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GBP/USD FORECAST – TECHNICAL ANALYSIS

GBP/USD fell moderately on Thursday but remained above support at 1.2430. Bulls must vigorously defend this floor to prevent a deeper pullback; failure to do so may result in a retracement towards 1.2325. Subsequent losses beyond this point may lead to a retest of the October 2023 lows near 1.2040.

On the flip side, if sentiment shifts back in favor of buyers and prices reverse to the upside off current levels, resistance looms at 1.2525. Above this critical barrier, the focus will transition to the 200-day simple moving average at 1.2570, followed by 1.2640, where the 50-day simple moving average aligns with two important short-term trendlines.

GBP/USD PRICE ACTION CHART

GBP/USD Chart Created Using TradingView

EUR/GBP FORECAST – TECHNICAL ANALYSIS

EUR/GBP rallied earlier in the week but reversed its course on Thursday after failing to clear trendline resistance at 0.8570, with prices dropping towards the 50-day simple moving average at 0.8550. The pair is likely to stabilize around current levels before mounting a comeback, but in the event of a breakdown, a dip towards 0.8520 and potentially 0.8500 could be around the corner.

Alternatively, if bulls manage to reassert dominance and push the exchange rate higher, resistance emerges at 0.8570 as mentioned before. Breaking through this technical obstacle could set the stage for a surge toward the 200-day simple moving average near the 0.8600 handle.

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EUR/GBP PRICE ACTION CHART

EUR/GBP Char Creating Using TradingView

GBP/JPY FORECAST – TECHNICAL ANALYSIS

GBP/JPY was largely flat on Thursday, trading slightly below trendline resistance at 192.70. Bears need to protect this ceiling tooth and nail; any lapse could spark a move towards the 2024 highs at 193.55. On further strength, a jump towards the psychological 195.00 mark cannot be ruled out.

On the other hand, if the pair gets rejected from its current position and pivots to the downside, support stretches from 190.60 to 190.15, where a rising trendline converges with the 50-day simple moving average and April’s swing lows. Additional losses below this floor could reinforce bearish impetus, opening the door for a drop towards 187.90.

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Change in	Longs	Shorts	OI
Daily	-26%	5%	-3%
Weekly	-30%	5%	-5%

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GBP/JPY PRICE ACTION CHART

GBP/JPY Chart Created Using TradingView

However, the Bank of Japan must also grapple with the effects of a weaker Japanese Yen on the economy. A weaker Japanese Yen leads to higher import costs, impacting household spending. The Bank of Japan expects recent wage increases to fuel household spending and demand-driven inflation. Higher import costs would offset the effects of wage growth.

Trade data for March signaled a weakening demand environment, with imports falling by 4.9% year-on-year.

US Economic Calendar: Fed Speakers in Focus

On Friday, investors should monitor FOMC member commentary. Fed Chair Powell and FOMC members poured cold water on investor expectations of a June Fed rate cut.

US labor market conditions remain tight, with consumer spending continuing to drive the US economy.

Support for a more cautious approach to cutting interest rates could further shift investor bets on 2024 Fed rate cuts. FOMC member Austan Goolsbee is on the calendar to speak. The Chicago Fed President recently highlighted that the housing services sector is the biggest challenge to bringing inflation to the 2% target.

The CME FedWatch Tool reflects the effects of recent economic data and Fed speeches. According to the CME FedWatch Tool, the probability of a 25-basis point June rate cut fell from 20.1% (April 11) to 16.2% (April 18). Moreover, the chances of the Fed holding interest rates at 5.5% in September increased from 31.0% to 35.6% over the same period.

Australian Dollar vs US Dollar Technical Analysis

The Aussie dollar has rallied a bit during the early hours on Thursdays. It looks like we are threatening the 0.6450 level. This is an area that previously has been support and resistance so a certain amount of market memory in this area makes a lot of sense. Ultimately, this is a situation where we would more likely than not see some type of decision being made.

If we can break above here and perhaps even more importantly above the inverted hammer that we had formed on Monday of this week, then I think we have a real shot at going to the 50 day EMA, possibly even the 200 day EMA. At this point in time if we were to roll over from here, the 0.64 area would be a short-term target. If we break down below there, then you are looking for a move down to the 0.63 level. Keep in mind that the Australian dollar is highly levered to risk appetite in commodities, and therefore you need to pay close attention to the idea of what the other markets in general are doing.

So, for example, if you see stock markets really starting to take off to the upside, generally speaking, not always, but generally speaking, that’s a good sign for the Aussie. On the other hand, if it’s a major risk-off move, and we most certainly have seen that over the last week or so, the US dollar strengthens. So, make sure to keep all of that in mind.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

• EUR/USD’s bullish attempt faltered ahead of 1.0700.
• The Dollar regained momentum on hawkish Fedspeak.
• The ECB is seen reducing its interest rate three times this year.

A marked rebound in the US Dollar (USD) motivated EUR/USD to interrupt its weekly recovery and refocus on the downside soon after hitting tops around 1.0690 earlier on Thursday.

The firmer tone in the Greenback, in the meantime, came amidst further hawkish tone from Fed officials as well as investors’ reassessment of the timing of a potential rate cut by the Federal Reserve (Fed), now expected to happen later than previously anticipated, possibly in December.

The resurgence of the bull trend in the US Dollar coincided with a decent bounce in US yields across the yield curve and a consistent narrative regarding the divergence in monetary policy between the Fed and other G10 central banks, especially the European Central Bank (ECB).

In this regard, Board member Villeroy proposed a rate cut at the bank’s upcoming meeting, while his colleague Simkus advocated for three rate cuts this year, and Kazaks emphasized the high likelihood of a rate reduction in June.

The above starkly contrasted with comments from Fed’s J. Williams (New York), who underscored that the Fed’s decisions are grounded in favourable data, emphasizing the robustness of the economy and the reduction of imbalances. While recognizing the necessity for rate cuts, he clarified that there are no predetermined increases, adding that if the data necessitate higher rates, the Fed may adjust accordingly.

Looking ahead, the relatively subdued economic fundamentals in the eurozone, coupled with the resilience of the US economy, reinforce expectations for a stronger Dollar in the medium term, particularly considering the prospect of the ECB cutting rates before the Fed. In such a scenario, EUR/USD is expected to undergo a more pronounced decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

The drop from the 2024 low of 1.0601 (April 16) may indicate a return to the November 2023 low of 1.0516 (November 1), before the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

On the upside, EUR/USD is expected to face early resistance at the important 200-day SMA of 1.0822, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

The 4-hour chart shows that the bearish trend seems to have regained some impetus. Against it, the initial support is at 1.0601, followed by 1.0516. In the opposite direction, the initial up-barrier is at 1.0690, ahead of 1.0756 and the 100-SMA at 1.0757. The Relative Strength Index (RSI) plummeted to around 43.

• EUR/USD’s bullish attempt faltered ahead of 1.0700.
• The Dollar regained momentum on hawkish Fedspeak.
• The ECB is seen reducing its interest rate three times this year.

A marked rebound in the US Dollar (USD) motivated EUR/USD to interrupt its weekly recovery and refocus on the downside soon after hitting tops around 1.0690 earlier on Thursday.

The firmer tone in the Greenback, in the meantime, came amidst further hawkish tone from Fed officials as well as investors’ reassessment of the timing of a potential rate cut by the Federal Reserve (Fed), now expected to happen later than previously anticipated, possibly in December.

The resurgence of the bull trend in the US Dollar coincided with a decent bounce in US yields across the yield curve and a consistent narrative regarding the divergence in monetary policy between the Fed and other G10 central banks, especially the European Central Bank (ECB).

In this regard, Board member Villeroy proposed a rate cut at the bank’s upcoming meeting, while his colleague Simkus advocated for three rate cuts this year, and Kazaks emphasized the high likelihood of a rate reduction in June.

The above starkly contrasted with comments from Fed’s J. Williams (New York), who underscored that the Fed’s decisions are grounded in favourable data, emphasizing the robustness of the economy and the reduction of imbalances. While recognizing the necessity for rate cuts, he clarified that there are no predetermined increases, adding that if the data necessitate higher rates, the Fed may adjust accordingly.

Looking ahead, the relatively subdued economic fundamentals in the eurozone, coupled with the resilience of the US economy, reinforce expectations for a stronger Dollar in the medium term, particularly considering the prospect of the ECB cutting rates before the Fed. In such a scenario, EUR/USD is expected to undergo a more pronounced decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

The drop from the 2024 low of 1.0601 (April 16) may indicate a return to the November 2023 low of 1.0516 (November 1), before the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

On the upside, EUR/USD is expected to face early resistance at the important 200-day SMA of 1.0822, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

The 4-hour chart shows that the bearish trend seems to have regained some impetus. Against it, the initial support is at 1.0601, followed by 1.0516. In the opposite direction, the initial up-barrier is at 1.0690, ahead of 1.0756 and the 100-SMA at 1.0757. The Relative Strength Index (RSI) plummeted to around 43.

• Recently, the US dollar exchange rate against other major currencies has remained supported by new warnings from Federal Reserve Chairman Jerome Powell that US interest rates will need to stay at current levels for longer than previously expected.
• However, the story of Fed repricing may now be reaching its limits.
• Amidst the continued divergence between the Fed and the Bank of Japan, the sharp upward trend of the USD/JPY currency pair continued with gains extending above the 154.78 resistance level, the highest in 34 years.
• Furthermore, the currency pair is settling around its gains awaiting Japanese intervention in the markets.

For his part, Federal Reserve Chairman Jerome Powell said: “It is clear that the latest data has not given us more confidence, and instead suggests that it will likely take longer than expected to achieve that confidence.”

In general, expectations for US rate cuts in 2024 have fallen to just 38 basis points (one 25 basis point cut) after the comments, further supporting US bond yields and the dollar. Commenting on the performance of the US dollar, Jamie Dutta, head of forex analysis at Vantage Markets, which provides forex trading accounts, says: “The US dollar has hit its cycle highs, rising for the fifth consecutive day.” “Fed Chair Powell backed away from comments about rate cuts.”

In comments made alongside Bank of Canada Governor Tiff Macklem, Powell said: “If high inflation persists, we can keep the current level of as long as needed.”

Meanwhile, markets had entered 2024 expecting cuts of up to 150 basis points in 2024; this has been reduced to just 38 in the repricing that has boosted US bond yields and attracted foreign currency inflows to the US dollar. At the same time, the decline in global equity markets reflects a decline in investor confidence, which is boosting demand for safe-haven assets such as the US dollar. This creates a win-win scenario for the US currency, and further progress is likely.

For his part, Lee Hardman, senior currency analyst at MUFG, says: “The sharp and sustained rise in US yields has begun to have a greater impact on risky assets. The gains of the US Dollar Index are more impressive year-to-date, up nearly 6%.” From its low at the end of last year.” Also, federal Reserve Vice Chairman Philip Jefferson and Richmond Fed President Thomas Barkin echoed Powell’s remarks. Jefferson said he expects US inflation to continue to moderate if interest rates remain at their current level, but ongoing price pressures will justify keeping borrowing costs high for longer. Now, Forex market participants must ask themselves how far this trend can continue. Ultimately, the lion’s share of the repricing in the Fed’s 2024 expectations is already in the rearview mirror, suggesting the law of diminishing returns.

In short, we will now watch for signals that the USD rally may have peaked as the Fed’s repricing has reached its highest levels.

• 

USD/JPY Technical Analysis and Expectations Today:

As we mentioned before, and we confirm now, the discrepancy between the US Central Bank’s policy and the Bank of Japan will remain an important factor to complete the bulls’ control over the direction of the price of the US dollar against the Japanese yen (USD/JPY). This pair’s successive record gains were sufficient to push all technical indicators towards saturation levels. Strong buying in the event of actual Japanese intervention in the currency markets, as the Japanese administration has often warned. Also, the price of the dollar against the Japanese yen may be exposed to strong selling operations to take profits, with which the direction will turn bearish for a limited period, then return to the upward path again. Furthermore, if the factors of gains of the currency pair mentioned above remain existing. Currently, the closest resistance levels to the trend are 154.65, 155.20, and 156.00, respectively.

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• For three trading sessions in a row, the price of the euro against the US dollar (EUR/USD) is trying to rebound higher, but its gains did not exceed the level of 1.0680.
• The losses of the downward trend reached the support level of 1.0601, its lowest level in five months.

As we mentioned before, selling operations increased considering the strength of the US dollar in the Forex currency market, with momentum from the positive results of US economic data, because of which expectations weakened of the imminent date of reducing US interest rates. On the other hand, the euro price received downward pressure as the European Central Bank became the closest to reducing interest rates.

Economic Calendar Outlook

The EU Harmonized Consumer Price Index for March was in line with expectations (monthly) of 0.8%, unchanged from the previous update. The core HICP for the period also remained steady at 2.9%, in line with estimates. Also, the (monthly) equivalent remained unchanged from the previous period at 1.1%. On Tuesday, US building permits for March exceeded expectations of 1.514 million with a total of 1.458 million. Also, housing starts for the period were below the expected 1.48 million with a total of 1.321 million. On the other hand, industrial production for March was in line with estimates of 0.4%. Moreover, US retail sales for March beat expectations (monthly) of 0.3% with a change of 0.7%. furthermore, Retail sales excluding autos for the period exceeded expectations of 0.4% with a change of 1.1% (monthly).

On the other hand, according to stock trading platforms, US stock indices closed lower on Wednesday, as investors weighed the latest batch of profits and the hawkish tone from Federal Reserve officials. According to trading, the Standard & Poor’s 500 index fell by 0.5%, and the Nasdaq index fell sharply by 1.1%, both representing the fourth consecutive session of losses, reaching its lowest levels in February. Meanwhile, the Dow Jones ended down 0.1% as gains in UnitedHealth shares limited the index’s losses.

For his part, Fed Chairman Powell indicated that the Fed is in no hurry to cut US interest rates in response to recent signs of rising inflation, a sharp change in tone from previous statements that the hot inflation readings in January and February did not change the downward trend in inflation.

In trading, semiconductor stocks led the losses, with ASML shares down 7% on poor results, while ARM and Nvidia shares fell 12% and 3.8%, respectively. Also, Abbott shares fell 3% as a decline in second-quarter earnings guidance offset strong sales. On the other hand, US Bancorp shares rose 1.7% despite lower net interest income expectations, and United Airlines shares rose 17.4% on strong results.

• 

On the US Treasury market front, the yield on the 10-year Treasury bond fell to 4.63% from its 2024 high of 4.7%, as traders closely watch monetary policy and the possibility of continued high interest rates. Stronger-than-expected US retail sales, inflation, and employment data had prompted investors to trim their expectations for Fed funds rate cuts this year.

Futures contracts show that a slight majority of the market expects the Fed to start cutting rates only in September, while nearly 20% are bracing for no rate cuts at all this year. Furthermore, President Powell reiterated during a panel discussion at the Wilson centre in Washington that the Fed may need more time to feel comfortable cutting rates. At the same time, demand for safe-haven assets eased as there were no further signs of escalation in the Middle East conflict following Iran’s retaliatory strike on Israel over the weekend.

EUR/USD Technical analysis and forecast:

The Euro to US Dollar (EUR/USD) exchange rate has now risen, trading above the 100-hour moving average on the hourly chart. As a result, it appears that the EUR/USD currency pair is on the verge of entering overbought levels for the Relative Strength Index on the 14-hour timeframe.

In the short term, based on the performance on the hourly chart, it seems that the EUR/USD pair has recently completed an upward breakout from a sideways channel. Additionally, the Relative Strength Index on the 14-hour timeframe also supports the bullish trend in the short term as it approaches overbought levels. Therefore, bulls will target extended gains around 1.0707 or higher at resistance 1.0740. On the other hand, bears will look to capitalize on pullbacks around 1.0633 or lower at support 1.0603.

On the longer term and based on the performance on the daily chart, it appears that the EUR/USD currency pair is trading within a descending channel. However, the 14-day Relative Strength Index has recently rebounded to avoid falling into oversold levels. Therefore, bulls will look to extend the current rebounds towards 1.0779 or higher at resistance 1.0885. Conversely, bears will target profits in the long term around 1.0567 or lower at support 1.0440.

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Previously, ING analysts have forecast GBP/USD would trade above 1.30 on a 12-month view but have shifted their forecasts this month, primarily due to a forced change in Federal Reserve interest rate expectations.

The Pound to Dollar (GBP/USD) exchange rate has hit 5-month lows just above 1.2400 this week before a recovery to 1.2475.

Much of the impact may have already been seen, limiting Pound losses from current levels.

It notes that the last three US inflation readings have been stronger than expected which will inevitably have an impact on Fed thinking.

ING now expects three Fed rate cuts at most this year and possibly only two which will support the dollar.

It expects Middle East tensions will underpin the US currency while a higher US rate profile will also hamper risk conditions and tend to be a headwind for the Pound.

As far as the UK outlook is concerned, ING does not expect that the Bank of England (BoE) will cut interest rates until August.

Once it does, start the process, however, it expects BoE cuts at every remaining meeting for the year as inflation pressures within the economy ease.

It, therefore, expects that relative yields will move sharply against the Pound which will undermine the currency.

Key Quotes:
“A rewrite of the US/Fed scenario means that we have had to cut our GBP/USD profile.”

“We are still looking for four cuts this year starting in August.”

“Some are looking for June – but that seems too early.”

“Independent sterling moves will be driven by key UK data releases – e.g. wages and services inflation.”

“These could still prove a little sticky but should be falling sharply by the summer.”

“We do not see a UK election (probably Oct. or Nov.) having a big say on sterling.”

• EUR/USD rises toward 1.0700 after closing in positive territory on Wednesday.
• Near-term technical outlook points to a buildup of recovery momentum.
• The risk-positive market environment could help the pair push higher.

EUR/USD gained traction and closed in positive territory on Wednesday, snapping a six-day losing streak. The pair continues to inch higher toward 1.0700 in the European session on Thursday and the near-term technical outlook highlights a buildup of recovery momentum.

The renewed US Dollar (USD) weakness helped EUR/USD stage a decisive rebound midweek. In the absence of high-tier data releases, retreating US Treasury bond yields weighed on the USD. 

Later in the session, the US economic docket will feature weekly Initial Jobless Claims data. Investors expect the number of firs-time applications for unemployment benefits to rise to 215,000 in the week ending April 13 from 211,000. A reading close to 220,000 could put additional weight on the USD’s shoulders.

In the meantime, US stock index futures trade in positive territory in the European session. A bullish opening in Wall Street could help EUR/USD preserve its recovery momentum.

Markets remain optimistic about an avoidance of a deepening Iran-Israel conflict, with the UK, the EU and the US looking to widen sanctions against Iran.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 50 for the first time in a week and EUR/USD closed the last five 4-hour candles about the 20-period Simple Moving Average (SMA), reflecting a buildup of recovery momentum.

1.0700 (psychological level, static level) aligns as immediate resistance before 1.0720-1.0730 (50-period SMA, static level) and 1.0760 (100-period SMA). On the downside, 1.0660 (static level, former resistance) could be seen as first support ahead of 1.0640 (20-period SMA) and 1.0600 (psychological level, static level).

 

• EUR/USD rises toward 1.0700 after closing in positive territory on Wednesday.
• Near-term technical outlook points to a buildup of recovery momentum.
• The risk-positive market environment could help the pair push higher.

EUR/USD gained traction and closed in positive territory on Wednesday, snapping a six-day losing streak. The pair continues to inch higher toward 1.0700 in the European session on Thursday and the near-term technical outlook highlights a buildup of recovery momentum.

The renewed US Dollar (USD) weakness helped EUR/USD stage a decisive rebound midweek. In the absence of high-tier data releases, retreating US Treasury bond yields weighed on the USD. 

Later in the session, the US economic docket will feature weekly Initial Jobless Claims data. Investors expect the number of firs-time applications for unemployment benefits to rise to 215,000 in the week ending April 13 from 211,000. A reading close to 220,000 could put additional weight on the USD’s shoulders.

In the meantime, US stock index futures trade in positive territory in the European session. A bullish opening in Wall Street could help EUR/USD preserve its recovery momentum.

Markets remain optimistic about an avoidance of a deepening Iran-Israel conflict, with the UK, the EU and the US looking to widen sanctions against Iran.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 50 for the first time in a week and EUR/USD closed the last five 4-hour candles about the 20-period Simple Moving Average (SMA), reflecting a buildup of recovery momentum.

1.0700 (psychological level, static level) aligns as immediate resistance before 1.0720-1.0730 (50-period SMA, static level) and 1.0760 (100-period SMA). On the downside, 1.0660 (static level, former resistance) could be seen as first support ahead of 1.0640 (20-period SMA) and 1.0600 (psychological level, static level).