The 50-day EMA at $1.31424 supports the current bullish momentum, while the 200-day EMA at $1.30481 reinforces the longer-term uptrend.

As long as the pair stays above the $1.3156 pivot, the upward channel remains intact, suggesting more buying interest. A break below this level, however, could shift the bias towards selling.

Euro Steady as CPI Matches Forecast; Eyes on Buba Speech

The Euro (EUR) remains stable following the release of Final CPI, which held at 2.2% year-over-year, matching expectations. Core CPI also aligned at 2.8%.

Markets now shift focus to the upcoming speech from German Buba President Nagel, which could offer insights into future European Central Bank policy direction and impact the Euro’s outlook.

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at $1.11188, up 0.08%, and hovering just above its pivot point at $1.11107, signaling potential bullish momentum. Immediate resistance is seen at $1.11453, with higher targets at $1.11753 and $1.12007.

On the downside, key support levels are at $1.10827, followed by $1.10525 and $1.10213.

Created on September 18, 2024

• Ahead of this week’s crucial event for the foreign exchange markets, the EUR/USD is hovering bullishly around the 1.1130 resistance level.
• The decisions of the US Federal Reserve, the tone of its policy statement, and the comments of its chairman, Jerome Powell, will determine the fate of the current upward rebound. 

What is expected from the US Federal Reserve today? 

The Federal Reserve cuts interest rates for the first time in 4 years . Today, the US Federal Reserve is expected to cut the federal funds rate, which is currently at a 23-year high of 5.25% – 5.50%, at its meeting in September 2024. Decisively, this will be the first rate cut since March 2020. While the size of the cut remains uncertain, there is growing discussion of a possible cut of 50 basis points, although the Fed typically implements cuts of 25 basis points. The US headline annual inflation rate slowed for the fifth straight month to 2.5% in August, the lowest since February 2021, while the annual core inflation rate hit a more than three-year low of 3.2%. The annual core personal spending rate, the Fed’s preferred measure of core inflation, remained at 2.6% for the third straight month in July. In addition, the unemployment rate rose to 4.2% in August and monthly payroll growth has slowed this year. 

The US quarterly economic outlook and interest rates are also on the Fed’s agenda. Concurrently, Traders have priced in more than a full percentage point of cuts this year. 

What is the expected price of the euro dollar in the coming days? 

In this regard, Société Generale Bank says that the euro price has the fuel needed to reach the 1.12 resistance. The euro exchange rate against the US dollar (EUR/USD) started the new week’s trading with fresh momentum as the market adjusts to the increasing possibility of a 50-basis point cut in US interest rates by the Federal Reserve on Wednesday. 

This has led to a decline in US Treasury yields, narrowing the gap between US and European government bonds, leading to a rise in the EUR/USD pair. However, an analysis from société Generale says the gap has not yet closed and “sets the stage for further gains this week.” Kate Judd, head of FX foreign exchange analysis at Société Generale, says, “A return to the 1.12 resistance, a post-Jackson Hole high, is on the cards if the Fed cuts 50 basis points on Wednesday.” 

However, a smaller cut of 25 basis points would be relatively disappointing compared to market expectations. Ultimately, the analyst believes that this could lead to profit-taking on the euro against the US dollar. 

EUR/USD Technical analysis and forecast: 

From a technical perspective, the setup for the EUR/USD currency pair is constructive. Based on the performance on the daily chart attached, the 1.12 resistance will remain the main hurdle going forward. The EUR/USD pair has broken a large symmetrical triangle and extended its upward move. 

Overall, financial markets now see a 75% chance of a 50 basis point US interest rate cut by the Federal Reserve on Wednesday, while a week ago, this was only around 30%. The rise in the probability of a 50-basis point rate cut came following media reports suggesting that a 50-basis point rate cut is possible. However, since the report is uncertain, there is a real risk of disappointment. If the rate is cut by 25 basis points, the dollar could recover, and the EUR/USD pair would decline sharply. 

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• GBP/USD bias remains bullish, with the RSI favoring buyers, though profit-taking ahead of the Fed decision limits further gains.
• A 25-bps Fed rate cut could see GBP/USD fall toward support at 1.3200, 1.3151, and 1.3100, with a potential retest of 1.3001.
• A 50-bps cut could push GBP/USD above 1.3300, targeting the March 2022 high of 1.3437.

The Pound Sterling posted modest gains during the North American session, hitting a three-week high of 1.3254, but failed to gain traction as traders braced for the Federal Reserve’s monetary policy decision. Therefore, GBP/USD traders dragged the exchange rate toward 1.3205, still above its opening price by 0.30%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD bias is bullish, though it has failed to break to new yearly highs due to a possible change of scenario. At the time of writing, the Relative Strength Index (RSI) favors buyers, while price action hints they-‘re booking profits ahead of the Fed.

If Powell and Co. decide to cut rates by 25 basis points (bps), further downsides will be seen in the GBP/USD. This will put into play the 1.3200 figure and the daily low of 1.3151. If those levels are taken out, the next support would be 1.3100 ahead of the latest cycle low at 1.3001, the September 11 low.

On the other hand, a 50-bps cut could cause the GBP/USD to climb past 1.3300, opening the door to testing the March 1, 2022 peak at 1.3437.

GBP/USD Price Action – Daily Chart

Created on September 18, 2024

• For the second consecutive day, the USD/JPY is recovering from its sharp losses, which extended to the 13-month high support level of 139.60.
• The rebound gains stalled at the 142.46 resistance level and are stabilizing around 141.80 at the time of writing, ahead of the most important event for the foreign exchange markets: the announcement of the US Federal Reserve’s policy decisions today. 

Meanwhile, the Japanese Yen gains came as investors prepare for the latest monetary policy decisions from Japan and the United States this week. The Bank of Japan is expected to keep interest rates unchanged on Friday, but it is likely to indicate more rate hikes. Financial markets are betting that the Bank of Japan will raise interest rates again in December, while the move in October remains uncertain. Elsewhere, the US Federal Reserve is widely expected to deliver its first interest rate cut in four years on Wednesday, with financial markets pricing in a two-thirds chance of a large 50 basis point cut. Elsewhere, Japanese Finance Minister Shunichi Suzuki said on Tuesday that forex volatility has both advantages and disadvantages for the economy, stressing that rapid moves are undesirable. 

Furthermore, Japan’s 10-year bond yield hits one-month low. The yield on the benchmark 10-year Japanese government bond fell to around 0.83%, hitting a one-month low and tracking a decline in US bond yields amid growing expectations that the Federal Reserve will cut US interest rates more aggressively this week. Financial markets are currently pricing in a 67% chance of a 50-basis point cut, up from just 25% a month ago, according to CME’s FedWatch tool. 

On the other hand, the Bank of Japan is widely expected to keep its policy steady this week but is likely to signal further rate hikes. Markets are betting that the BoJ will raise interest rates again in December, while a move in October remains elusive. Fitch recently revised its interest rate forecasts for Japan, now expecting them to be 0.5% by the end of 2024, 0.75% in 2025 and 1% by the end of 2026. 

USD/JPY Technical analysis and Expectations Today: 

Despite recent rebound attempts, the overall trend for the USD/JPY exchange rate remains bearish, and the psychological support level of 140.00 will remain a testament to the bears’ strong control of the trend. At the same time, technical indicators will move towards oversold levels. Technically, the reaction to the announcements of the world’s central banks this week will determine the fate of the dollar/yen. Moreover, it will decline further and break important support levels, with the nearest support at 138.00 for further strengthening of the bears’ control. Conversely, according to the daily chart, the psychological resistance of 150.00 will remain the most important for a real reversal of the overall trend to bullish. 

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EUR/USD Current price: 1.1120

• Market participants await the Federal Reserve’s monetary policy announcement.
• The Eurozone confirmed the August Harmonized Index of Consumer Prices at 2.2% YoY.
• EUR/USD losing steam in the near term, but bulls retain control.

The EUR/USD pair hovers around 1.1120 ahead of Wall Street’s opening, little changed on a daily basis. The US Dollar is broadly weak ahead of the Federal Reserve (Fed) monetary policy announcement later in the day, but the Euro can’t take advantage of it.  The Fed is expected to trim interest rates for the first time in four years, with markets anticipating a 25 basis points (bps) cut. However, a larger 50 bps trim is not out of the table.

Even further, the Fed will present a fresh Summary of Economic Projections (SEP) or dot-plot, which may add to the expected peak in volatility. The document could provide clues on what Fed officials plan to do in the upcoming months and whether they will adopt a more conservative or hawkish stance.

In the meantime, the Eurozone confirmed that the Harmonized Index of Consumer Prices (HICP) rose by 2.2% in the year to August. The monthly reading was downwardly revised to 0.1% from the flash estimate of 0.2%. Ahead of the Fed’s decision, the United States (US) published Building Permits and Housing Starts figures for August, up 4.9% and 9.6%, respectively.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is bullish. In the daily chart, the pair is comfortable above a flat 20 Simple Moving Average (SMA) at around 1.1090, while the 100 SMA keeps grinding higher above the 200 SMA, both far below the shorter one. At the same time, the Momentum indicator crossed its midline into positive territory, maintaining a firm upward slope. Finally, the Relative Strength Index (RSI) indicator consolidates at around 58 without signs of upward exhaustion.

EUR/USD is losing its bullish poise in the near term. The 4-hour chart shows that technical indicators head lower, although still above their midlines. At the same time, the price is pressuring a mildly bullish 20 SMA, with a break below it favoring a slide. Still, the upcoming direction will depend on the Fed’s announcement and how financial markets understand the accompanying documents.

Support levels: 1.1090 1.1050 1.1010

Resistance levels: 1.1160 1.1200 1.1250

• During the trading session on Tuesday, we have seen the euro rally quite a bit against the Japanese yen, as it looks like we are trying to do everything we can to form some type of bottom in this market.
• Ultimately, I believe at this point, the euro might end up being fairly strong against the yen, as we have seen the yen so overbought.
• This is true here, as well as many other currency pairs.

At this point, I suspect that the 155 yen level will end up being the floor in the market, unless of course something drastic happens that has a huge risk off trade going forward. Keep in mind though, Friday is the Bank of Japan interest rate decision and that of course will have its own influence on the market and could cause this pair to be very volatile. This is normal for yen-related pairs, but in the next few weeks, I suspect it will only get worse when it comes to the volatility.

Interest Rate Swap

All of that being said, you get paid at the end of every day to hang on to this pair. I think the carried trade may come back into vogue, especially in some of the other currencies like the New Zealand dollar, the Australian dollar against the yen. And I think the euro will just simply follow right along.

On the other hand, if we were to get a crash below the 155 yen level, we could see this pair just really fall apart we could drop another 500 pips rather quickly. In general, this is a market that I think continues to be noisy, very volatile, but we are in the midst of trying to form some type of bottoming power pattern in the yen related pairs on the whole. So, with that being said, I do think that the risk is to the upside, not the down in the current environment.

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STORY LINK Euro to Pound Exchange Rate Forecast: EUR/GBP Firm Ahead of Latest UK Inflation Test

The Pound to Euro (GBP/EUR) exchange rate secured a net gain to 1.1870 on Tuesday and close to 10-day highs.

Weak German data hampered the Euro while expectations of no change in Bank of England interest rates this week supported the Pound.

Equities have also made headway over the past 24 hours with markets optimistic over the potential for a 50 basis-point interest rate hike.

The FTSE 100 index hit 2-week highs and overall risk conditions helped support Sterling.

At this stage, there are very strong expectations that the Bank of England will hold interest rates at 5.00%, but the latest UK inflation data will be released on Wednesday and could have an important impact on market expectations.

Consensus forecasts are for the headline rate to remain at 2.2% for August while the core rate is expected to increase to 3.5% from 3.3%.

The BoE is likely to watch the core data very closely with a particular focus on the services sector.

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A stronger than expected release would make it even less likely that the BoE would be willing to sanction a rate cut this week.

There will, however, be additional pressure for action if there is a weaker than expected reading for core inflation.

Andrew Goodwin, chief UK economist for Oxford Economics, commented; “most members of the MPC are likely to be content to sit back and reassess the situation in November, a meeting at which the MPC will update its forecasts to incorporate the impact of the budget.”

He added; “We think that fiscal event will be the factor most likely to push the MPC off the gradual loosening path that it advocated in August.”

Danske Bank sees a potential Pound move lower on Thursday, but expects longer-term GBP/EUR gains; “we more generally still expect EUR/GBP to continue its recent move lower driven by UK economic outperformance, BoE lagging peers in an easing cycle for the time being and tight credit spreads. The key risk is policy action from the BoE.”

As far as the Euro-Zone is concerned, the German ZEW economic sentiment index declined sharply to 3.6 for September from 19.2 the previous month and well below consensus forecasts of 17.0.

The current conditions component also deteriorated to -84.5 from -77.3 and below expectations of -80.0. There was a slightly more modest decline in the Euro-Zone index.

According to ZEW President Professor Achim Wambach; “The hope for a swift improvement in the economic situation is visibly fading. Although the falling economic expectations for the eurozone point to an overall rise in pessimism, the drop in expectations for Germany is significantly greater.”

ING commented; “the euro’s strong momentum has gone through several concerning eurozone activity prints, and the ZEW should merely confirm the widely-priced notion that Germany’s outlook remains grim.”

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The 50-day EMA at $1.31424 supports the current bullish momentum, while the 200-day EMA at $1.30481 reinforces the longer-term uptrend.

As long as the pair stays above the $1.3156 pivot, the upward channel remains intact, suggesting more buying interest. A break below this level, however, could shift the bias towards selling.

Euro Steady as CPI Matches Forecast; Eyes on Buba Speech

The Euro (EUR) remains stable following the release of Final CPI, which held at 2.2% year-over-year, matching expectations. Core CPI also aligned at 2.8%.

Markets now shift focus to the upcoming speech from German Buba President Nagel, which could offer insights into future European Central Bank policy direction and impact the Euro’s outlook.

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at $1.11188, up 0.08%, and hovering just above its pivot point at $1.11107, signaling potential bullish momentum. Immediate resistance is seen at $1.11453, with higher targets at $1.11753 and $1.12007.

On the downside, key support levels are at $1.10827, followed by $1.10525 and $1.10213.

Upbeat trade data and a surge in machinery orders could test the theory of the Fed being in the policy driving seat.

US Federal Reserve: 25 or 50 Basis Points? FOMC Projections and Powell Press Conference

Beyond Japan’s data, the Fed interest rate decision, FOMC projections, and Powell’s press conference could prove crucial.

A 50-basis point Fed rate cut, downward revisions to growth, and a more dovish Fed rate path could send the USD/JPY below 140. Conversely, a 25-basis point rate hike and expectations of a soft landing could push the USD/JPY toward 145.

Other stats include housing sector-related data. However, these will play second fiddle to the Fed.

Short-term Forecast for USD/JPY

USD/JPY trends will likely hinge on the Fed interest rate decision and FOMC projections as the BoJ interest rate decision looms. The USD/JPY could face heightened volatility, with the Fed likely to address unanswered questions about the rate path and the economic outlook.

Investors should remain alert with the BoJ’s interest rate decision also pivotal for the USD/JPY pair. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY hovers well below the 50-day and 200-day EMAs, confirming bearish price trends.

A USD/JPY breakout from the 142.500 level may bring the 143.495 resistance level into play. Furthermore, a break above the 143.495 resistance level could give the bulls a run at the 145.891 resistance level.

Economic indicators from Japan, the Fed interest rate decision, the FOMC projections, and the FOMC press conference require consideration.

Conversely, a break below the 141.032 support level could signal a drop to the September 16 low of 139.576. A fall through 139.576 could bring the 137.712 support level into play.

The 14-day RSI at 38.58 suggests a USD/JPY fall below the 141.032 support level before entering oversold territory.

• The USD/JPY exchange rate has declined for the second consecutive week, reaching its lowest level since December last year.
• The pair dropped to the 139.60 support level, down about 14% from its high this year, indicating it has entered a correction phase.
• According to licensed trading platforms, GBP/JPY and EUR/JPY also fell to 185 and 156, respectively, down more than 10% from their highs this year. Meanwhile, AUD/JPY dropped to 94.42, its lowest since July 5.

Fed Rate Decision

The USD/JPY exchange rate fell sharply as investors anticipated the upcoming interest rate decision from the US Federal Reserve. Recent economic figures show that the economy has been slowing, meaning the Federal Reserve will need to step in to cut US interest rates. Also, economic data released earlier this month showed that the unemployment rate held steady above 4% in August as the economy created 113,000 jobs.

Moreover, there are signs that the number of US non-farm payrolls has been weaker than reported. Also, the Bureau of Labor Statistics has revised down the number of jobs added to the economy in recent months. In a recent report, the bureau revised down the number of jobs created in the 12 months through March by more than 818,000. At the same time, there are signs that inflation in the US is slowing and could fall to the Fed’s target of 2.0%. Data released last week showed that the core consumer price index fell from 2.9% in July to 2.5% in August, its lowest level in months.

Meanwhile, there are signs that inflation in the country is slowing as energy prices fall. Brent crude, the global benchmark, fell to $71, while West Texas Intermediate (WTI) crude fell to $69. As a result, gasoline prices have been moving lower in the past few months.

Therefore, expectations are for the Fed to cut rates by either 0.25% or 0.50% at this meeting. In a note, Bloomberg analysts said: “We believe Fed Chairman Jerome Powell supports a 50-basis point cut. However, the lack of a clear signal from New York Fed President John Williams before the blackout period before the meeting makes us believe that Powell does not have the committee’s full support.”

The Fed’s cut will come a week after the European Central Bank cut interest rates for the second time this year to stave off a slowdown in the country.

Bank of Japan Decision

Another major catalyst for the USD/JPY exchange rate will be the Bank of Japan’s upcoming interest rate decision on Friday. Clearly, the decision comes a month after the bank stirred up market turmoil by raising interest rates for the second time this year. Likewise, economists expect the central bank to take a wait-and-see approach at this meeting even as inflation remains stubbornly high.

The latest data showed that the core consumer price index remained at 2.8% in July, above the median estimate of 2.7%. furthermore, It has risen from a low of 2.2% earlier this year. Also, there are signs that the Japanese economy is slowing. The latest economic data showed that GDP expanded by 2.9% in the second quarter, below the expected 3.1%. One of the main concerns for Japan is that the auto industry is undergoing a major change, with China becoming a dominant player. China also dominates other industries in Southeast Asia, and Japan has been a big player.

Japanese carry trade rebounds in yen

The decisions of the Bank of Japan and the US Federal Reserve will be notable because of the carry trade that has been around for many years. Meanwhile, the carry trade is a situation where investors borrow money in countries with low interest rates and invest in countries with high interest rates. In the past, it was very profitable to borrow in Japan, where interest rates were negative, to invest in the United States. Now, with the Fed cutting rates and the Bank of Japan relatively hawkish, the gap has narrowed, making the carry trade unattractive.

Therefore, the major actions of the Fed and the Bank of Japan are unlikely to have a significant impact on the USD/JPY pair. Instead, the currency pair will react to the comments of Powell and Kazuo Oda of the Bank of Japan, who will indicate the next actions.

USD/JPY Technical Analysis and Expectations Today:

The daily chart shows that the USD/JPY exchange rate peaked above 160 earlier this year and then experienced a sharp reversal as the BoJ began raising rates. Recently, the pair formed a death cross pattern, where the 200-day and 50-day exponential moving averages crossed. The death cross is one of the most bearish patterns in the market. Additionally, the pair has fallen below the key support level of 141.67, the lowest level in August. Therefore, the pair is likely to continue lower as sellers target the key support level at 137.16, the lowest since July last year.