied again against the Japanese yen as we continue to see a lot of upward pressure in general.
• That being said, the 155 yen level is an area that a lot of people would be paying close attention to as it is a large round psychologically significant figure and an area that should cause a little bit of noise.
• If we can get above there, then we can really take off to the upside, perhaps to the 158 level. If we pull back from here, I think there are plenty of buyers underneath willing to get involved. 

I think you have to keep in mind that the 152.50 yen level then becomes something that could be crucial as well. So, with all of this being said, I do think that we either see a move to the upside, or we see a pullback that offers value that traders should be willing to take advantage of. Keep in mind that the interest rate differential continues to favor the US dollar, and it will for the foreseeable future.

Do Not Fight the Trend

So, I just don’t see any reason why you would fight the trend. Underneath, we have the 150 yen level offering a floor in the market, especially now that the 50 day EMA and the 200 day EMA indicators both are sitting right there and they are crossing, forming the so-called Golden Cross. Either way, I think this is a market that continues to go higher over the longer term and short-term pullbacks, like I said, should end up being thought of as opportunities to pick up cheap US dollars. This will more likely than not continue to be the case, so at this point in time I think it’s only a matter of time before we break out and go much higher. All things being equal, I have no interest in shorting this USD/JPY pair anytime soon, as there are so many reasons for it to go higher.

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The GBP/USD pair is trading at $1.27321, showing a minor decline of 0.12% on the 4-hour chart. Currently sitting below the pivot point at $1.27542, the pair leans bearish, with immediate support at $1.27210. If prices dip further, we could see additional support at $1.26775 and $1.26446.

On the upside, breaking above $1.27542 could invite bullish momentum, with resistance levels at $1.27935 and $1.28311. The 50-day EMA at $1.28064 and 200-day EMA at $1.28937 suggest overhead resistance, adding to the bearish outlook for now.

EUR Pressured by Weak German Sentiment Data

The Euro struggles as German economic sentiment indicators fall short. The German ZEW Economic Sentiment index dropped to 7.4, below the expected 13.2, reflecting weaker investor confidence.

Additionally, the broader Eurozone ZEW sentiment slipped to 12.5, missing forecasts of 20.5. While the German CPI held steady at 0.4% month-over-month, the softening sentiment underscores ongoing economic challenges in the Eurozone.

Markets now await the German 10-year bond auction results for further direction.

EUR/USD Technical Forecast

Created on November 13, 2024

• The Euro has gone back and forth during the early hours on Tuesday against the Japanese Yen as we are hanging around the 50 day EMA.
• It’s worth noting that this pair does have a positive swap.
• So of course, a lot of people are looking at this through the prism of the carry trade.
• If we do break higher from here, it looks like we are at least going to try to break above there.

The 165 yen level is the gateway to the market going higher. We had recently broken out of a significant consolidation range. And we, in the last 24 hours, have tested the 50-day EMA as well as the 200-day EMA indicators. So, I think it all lines up for a bit of a bottoming and bouncing pattern.

If we were to break above the inverted hammer, during the trading session on Monday, that would also reinforce the idea of a break above the 165 yen level breaking above the 167 yen level then opens up the possibility of a much bigger move. And I do think that happens given enough time. The interest rate differential does favor holding this EUR/JPY pair, although I’m the first to admit that the euro is not as enticing as something like the US dollar or the British pound against the Japanese yen.

JPY-related Pairs Move Together Normally

Nonetheless, the yen related pairs all do tend to move in the same direction. And that’s something that needs to be paid close attention to. With this, I’m looking for some type of momentum in this market to send the euro higher. At that point, I’m more than willing to start buying. If we were to break down below the 161.50 yen level, then that could be fairly negative, but I would anticipate you would see the yen strengthening against almost everything at that point.

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The Euro to Dollar exchange rate (EUR/USD) could be on course to hit the 1:1 marker, according to an increasing number of analysts. Others say such talk is overblown.

“The sell-side researchers are upgrading the USD across the board. The EUR/USD calls are getting the most attention, with many calling for a move to parity for EUR/USD,” says W. Brad Bechtel, Global Head of FX at Jefferies.

EUR/USD entered a downtrend in October, with the selloff intensifying following the unexpectedly strong showing of Donald Trump and the Republicans in the November 05 vote.

Trump wants to raise tariffs on U.S. imports, which will hit exporter economies, such as that of the Eurozone. At the same time, Germany’s ruling coalition has collapsed, and Europe’s largest economy now faces a winter of political uncertainty ahead of a February election.

“In sum, if the Trump agenda is implemented in full force and quickly without a countervailing policy response from Europe or China, we could see EUR/USD drop through parity to 0.95 cents or even below,” says George Saravelos, Global co-Head of FX Research at Deutsche Bank.

Trump said he wants to place a 10% global import tariff on all imports to the U.S., with a 60% tariff reserved for China.

The U.S. is the Eurozone’s main export market for manufactured goods, while any economic hit to China from tariffs will also impact another crucial market.

“The euro has suffered more than most in the wake of Trump’s victory and we doubt that will let up anytime soon. Given our view that tariffs will be imposed next year and the ECB will ease by more than investors expect, we forecast the euro to slide to parity against the greenback by the end of 2025,” says James Reilly, Senior Markets Economist at Capital Economics.

Deutsche Bank says that for EUR/USD to go below parity, a number of negative scenarios must play out in Europe and China, in addition to a strong set of USD-supportive developments.

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EUR/USD at 0.95 “would be an overshoot that takes the real trade-weighted dollar to record highs, exceeding the Volcker period. A more balanced approach to the various scenarios would suggest a EUR/USD drop to 1.00 that matches the dollar’s historical record highs but does not exceed it,” explains Saravelos.

Trump has far more experience going into his second term and is keen to hit the ground running, meaning he will be fast to deliver on his agenda.

It appears euro exchange rates came under pressure on Monday as Trump announced a series of ‘hawkish’ appointments to top positions, with analysts saying he is filling his top team with people who share his view on China and global trade.

This means he was not bluffing with his ‘hawkish’ trade agenda.

“The Dollar is rising almost exactly in line with what it did after the 2016 election. This is – so far – a conventional Dollar move driven by expectations of fiscal easing, the impact on growth and thus rate differentials. If tariffs come, this Dollar rise will get MUCH bigger,” says Robin Brooks, Senior Fellow at Brookings Institute and previously the Chief Economist at the IIF and Chief FX Strategist at Goldman Sachs.

However, other analysts are not convinced and say it is too soon to talk about parity in the Euro-Dollar.

“EUR/USD parity? Not so fast,” says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

Crédit Agricole acknowledges that Trump’s victory and the growing chances for a ‘red sweep’ in the U.S. Congress have added to the downside risks to their current EUR/USD forecasts.

However, there are reasons why this might not happen. These include the fact that markets have already made significant adjustments to the outlook of relative interest rate policy in the Eurozone and the U.S.

“Investors have pared back some of their Fed easing bets while pricing in very aggressive ECB rate cuts ahead, which suggests that many negatives are in the price of EUR/USD,” says Marinov.

Furthermore, Marinov explains that U.S. tariffs could add to headwinds for growth but also fuel imported inflation in the Eurozone if EUR weakens further and the EU retaliates against the U.S., which could slow down the ECB easing cycle.

A potential boost to the Eurozone, according to Crédit Agricole, could come if Trump succeeds in his stated aim of ending the Ukraine war.

“All of these considerations would argue for more muted EUR/USD losses from here,” says Marinov.

• UK wage growth, excluding bonuses, cooled in September. 

• The UK unemployment rate rose to 4.3% after a previous reading of 4.1%.

• Sterling has lost 1.1% of its value amid the Trump trade.

The GBP/USD price analysis indicates a weaker UK labor market, increasing expectations for BoE rate cuts. At the same time, the pair is dropping as the dollar’s Trump trade rally continues. 

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Data on Tuesday revealed that UK wage growth, excluding bonuses, cooled, and unemployment rose. In September, the unemployment rate rose to 4.3% after a previous reading of 4.1%. Meanwhile, unemployment claims edged up from 10,100 to 26,700. The labor market drives a considerable part of the economy. 

Therefore, weakness in this sector is a big motivator for the Bank of England to continue lowering borrowing costs. However, the recent government budget raised the chances of a spike in inflation, which might keep policymakers cautious.  

On the other hand, dollar strength since Trump won the US election put downward pressure on the GBP/USD pair. Sterling has lost 1.1% of its value amid the Trump trade. The new US president has proposed policy changes to boost the US economy in the long run.

Bigger tax cuts and tariffs on imported goods will benefit local businesses, heating up the economy. If this happens before inflation hits the 2% target, the Fed might be forced to pause its rate cuts and assess the situation. A cautious or hawkish shift will be bullish for the dollar. 

Meanwhile, traders are holding their breath before October’s inflation figures, which will shape the outlook for the December Fed meeting. 

GBP/USD key events today

No key events will come after the UK employment figures. Therefore, traders will await tomorrow’s US inflation report.

GBP/USD technical price analysis: Downtrend resumes after short pause

On the technical side, the GBP/USD price has broken below the 1.2850 support level to make a lower low. Moreover, it has made a strong swing below the 30-SMA, a sign that bears are in the lead. Meanwhile, the RSI trades near the oversold region, indicating solid bearish momentum. 

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Initially, the price was in a downtrend before it paused to consolidate between the 1.2850 support and the 1.3000 resistance. Therefore, the break below the range resistance signals a continuation of the downtrend.

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• USD/JPY is probably forming a bearish Broadening Formation price pattern. 
• These often occur during periods of market volatility and end with a breakout lower.

USD/JPY is probably forming a Broadening Formation price pattern which began in the last week of September. 

The Broadening Formation occurs when price starts to go sideways but forms higher highs and lower lows with each leg of its unfolding. When the highs and lows of the range are connected with trendlines this creates a widening range, or price pattern. 

USD/JPY 4-hour Chart 

Broadening Formations usually occur during periods of high market volatility as has been the case during the formation of the one on USD/JPY which coincides with the US presidential election. 

When it forms at a price top the pattern is bearish as is the case with the one on USD/JPY. Eventually price is likely to break below the lower boundary line and decline rapidly lower. The distance it is likely to go depends on how wide the pattern becomes at its broadest point.

It is difficult to determine when these patterns have concluded, however, it is worth keeping USD/JPY on a watchlist and assessing its maturity as it evolves. 

The Moving Average Convergence Divergence (MACD) momentum indicator is a useful indicator for trading the up and down legs of the pattern. The blue MACD tends to be a useful indicator of turning points in price as it turns above or below its red signal line.

• The euro wallowed near a seven-month low on Tuesday.

• Trump will likely impose higher tariffs on goods imported from the Eurozone.

• Market participants await the October US inflation figures.

The EUR/USD outlook shows a steep decline as the euro suffers at the prospect of higher import tariffs in the US. Meanwhile, the dollar soared as Trump’s win painted a bright outlook for the US economy, reducing Fed rate cut expectations. 

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The euro wallowed near a seven-month low as investors sold the currency after Trump’s presidential win. Trump will likely impose higher tariffs on goods imported from the Eurozone. Such an outcome will significantly hurt the Eurozone economy.

On the other hand, it will boost the US economy as local businesses will flourish. At the same time, Trump’s proposal for more significant tax cuts will improve business conditions. A more robust economy will translate to higher inflation. The Federal Reserve recently pivoted from rate hikes to rate cuts. 

The US Central Bank increased interest rates to bring down sky-high inflation. Although price pressures have eased significantly from the peaks, the journey is not yet over. Inflation remains above the Fed’s 2% target. Nevertheless, policymakers voted to start slashing rates because all indicators showed that inflation was in a downtrend and would soon hit the target. 

Unfortunately, that outlook might have changed with Trump’s win. Now, there is a chance that inflation will start increasing before it reaches the target. Consequently, the Fed might become more cautious about rate cuts. 

Meanwhile, market participants await the October US inflation figures for more clues on whether the Fed will cut in December. Traders currently price a lower 69% chance of a December rate cut.

EUR/USD key events today

Neither the US nor the Eurozone will release high-impact economic reports. Therefore, markets will keep digesting Trump’s win.

EUR/USD technical outlook: Bears eye 1.0600 support in new downtrend

On the technical side, the EUR/USD price has collapsed below the 1.0700 support to make a new low in the downtrend. Consequently, the bearish bias has strengthened since there is a lower high and low. At the same time, the price respects the 30-SMA as resistance, and the RSI is in the oversold region, suggesting solid bearish momentum. 

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The trend shifted when the price made a strong evening star candlestick pattern. If the new trend continues, EUR/USD will soon break below the 1.0600 support level.

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GBP/USD is trading at $1.28213, down 0.37%, as the pair remains pressured below the pivot at $1.28463. This level, which recently acted as a breakout point, now serves as a key pivot; staying below it could keep the pair in a bearish trend.

Immediate support sits at $1.27916, with further levels at $1.27509 and $1.27210 if sellers maintain control. Resistance is seen at $1.28856 and $1.29249, with the 50-day EMA at $1.29079 reinforcing the bearish outlook.

Until GBP/USD clears $1.28463, we’re likely to see cautious trading with a downward bias.

Euro Steady with German ZEW Sentiment Above Forecast

The Euro (EUR) held steady as Germany’s Final CPI m/m met expectations at 0.4%, showing stable inflation in the region. The German ZEW Economic Sentiment index also slightly exceeded forecasts, reaching 13.2, up from the previous 13.1.

Meanwhile, the broader ZEW Economic Sentiment for the Eurozone rose to 20.5, surpassing the expected 20.1. This mild improvement in sentiment supports the euro, though broader economic challenges persist in the region.

EUR/USD Technical Forecast

Created on November 11, 2024

• A shift in the Bank of Japan’s policy has tempered market expectations for further monetary tightening.
• In addition to Trump’s victory in the US presidential election and expectations of a return to market talk due to customs wars and tariffs and confronting countries that devalue their currencies.
• All of these factors contributed to further strengthening the upward trend of the USD/JPY currency pair, with last week’s gains reaching the resistance level of 154.70, the highest for the currency pair in more than three months, and closing the exciting week’s trading stable around the 152.60 level.
• This performance will be monitored by US inflation figures this week, in addition to a round of statements by US Federal Reserve officials led by Jerome Powell.

How has Trump’s victory affected the markets and investor sentiment?

Trump’s return to the White House has upended expectations for the U.S. Treasury market, where October’s losses have already erased much of this year’s 2024 gains. Less than two months after the Federal Reserve began cutting U.S. interest rates from their highest levels in more than two decades, the prospect of Trump cutting taxes and imposing big tariffs threatens to reignite inflation by raising import costs and pumping stimulus into an already strong economy.

His fiscal plans — unless offset by massive spending cuts — would also send the U.S. budget deficit soaring. That in turn has renewed doubts about whether bondholders will start demanding higher yields in exchange for absorbing the ever-increasing supply of new Treasuries. Analysts expect the 10-year Treasury yield to rise to its peak of 5% in late 2023, about 70 basis points above Friday’s level.

Overall, there is still a great deal of uncertainty about the exact policies that Trump will enact, and some of the potential impact has already been priced in, as speculators began betting on his victory long before the vote. While yields on 10- and 30-year Treasury bonds rose last week to their highest levels in months, they fell again over the next two days, ending the week at a lower level than they started. But the prospect that Trump’s policies will stimulate growth has led traders to scale back their expectations of how deeply the Federal Reserve will cut US interest rates next year, dashing hopes for bonds to rise with strong policy easing.

Economists at Goldman Sachs, Barclays, and JPMorgan have adjusted their forecasts for the Federal Reserve to show fewer cuts. Swap traders are pricing in policymakers cutting the US interest rate to 4% by mid-2025, which is a full percentage point higher than their expectations in September. And it is now in the range of 4.5% to 4.75%. Accordingly, economic data this week, especially the latest reading of US consumer and producer prices, could renew volatility. Federal Reserve Chairman Jerome Powell, New York Fed President John Williams, and Fed Governor Christopher Waller will also speak, offering potentially new insights into their outlook.

USD/JPY Technical Analysis and Expectations Today:

USD/JPY continues to trade slightly below its 100-hour moving average. Last Friday’s rebound prevented the pair from falling to oversold levels on the 14-hour RSI. Accordingly, based on the near-term performance and as seen on the hourly chart, USD/JPY is trading within a descending channel formation. However, the 14-hour RSI has recently rebounded to avoid falling into oversold levels. Therefore, bulls will target extended rebounds around 153.20 or higher at the 154.00 resistance. On the other hand, bears will look to move towards extended declines around 152.11 or lower at the 151.00 support.

In the long term, based on the daily chart, USD/JPY is trading in an ascending channel formation. Also, the 14-day RSI supports a bullish bias after the rally near overbought levels. Therefore, bulls will look to move the current rally towards 155.30 or higher to the 157.00 resistance. On the other hand, bears will look to pounce on the declines around 150.00 or lower to the 147.87 support.

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