• 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).

 

• The British pound has rallied against the Japanese yen yet again on Wednesday, as it looks like the ¥193 level continues on for a lot of resistance.
• If we can break above there and then, I think it’s likely that the market could go looking to the ¥195 level. This is a psychological area of resistance, and there is probably a situation where some profit taking will take place.

Short term pullbacks continue to be buying opportunities. And this makes a lot of sense, considering that the Bank of Japan had recently raise interest rates to 0%. Furthermore, the United Kingdom has quite a bit of inflation and therefore interest rates will stay elevated. But beyond that, you get paid to hang on to this pair. Wednesday is triple swap, so that is yet another reason to think that this market continues to go higher.

• 

Technical Analysis

Underneath the 50 day EMA has the ¥190 level offering support as well. Short term pullbacks can continue to find plenty of buyers as again, you get paid to hang on to this pair, the trend is higher and although the Bank of Japan has complained multiple times, they don’t really have the wherewithal to fight this type of trend. They simply can’t do it, and the market knows all of this. The market will continue to look at getting paid in the end, and as we have such a great carry trade situation.

So, with that being the case, the best they can do is slow things down. The 50 day EMA has acted like a very strong trendline on the way higher, and therefore you have to assume that it will continue to behave as such. I believe at this point in time that the Japanese yen is going to fall on really hard times, and the British pound, of course, is one of the higher paying swaps that you get against this currency. Furthermore, you are likely to see a lot of upward pressure in all of the XXX/JPY pairs, including here.

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• UK inflation fell from 3.4% in February to 3.2% in March.

• Governor Bailey said the decline in inflation aligned with the central bank’s forecasts.

• There is more caution about rate cuts in the US.

Things are looking up in the GBP/USD forecast as the pound stages a recovery following a smaller-than-expected decline in inflation. At the same time, the dollar is falling as investors pause the recent data-driven rally. 

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On Wednesday, the UK released data showing higher-than-expected inflation, which led to a decline in rate cut expectations. Inflation fell from 3.4% in February to 3.2% in March. However, economists had expected a bigger decline to 3.1%. As a result, traders scaled back bets for BoE rate cuts. At the moment, they expect the first cut in August or September. Still, there is more clarity on The BoE’s rate cut outlook than the Fed’s.

After the report, Governor Bailey said the decline aligned with the central bank’s forecasts. Moreover, he said inflation was on a downtrend and would reach the central bank’s target. 

Meanwhile, Fed policymakers are less certain about the direction of inflation in the US. Recent data has indicated a pause at levels above the central bank’s target. Moreover, the economy remains resilient despite higher interest rates. Therefore, there is more caution about rate cuts in the US.

Additionally, Fed Chair Powell has said that restrictive policy conditions will likely continue for longer. With no clear timing for the first cut, investors are betting on some time in the fourth quarter. Some experts even believe the Fed might not cut in 2024 if inflation remains stubborn.

GBP/USD key events today

GBP/USD technical forecast: Bears weaken at the 1.618 Fib extension level

On the technical side, the GBP/USD price is consolidating between the 30-SMA and the 1.2400 key level. Meanwhile, the bias is bearish because the range is below the 30-SMA, and the RSI is in bearish territory below 50. However, the price has failed to close strongly below the 1.618 Fib extension level. 

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Moreover, the RSI has made a bullish divergence, indicating weaker bearish momentum. Consequently, bulls might be preparing to make a big move that would break above the 30-SMA. This would signal a shift in the bias to bullish. Moreover, the price would likely retest the 1.2550 key level. However, if bears regain strength, the price will fall below 1.2400.

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Since the Bank of Japan exited negative interest rates, the USD/JPY has tumbled to the 154 handle. Forward guidance impacted buyer demand for the Japanese Yen, with the BoJ signaling the need for accommodative policy measures.

However, the weaker Japanese Yen impacts import prices and household spending. Household spending and the services sector are considerations for the Bank of Japan. Hopes of recent wage hikes translating into a demand-driven inflation environment could fade if the weakness in the Yen persists.

On Wednesday, trade data from Japan highlighted the effects of a weak Yen on demand. The trade balance grew from a ¥377.8 billion deficit to a ¥366.5 billion surplus in March. However, imports fell by 4.9% year-on-year in March after rising by 0.5% in February.

US Economic Calendar: Jobless Claims, the Philly Fed, and the Fed

On Thursday, the US labor market will be in focus. Economists forecast initial jobless claims to increase from 211k to 215k in the week ending April 13. An unexpected spike in jobless claims may influence the Fed rate path.

Recent economic indicators, including inflation, labor market data, and retail sales figures, have impacted investor expectations of a June Fed interest rate cut. Tight labor market conditions are bolstering wage growth, which in turn increases disposable income. This upward trend in disposable income could fuel consumer spending and demand-driven inflation.

In response to the latest round of economic indicators, investors shifted bets to a September Fed rate cut. However, a deterioration in labor market conditions could impact wage growth and refuel investor bets on a June rate cut.

Most Read: Market Sentiment Analysis and Outlook: Crude Oil, Dow 30, AUD/USD

The US dollar, as measured by the DXY index, retreated from multi-month highs on Wednesday, dragged lower by a pullback in Treasury yields. Despite this retracement, the DXY remains biased to the upside, especially after top Fed officials signaled that the U.S. central bank may delay the start of its easing cycle in response to resilient economic data and hotter-than-expected inflation readings in recent months.

Putting fundamental analysis aside, the next segment of this article will focus on analyzing the technical outlook for four U.S. dollar FX pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CAD. Within this section, we will examine price action dynamics and essential tech levels poised to function as either support or resistance in the upcoming trading sessions.

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EUR/USD FORECAST – TECHNICAL ANALYSIS

After steep losses in recent days, EUR/USD stabilized and rebounded off the psychological 1.0600 level on Wednesday, pushing past the 1.0650 mark. If the pair manages to build upon its recovery in the days ahead, resistance lies at 1.0695, followed by 1.0725. On further strength, the focus will be on 1.0820.

On the other hand, if sellers return and regain control of the market, technical support emerges at 1.0600. Bulls must staunchly defend this technical floor; a failure to do so could reinforce bearish pressure in the near term, resulting in a deeper pullback toward the 2023 lows located near 1.0450.

EUR/USD PRICE ACTION CHART

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USD/JPY FORECAST – TECHNICAL ANALYSIS

USD/JPY edged lower on Wednesday, stepping off its multi-decade high established in the previous session when the pair hit 154.78. Should the downturn reversal gain momentum later this week, support can be spotted at 153.20 and 152.00 thereafter. Below these levels, 150.80 may become a focal point.

Conversely, if USD/JPY resumes its rally, resistance looms at 154.78, followed by 156.00, the upper limit of a short-term ascending channel. Despite the pair’s bullish bias, caution is warranted due to overbought market conditions and the growing possibility of FX intervention by the Japanese government.

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GBP/USD FORECAST – TECHNICAL ANALYSIS

GBP/USD mounted a moderate comeback on Wednesday, bouncing off support in the 1.2430 region. If the pair extends its rebound in the coming trading days, resistance awaits at 1.2525, followed by 1.2575 near the 200-day simple moving average. On continued strength, the next key level to watch is 1.2645.

Alternatively, if sellers return and trigger a market selloff, support is visible at 1.2430. To prevent a larger drop, bulls must protect this floor tooth and nail; any lapse could usher in a slump towards 1.2325. Further losses beyond this point might refocus attention on the October 2023 lows near 1.2040.

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Change in	Longs	Shorts	OI
Daily	9%	4%	5%
Weekly	10%	24%	20%

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USD/CAD FORECAST – TECHNICAL ANALYSIS

After failing to clear confluence resistance at 1.3850, USD/CAD turned lower on Wednesday, with sellers capitalizing on the reversal opportunity and driving prices back down towards 1.3765. If losses pick up pace over the coming trading sessions, support appears near the 1.3700 handle, followed by 1.3610.

Alternatively, if the bulls regain the upper hand and manage to push the exchange rate higher, primary resistance rests at 1.3850, followed by the psychological 1.3900 threshold. Further up the ladder, attention will be fixed on the 2022 highs around 1.3980.

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The Pound to Euro (GBP/EUR) exchange rate briefly hit 1-month highs after the latest UK inflation data before settling just above 1.1700.

Danske expects the Bank of England (BoE) will be more aggressive than expected in cutting interest rates which will weaken GBP/EUR to 1.1235 in 12 months.

Headline UK inflation declined to 3.2% for March from 3.4% previously and Danske expects further declines in the short term which will trigger interest rate cuts.

Danske expects that the BoE will prep the markets for a rate cut in May and deliver it at the June meeting.

It also expects two further rate cuts over the remainder of 2024.

Danske also expects that the ECB will cut three times during the year.

The key element is expectations as markets are pricing in just below 50 basis points of BoE rate cuts this year and 80 basis points of cuts for the ECB.

Danske, therefore, considers that the BoE will cut rates by more than the markets expect and, in this context, it expects that the Pound will lose ground.

It also expects that the UK economy will perform relatively worse than the Euro-Zone which will undermine the Pound.

Key Quotes:
“We continue to expect the Bank of England to prime markets for a rate cut at the May meeting.”

“Markets are pricing 50bp for the remainder of the year with the first 25bp cut fully priced by August.”

“GBP remains fundamentally undervalued with our Brexit-corrected MEVA estimate for EUR/GBP around 0.83.”

“The risks that could see EUR/GBP trade substantially below our projection is if the UK economy considerably outperforms the euro area.”

“We expect upcoming data to increasingly support this notion.”

“We target the cross at 0.89 in 6-12M.”

“We think the dovish shift marks an important turning point for EUR/GBP.”

“We expect the UK economy to perform relatively worse than the euro area.”

• The US dollar remained near its highest levels in several months against the pound, euro, and other major currencies after the release of more strong economic data.
• As a result, the record breakout in the USD/JPY currency pair continued its upward trend.
• The pair is moving towards the 154.76 resistance level, the highest in 34 years.
• With only verbal intervention from Japan on the path of the yen’s collapse, the upward trend continued and the dollar’s gains against the yen did not stop.

After stronger-than-expected US inflation and jobs numbers that helped push the dollar to its highest in five months, the positive momentum for the dollar increased, according to the results of the economic calendar data. US retail sales were reported to rise 0.7% monthly in March, more than double the market’s forecast of 0.3%.

Also announced, the Core Retail Sales Control Group measure – which excludes gasoline, cars, food services and building materials – rose 1.1% in March, beating expectations of 0.4%. Total revenue at retail stores, online sellers and restaurants rose 0.7% monthly, up 2.4% year-on-year from a year ago. The price paid element rose to its highest level since last May, consistent with evidence that inflation rates in the United States are accelerating again.

In general, market expectations for the number of Fed rate cuts in 2024 have fallen sharply in the face of rising inflation. Also, Société Générale the latest major institution to warn that it no longer expects the Fed to cut rates in 2024.

At the same time, dollar exchange rates rose amid this shift in expectations, while stock markets came under pressure. Commenting on this, Derek Halpenny, foreign exchange analyst at MUFG Bank Ltd, says, “The path for further USD appreciation from here remains clear as US CPI data is forcing markets to rethink the timing of the Fed’s first rate cut.”

According to analysts, US Federal Reserve Chairman Jerome Powell has no choice but to reset the clock regarding interest rate cuts in the upcoming appearances. Moreover, the US central bank’s repeated assertion that official interest rates are in the “restricted” zone – perhaps determined by the difference between the Fed’s real funds rate and their estimate of the “normal” interest rate – seems more difficult than ever to justify. Added, “And with activity indicators that follow indicators that rely on market evaluation to indicate a comprehensive easing in financial conditions.”

However, high inflation rates may reinforce the impression of a thriving economy, says James Knightley, chief international economist at ING Bank. He said, “We have to acknowledge that the retail sales figure is a nominal growth rate for the dollar, and with the high inflation rate, this represents a large part of the growth.” Added, “Real retail sales, i.e. inflation-adjusted retail sales, are much weaker and have been essentially flat over the past three years.”

Amid the performance of the forex market, the decline of the Japanese yen is prompting traders to strategize how far the besieged currency can fall, even with the spectre of intervention looming on the horizon. Meanwhile, JPMorgan Chase & Co and Bank of America Corp’s private banking units see the number 160 as the potential next milestone for the USD/JPY currency pair, which has risen to its highest level in 34 years. T. Rowe Price is considering the risk of the Japanese yen falling to around 170 – a level last seen in the 1980s.

The path to these levels may be clearer than previously thought if recent market moves are any guide. Last week, Japanese yen fell 1% alone as fears of rising long-term US borrowing costs drove a rush to the dollar. Thus, this has dashed expectations for a rebound in the Asian currency just a month after the Bank of Japan raised interest rates for the first time since 2007.

• 

USD/JPY Technical Analysis and Expectations Today:

According to the performance on the daily chart, the general trend of USD/JPY is strongly bullish. Its consecutive record gains have been enough to push all technical indicators towards strong buying saturation levels. As we mentioned before, the general trend will remain bullish until real Japanese intervention in the markets to prevent further collapse of the yen occurs. Moreover, this could happen at any time. On the other hand, the factors behind the dollar’s gains are strong and persistent, ensuring that the dollar makes gains against other major currencies. Currently, the nearest resistance levels for the trend are 154.90, 155.40 and 156.00, respectively.

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• EUR/USD bounced off yearly lows near 1.0600.
• The Dollar’s loss of momentum lent legs to the risk complex.
• The ECB-Fed policy divergence dominates the scenario.

A decent bounce in EUR/USD left behind six consecutive daily drops, including a new YTD bottom near 1.0600 the figure, regaining the mid-1.0600s in response to some loss of impetus in the Dollar’s rally.

The recent multi-session strong rally in the greenback occurred as investors re-evaluated the timing of a potential rate cut by the Federal Reserve (Fed), now anticipated to occur later than previously thought, potentially in December.

This reassessment coincided with a move lower in US yields across the curve and a steady narrative regarding the divergence of monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

Regarding the ECB, Board member Holzmann highlighted the differing inflation dynamics between Europe and the US, emphasising the need to await developments until June before considering any cuts. He cautioned against premature speculation on the frequency of potential cuts by the ECB in 2024, noting that moving ahead of the Fed could diminish the effectiveness of such measures.

Echoing this sentiment, the ECB’s Cipollone observed a rapid decline in inflation, expressing expectations for a return to the 2% path next year and attainment of the target by mid-2025. Should data in June and July confirm growing confidence in achieving the target, consideration would be given to easing some of the restrictive measures imposed in 2023. Additionally, the impact of the Middle East conflict on energy costs remains a significant risk factor.

Around the Fed, at an event hosted at The Wilson Center in Washington on Tuesday, Chair Powell stated that recent data have not instilled increased confidence in them; rather, they suggest that it will likely take more time than anticipated to gain that confidence.

Looking forward, 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 lowering rates before the Fed. In such a scenario, EUR/USD is anticipated to experience a more pronounced decline from a short-term perspective.

EUR/USD daily chart

EUR/USD short-term technical outlook

The fall of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to 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 projected to find initial resistance at the crucial 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 hitting the psychological barrier of 1.1000. Further advances from here could threaten the December 2023 high of 1.1139 (December 28).

The 4-hour chart shows that the bearish trend seems to have met some contention around the 1.0600 neighbourhood. Against it, the initial support is at 1.0601, followed by 1.0516. In the opposite direction, the initial up-barrier is at 1.0665, ahead of 1.0756 and the 100-SMA at 1.0767. The Moving Average Convergence Divergence (MACD) rebounded from recent lows, while the Relative Strength Index (RSI) advanced past 45.

• EUR/USD bounced off yearly lows near 1.0600.
• The Dollar’s loss of momentum lent legs to the risk complex.
• The ECB-Fed policy divergence dominates the scenario.

A decent bounce in EUR/USD left behind six consecutive daily drops, including a new YTD bottom near 1.0600 the figure, regaining the mid-1.0600s in response to some loss of impetus in the Dollar’s rally.

The recent multi-session strong rally in the greenback occurred as investors re-evaluated the timing of a potential rate cut by the Federal Reserve (Fed), now anticipated to occur later than previously thought, potentially in December.

This reassessment coincided with a move lower in US yields across the curve and a steady narrative regarding the divergence of monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

Regarding the ECB, Board member Holzmann highlighted the differing inflation dynamics between Europe and the US, emphasising the need to await developments until June before considering any cuts. He cautioned against premature speculation on the frequency of potential cuts by the ECB in 2024, noting that moving ahead of the Fed could diminish the effectiveness of such measures.

Echoing this sentiment, the ECB’s Cipollone observed a rapid decline in inflation, expressing expectations for a return to the 2% path next year and attainment of the target by mid-2025. Should data in June and July confirm growing confidence in achieving the target, consideration would be given to easing some of the restrictive measures imposed in 2023. Additionally, the impact of the Middle East conflict on energy costs remains a significant risk factor.

Around the Fed, at an event hosted at The Wilson Center in Washington on Tuesday, Chair Powell stated that recent data have not instilled increased confidence in them; rather, they suggest that it will likely take more time than anticipated to gain that confidence.

Looking forward, 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 lowering rates before the Fed. In such a scenario, EUR/USD is anticipated to experience a more pronounced decline from a short-term perspective.

EUR/USD daily chart

EUR/USD short-term technical outlook

The fall of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to 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 projected to find initial resistance at the crucial 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 hitting the psychological barrier of 1.1000. Further advances from here could threaten the December 2023 high of 1.1139 (December 28).

The 4-hour chart shows that the bearish trend seems to have met some contention around the 1.0600 neighbourhood. Against it, the initial support is at 1.0601, followed by 1.0516. In the opposite direction, the initial up-barrier is at 1.0665, ahead of 1.0756 and the 100-SMA at 1.0767. The Moving Average Convergence Divergence (MACD) rebounded from recent lows, while the Relative Strength Index (RSI) advanced past 45.

• According to this week’s trading, the pound sterling fell against the euro and the US dollar after Britain announced an unexpected rise in the unemployment rate, but the weakness will be limited due to surprise wage increases that will keep the Bank of England cautious.
• Consequently, the strong downward trend of the GBP/USD currency pair continued with losses extending towards the 1.2408 support level.
• This is the lowest in five months, before settling around the 1.2435 level at the time of writing the analysis.

According to forex trading platforms, the pound sterling fell in value after the Office for National Statistics announced that the unemployment rate in Britain rose to 4.2% in February from 3.9%, higher than the 4.0% the market had expected. The important figure for average earnings (including bonuses) remained steady at 5.6% in February, according to the ONS, but this was higher than the 5.5% the markets had expected. Without bonuses, average earnings rose by 6.0%, down from 6.1% in the previous month, but above the 5.8% the market had expected. Richard Carter, head of fixed income research at Quilter Cheviot, says: “There was further evidence of slowing wage growth. This rise in unemployment, coupled with the gradual decline in wages, suggests a slowdown in the economy.”

Commenting on the performance of the currency pair, Kyle Chapman, forex market analyst at ING Group, says: “Overall, I don’t see any clear directional signals for sterling in this report. Also, wage growth is still too high to warrant an imminent rate cut.” “This number would have to fall significantly for policymakers to feel comfortable that the risks of continued inflation will recede.”

According to Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee, regular wage growth in the UK is still “well above” 3% to 4%, which is consistent with an inflation rate of 2%. He added, “Wage growth has fallen by less than two percentage points from its peak of 7.9% last year. There is still a long way to go before wage increases return to a sustainable rate.”

Therefore, stronger-than-expected wage figures should provide a layer of protection under the pound sterling, as one analyst suggests they could be outright supportive. Elias Haddad, senior market analyst at BBH, says: “Flat nominal wage growth and rising real wages suggest that UK rate expectations have room to adjust higher in favor of a stronger pound.”

Meanwhile, wages remain high by historical standards, which could lead to continued upward pressure on inflation. Moreover, this could keep some Bank of England members cautious about cutting rates. The data will reinforce current market expectations that the Bank of England will cut rates in June or August, bringing it close to the first rate cut by the European Central Bank, which could limit the pound’s weakness. But the Fed may not cut rates at all in 2024, meaning the pound is still vulnerable to further weakness.

Another decline in British job vacancies was further evidence of a slowdown in the jobs market, which the Bank of England sees as a reason to combat inflation. Recently, Job vacancies fell to 916,000 in the three months to March, marking the 21st consecutive decline. However, they are still above pre-Covid-19 levels, suggesting that the rise in unemployment will be limited.

• 

Technical forecasts for the GBP/USD pair today:

Technically, the overall trend for the GBP/USD currency pair remains bearish. Despite its recent losses in support at 1.2400, technical indicators point towards strong selling saturation levels. However, the continued factors of strength in the US dollar, represented by the stronger US economic performance and the persistence of the strict policy of the US Federal Reserve, will ensure the continuation of the downward trend for the GBP/USD exchange rate. Moreover, the nearest target for the trend could be supported at 1.2300. Any attempts at an upward rebound will likely be temporary and not sustained. Today, the pound will react to the announcement of British inflation figures, followed by statements from the Governor of the Bank of England.

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• Powell’s speech lacked indications of when rate cuts would begin.

• The Bank of America revised its outlook and expects the first Fed cut in December or later.

• Eurozone inflation is on a clear path to the 2% target.

A hint of bullish sentiment emerges in the EUR/USD forecast as the dollar takes a step back following a robust rally. Yet, amidst this glimmer of optimism, Euro bears stand firm, with economic indicators signaling further downward pressure.

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Notably, the dollar rose Tuesday as Fed policymakers sounded more hawkish, pushing back rate cut expectations. Investors paid close attention to Powell’s speech, which lacked indications of when rate cuts would begin. Moreover, the Federal Reserve’s Chair said the US needs a restrictive monetary policy for a bit longer. 

These recent remarks came after the US retail sales report, which pointed to robust consumer spending. Incoming data has completely changed the outlook for interest rates in the US. Notably, the Bank of America revised its outlook and expects the first Fed cut in December or later. At the same time, investors are betting on September for the start of rate cuts.

This is the complete opposite of the Eurozone. On Tuesday, ECB policymakers continued supporting the first cut in June. Unlike the US, Eurozone inflation is on a clear path to the 2% target. Moreover, the economy is slowing down. Therefore, nothing is holding the ECB back. 

If the ECB cuts in June, it will be well ahead of the Fed. Furthermore, market participants expect 77bps in cuts in the Eurozone. This is much bigger than the 40bps expected in the US. This divergence will likely keep the EUR/USD pair on a strong downtrend.

EUR/USD key events today

Investors are not expecting any volatility today, as neither the US nor the Eurozone will release major economic reports.

EUR/USD technical forecast: Decline pauses as bears get exhausted

On the technical side, the bias for the EUR/USD pair is bearish. However, the decline has paused at a major support zone comprising the 1.618 Fib extension and 1.0600 key support levels.

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Moreover, the RSI showed a bullish divergence in the oversold region, indicating exhaustion in the downtrend. Therefore, there is a high chance that bulls will prompt a retest of the 30-SMA. The price might even rise to retest the 1.0600 key level before continuing lower.

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