Created on February 17, 2025

• According to recent trades, the British Pound has ignored US President Donald Trump’s threats to impose tariffs on countries that impose value-added taxes and appears set to achieve another weekly gain against the dollar and euro.
• At the end of last week, Trump outlined his plans to impose “reciprocal” tariffs on goods from countries that impose tariffs on the United States starting in April.
• Consequently, the bullish rebound of the GBP/USD pair extended to the resistance level of 1.2630, the pair’s highest level in two months, before settling around 1.2590 at the beginning of this week.

The Fate of US Tariffs

Recently, the US president surprised observers by saying he would impose tariffs on countries that impose sales taxes such as value-added tax, which includes Britain. He argued that the idea of VAT is ridiculous and confirms an agenda of punishing everyone, whether allies or enemies, to increase revenue for the United States. The random approach creates a great deal of uncertainty in the financial markets as it becomes difficult to predict where tariffs will fall and to what extent. This makes it difficult for other countries to respond.

Overall, it has become clear that forex markets are losing interest fast: the US dollar fell 1 percent last week and is heading for its fourth weekly decline in 2025. According to market experts, the law of diminishing returns appears to be at play as headlines about tariffs seem less provocative to the forex market. Overall, the pound is facing the threat of an expanded US tariff regime aimed at addressing stifling corporate rules that affect US companies. We reported that Howard Lutnick, the incoming US Commerce Secretary, will seek to impose tariffs on countries with onerous environmental, social and governance rules, which he says penalize US companies.

Now, Trump believes that VAT also punishes American companies. He told reporters at the White House, “We’re going to call it a tariff.”

Britain has imposed VAT since 1973 when it joined what would later become the European Union. For its part, the United States has pledged to deal with “each country individually. In almost all cases, they charge us much higher tariffs than we charge them but those days are over.” For its part, the American Taxpayer Foundation, a right-wing think tank, said last Thursday that VAT is “not a tariff” and is “commercially neutral.” “Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce the quantities of goods and services available to American businesses and consumers, leading to lower incomes, reduced employment, and lower economic output.”

Trading Tips:

We still recommend selling the GBP/USD from any upward level but without risking the trading account from any sudden price reversals by activating take-profit and stop-loss orders.

Trump’s Goal of Tariffs

Trump says his reciprocal tariffs are aimed at restoring balance to global trade dynamics in favour of the United States. Analysts point out that Britain already has a balanced trade in goods with the United States, which would technically make Britain a low-priority target for Trump. But targeting VAT, he says, is not about global trade but about exercising American economic power and increasing revenue. On this basis, Britain will not escape by virtue of its favourable trade balance.

Technical Analysis for the GBP/USD pair today:

Keep in mind that the GBP/USD pair may remain relatively around its recent gains until the financial markets and investors react to the US and UK economic releases led by the announcement of the minutes of the last US Federal Reserve meeting. The success of the bulls in moving towards the resistance levels of 1.2670 and 1.2800 strengthens the ascending channel forming on the daily chart above, which may eventually lead to a move towards the psychological resistance of 1.3000. Conversely, and in the same time frame, the bears broke the support level of 1.2380, threatening the current upward rebound and a return to the broader bearish path.

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Created on February 17, 2025

• A bearish start to the trading week for the USD/JPY pair with losses to the support level of 151.47 before settling around the 151.85 level at the time of writing.
• Furthermore, the Japanese yen’s gains increased as investors responded to strong economic growth data.
• According to economic indicators, Japan’s economy grew by 0.7% on a quarterly basis in the fourth quarter, accelerating from a growth of 0.4% in the previous quarter and exceeding expectations of 0.3%.
• On an annual basis, Japan’s GDP grew by 2.8% in the fourth quarter, in line with expectations and up from growth of 1.7% in the third quarter.

Overall, the positive numbers reinforced the hawkish expectations for the Bank of Japan’s monetary policy. While uncertainty remains about whether the Bank of Japan will raise interest rates again in March, a rate hike later in the year is widely expected. The Japanese Yen has also gained strength from the recent weakness of the US dollar, driven by weak US economic data and easing fears of a global trade war.

Trading Tips:

We still recommend buying the US Dollar against the Japanese Yen but without risking the trading account from any sudden price reversals by activating take-profit and stop-loss orders.

Tariffs and US Stock Performance

Since President Donald Trump took office, Wall Street stock markets have been guessing “whether or not he will do it” regarding tariffs, since he promised to impose comprehensive duties on both geopolitical allies and competitors alike. While the initial reaction in the stock market was cautious, the mood is changing as the administration’s policies become increasingly confused with delays and exemptions mixed with aggressive rhetoric.

For stock investors, they have ignored the concerns and bought stocks. While the risk of a global trade war remains dangerously real after Trump announced a 25% tariff on steel and aluminium imports that will take effect in March and reciprocal tariffs on many trading partners expected to be imposed in April, US stock indices continue to rise, with the S&P 500 ending last week just points away from its all-time high. The question now is whether the buyers driving these gains are adequately assessing what Trump will do – or are recklessly throwing caution to the wind.

USD/JPY Technical Analysis and Expectations Today:

According to the daily chart, the bears are trying to move the USD/JPY currency pair with stronger downward levels, and now the psychological support level of 150.00 is the most important for further control, and at the same time, technical indicators will move towards strong oversold levels, led by the direction of the Relative Strength Index and the Stochastic Oscillator. I still recommend buying the USD/JPY from any downward level. Conversely, on the same timeframe, the bulls will successfully break the downward trend if the pair rebounds above the resistance of 155.50 again. The reaction to the content of the minutes of the latest meeting of the US Federal Reserve and any new developments regarding US trade wars, as well as signals from central bank officials, will affect the performance of the dollar against the Japanese Yen.

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• EUR/USD trades below 1.0500 in the European session.
• Financial markets in the US will remain closed on Monday.
• The technical outlook remains bullish, with a potential for a technical correction in the near term.

EUR/USD trades in a relatively tight channel below 1.0500 to begin the new week. Financial markets in the US will remain closed in observance of the Presidents’ Day holiday on Monday, limiting the volatility in the second half of the day.

The persistent selling pressure surrounding the US Dollar (USD) helped EUR/USD post strong gains in the previous week. Easing fears over an aggressive trade policy by US President Donald Trump helped the market mood improve and weighed on the USD. Ahead of the weekend, the data from the US showed that Retail Sales in the US declined by 0.9% on a monthly basis in January, not allowing the USD to stage a rebound.

The economic calendar will not feature any high-tier data releases in the first half of the week. On Wednesday, the Federal Reserve (Fed) will publish the minutes of its January policy meeting.

In the meantime, market participants will pay close attention to developments surrounding the Trump administration’s trade policy with the EU. 

European Trade Commissioner Maros Sefcovic will travel to Washington on Monday to meet with US counterparts to discuss US tariffs.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declines from the 80 mark it touched on Friday but holds above 60, suggesting that EUR/USD remains bullish after correcting from overbought levels.

On the downside, 1.0440 (Fibonacci 61.8% retracement of the latest downtrend) aligns as first support before 1.0400 (100-period Simple Moving Average (SMA), Fibonacci 50% retracement) and 1.0360 (200-period SMA).

Looking north, first resistance could be spotted at 1.0500-1.0510 (round level, Fibonacci 78.6% retracement) ahead of 1.0550 (static level) and 1.0600 (static level, beginning point of the downtrend).

Copper price failed to resume the bullish attack after facing 4.8100$ barrier, to activate the correctional track by crawling towards 4.6200$ now.

The frequent stability below the mentioned barrier and stochastic attempt to provide the negative momentum support the domination of the correctional bias, to expect crawling towards 4.5600$ and 4.5200$ levels soon, while breaching the barrier will open the way to record new gains that might start at 4.8900$.

The expected trading range for today is between 4.5600$ and 4.7400$

Trend forecast: Bearish

Copper price failed to resume the bullish attack after facing 4.8100$ barrier, to activate the correctional track by crawling towards 4.6200$ now.

The frequent stability below the mentioned barrier and stochastic attempt to provide the negative momentum support the domination of the correctional bias, to expect crawling towards 4.5600$ and 4.5200$ levels soon, while breaching the barrier will open the way to record new gains that might start at 4.8900$.

The expected trading range for today is between 4.5600$ and 4.7400$

Trend forecast: Bearish

The GBPCAD price ended the correctional bearish decline by providing positive close above the bullish channel’s support line at 1.7700, to notice forming many bullish waves and achieve some gains by touching 1.7860 level followed by fluctuating near the MA55 at 1.7800.

The main stability within the bullish channel and stochastic positive momentum signals will increase the chances of gaining the positive momentum, to keep our bullish overview that might target 1.7890 followed by reaching 1.7960.

The expected trading range for today is between 1.7780 and 1.7890

Trend forecast: Bullish

• USD/JPY falls to 152.02, erasing February 12 gains as sellers take control.
• Bearish RSI signals further downside; key support at 150.93 and 148.64.
• A recovery above 152.73 could open the door to 153.22 and 154.00.

The USD/JPY extended its losses, dropping below the 200-day Simple Moving Average (SMA) of 152.73 and hitting a three-day low of 152.02. Worse than expected, US Retail Sales data weighed on the American currency, which has fallen to a year-to-date (YTD) low, according to the US Dollar Index (DXY). The pair trades at 152.26, below its opening price by 0.36%.

USD/JPY Price Forecast: Technical outlook

The downtrend resumed after the February 12 gains were erased during the last few days as sellers regained control. The Relative Strength Index (RSI) remains bearish, an indication that further downside lies ahead. Therefore, the USD/JPY’s first support would be the February 7 swing low of 150.93, followed by the December 3 daily low of 148.64.

Conversely, if USD/JPY reclaims the 200-day SMA, the pair could aim for 153.00, followed by the Tenkan-sen at 153.22 and the 154.00 figure.

USD/JPY Price Chart – Daily

February 16, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar FX Predictions: 2025 GBP/USD Peak Already in?

During the week, the Pound to Dollar exchange rate (GBP/USD) strengthened to 2025 high at 1.2630 as US yields declined, the dollar stumbled and European currencies made headway.

According to ING; “1.25/26 should be the top of the range this year and we are looking for a move to 1.19/20.”

Bank of America still forecasts that dollar weakness will help GBP/USD advance to 1.38 at the end of the year.

RBC expects that GBP/USD overall will struggle for direction with an end-year forecast of 1.24.

Volatility is likely to remain a key element over the next few months, especially with an on-going debate over US tariffs and trade policy.

Dan Tobon, head of G10 FX at Citi commented; “We’re in a place where the dollar is priced for everything positive. It’s going to be very choppy from here – a lot of volatility without necessarily going anywhere.”

RBC notes major uncertainty surrounding the dollar; it sees two major upside risks for the dollar and two downside risks.

One upside risk is that tariffs turn out to be more aggressive and last longer than expected.

A second threat is that risk appetite slides amid fears over US inflation trends.

On the other hand, it expects the dollar will tend to come under pressure if there is an unexpected US economic weakness and a move by the Federal Reserve to cut interest rates more aggressively.

A sustained period of underperformance by US equities would also undermine the US currency.

US asset-price moves will inevitably be influenced to an important extent by tariffs with the US looking to enforce reciprocal tariffs on global trading partners.

Danske Bank commented; “While tariff headlines remain a notable driver of FX price action, it seems markets increasingly view them as a negotiation tactic, with a fading impact. Our bias remains that Trump will ultimately underdeliver on tariffs, though further announcements are likely in the coming months.”

Despite initial strength, Bank of America expects the dollar will eventually lose out; “we argue that in a scenario of US tariffs against the rest of the world and full retaliation, the USD could weaken as second-round effects take over.”

It added; “Although the US economy is less dependent on trade, it would be more vulnerable than most economies if it is the US against the rest of the world in a trade war.”

Latest UK GDP data was slightly stronger than expected with 0.4% growth for December driving 0.1% growth for the fourth quarter compared with consensus forecasts of a slight decline.

Overall confidence in the outlook, however, remains fragile.

According to HSBC; “Our economics team have revised down their 2025 GDP forecast to 0.9% from 1.4% previously given this weakness in private demand, and an expectation that support from public spending is set to flounder.”

Standard Chartered took a similar view; “given the lack of momentum in H2, as well as our expectation of additional fiscal tightening on the spending front in the coming months, we lower our 2025 growth forecast to 1.0% from 1.3% previously.”

It added; “on balance, we would expect a faster pace of rate cuts from the BoE should labour market metrics show a clear deterioration.”

According to ING; “The next couple of months could be key for this story if, as we expect, the UK shifts to a tighter fiscal/looser monetary policy setting.”

It added; “Weaker growth and higher debt servicing costs mean that the UK government will probably have to announce real terms spending cuts in March.”

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TAGS: Currency Predictions Pound Dollar Forecasts

I wrote on 9^th February that the best trade opportunities for the week were likely to be:

• Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,867.25. The price fell by 1.57% over the week after this trade set up at Monday’s close.
• Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498. This did not set up.
• Long of Coffee futures (COFF etf can also be used) following a daily close of the next KC future at or above 403.95. The price fell by 3.75% over the week after this trade set up at Monday’s close.

The weekly loss of 5.32% equals 1.77% per asset. However, my weekly forecast of rising Yen crosses was more than enough to make up for these losses and put the week into profit.

Last week saw several data releases affecting the Forex market:

1. US CPI (inflation) – this came in slightly higher than expected, at an annualized rate of 3.0%, while only 2.9% was expected. The month-on-month increase was higher than expected. This gave a bit of a hawkish tilt on the US Dollar, although the greenback still lost value over the week.
2. Fed Chair Powell testifies before US Congress – the testimony was a bit hawkish while being optimistic on inflation, but Powell made it clear that the Fed is in “no hurry” to cut rates. It is now expected that there will be no further rate cuts in the USA over 2025.
3. US Retail Sales – this was much worse than expected, showing a month-on-month decline of 0.9% while a decline of only 0.2% was seen as likely. This suggests that the US consumer may be starting to slow down more significantly.
4. US PPI – this was a fraction higher than expected, showing a month-on-month increase of 0.4% while 0.3% was expected. This aligns with the slightly higher than expected inflation rate.
5. UK GDP – this was better than expected, with a month-on-month increase of 0.4% after an increase of 0.1% was seen as likely.
6. Swiss CPI (inflation) – as expected.
7. New Zealand Inflation Expectations – 2.06%, lower than the previous expected rate of 2.12%.
8. US Unemployment Claims – this was almost exactly as expected.

Last week’s key takeaways were:

1. A more hawkish tilt on rates can be expected from the US Federal Reserve, as inflation ticks fractionally higher and stubbornly refuses to fall to its target at 2%. This leads to the expectation that the Fed will leave rates unchanged for the remainder of 2025. This was backed up by US PPI data.
2. Despite the hawkish tilt on US monetary policy, and the long-term bullish trend, the greenback declined over the week, while illustrates a kind of weakness in the USD right now.
3. Stock markets advanced as the “Trump trade” made progress over the week, with the US technology-based NASDAQ 100 Index closing at a record high, with the broader S&P 500 Index trading near its record high which was reached only a few weeks ago.
4. The Japanese Yen saw strong movement over the week, first losing considerable value on more dovish comments from the Bank of Japan about the future path of rate hikes, but the Yen later regained some of its earlier losses.
5. There has been muted tariff threats between the USA and the EU, but US tariffs have moved out of focus for now.
6. The Trump administration has concerned talks with begin with Russia over Ukraine, which triggered a boost in risk-on sentiment, which is a dominant theme right now.

Essentially, we see a more risk-on environment in markets now, with a notable development being the weakening US Dollar. It seems that any flow into safe havens is going to the Japanese Yen and maybe Gold.

A few commodities have been performing strongly and breaking to new record highs, while a few others are also advancing in value.

The coming week has a lighter schedule of releases, so we are likely to see a lower level of activity and volatility in the Forex market.

The coming week’s important data points, in order of likely importance, are:

1. US FOMC Meeting Minutes
2. UK CPI (inflation)
3. Canadian CPI (inflation)
4. Australian Wage Price Index
5. Reserve Bank of Australia Policy Meeting
6. Reserve Bank of New Zealand Policy Meeting
7. UK Retail Sales
8. US, French & German Flash PMI Services & Manufacturing
9. US Unemployment Claims
10. Canadian Retail Sales

Monday is a public holiday in the USA and Canada.

For February 2025, I forecasted that the EUR/USD currency pair would decline in value. The performance so far is shown below.

Last week, I forecasted that the following currency pairs would rise in value over the week:

This was a good and profitable call.

This week, I forecast that the following currency crosses will fall in value over the coming week:

The Australian Dollar was the strongest major currency last week, while the Japanese Yen was the weakest, putting the AUD/JPY currency cross and other Yen crosses in focus. Volatility decreased last week as expected, with 41% of the most important Forex currency pairs and crosses changing in value by more than 1%. It is likely to decline again over the coming week.

You can trade these forecasts in a real or demo Forex brokerage account.

Last week, the US Dollar Index again moved lower and invalidated the long-term bullish trend, after making a bearish reversal two weeks ago near the resistance level at 110.00. The most bearish sign is that on Thursday the price finally broke below the nearest former support level at 106.85.

It seems clear that the dominant price action is bearish, while the long term trend is mixed: the price is below its level of 3 months ago but above its level of 6 months ago. However, it looks increasingly as if this trend is over, despite new US tariffs and a more hawkish Fed which is still grappling with inflation which stubbornly remains above its 2% target.

The Dollar is likely to continue falling over the coming week, although this is still technically countertrend so I would not rely on this forecast.

After making a new record high a few weeks ago, and then making a deep bearish retracement, the broad benchmark S&P 500 US stock index rose firmly last week, to close not far from its record high. The weekly candlestick closed quite near its high, and the highest daily close which remains to be beaten is 6118.71. The price ended last week just a few points below that.

The recent increase in risk appetite has pushed this Index higher and it looks close to a bullish breakout. I am very comfortable being long of the US stock market right now, so I think this looks like a buy if we get a daily close above 6118.71.

The linear regression analysis applied to the daily price chart below shows that the current bullish trend has been driving this market for almost 2 years, which is a relatively mature bull market.

The price barely made a new record high on Friday after a recent bullish trend sent it higher. The price closed right on the high of its range. These are bullish signs. The NASDAQ 100 Index is leading the S&P 500 as technology stocks usually do. These are all bullish signs.

I am very comfortable being long of the US stock market right now, so I think this looks like a buy now, as we have already had a record high daily close, plus the price traded Friday at a record high price.

Buying the NASDAQ 100 Index in strong bull markets has been an excellent trading strategy since this Index was created in 1985.

The GBP/USD currency pair printed a large bullish weekly candlestick, reaching its highest price since December 2024.

The British Pound was one of the strongest major currencies, partly because British economic data recently came in much higher than expected. This reduced expectations of forthcoming Bank of England rate cuts which in turn boosted the Pound.

On the other side, the US Dollar was the weakest major currency last week, so this allowed the buoyant Pound to push the price considerably higher.

Despite the relatively bullish picture here, the price is not trading in blue sky and I am not sure this analysis is very actionable, so I will not be trading this currency pair over the coming week.

Gold advanced last week to reach a new all-time high last Tuesday above $2,942 per ounce. However, later in the week on Friday, the price gave back much of its earlier gain to close not far from the week’s open, which should be a factor of some caution to bulls. On the weekly chart, last week’s price action looks close to a weekly bearish pin bar.

This trend may see a relatively slow rise, but we can see how steadily and strongly Gold gained over the past year, so this looks likely to be a solid trend.

I am far from sure that Gold will reach $3,000 per ounce over the coming week, but this target is certainly in sight now.

Gold seems to be doing well in the current market environment, where both risy and some safe-haven assets are performing well – Gold plays a role as both.

As we saw a stronger bearish element creep in at the end of last week, I’d like to see a new record high daily closing price before entering any new long trade – above $2,926.

The price chart below shows that Coffee futures have been breaking out to long-term high prices over a period of more than 6 months, with recent week’s price rises being relatively strong. We saw a new record high made last Tuesday, but the price action seen then has been choppy and volatile.

Taking long trades when major commodities break out to new 6-month highs has historically been a very profitable trading strategy, which is the main reason that I want to look for a long trade here.

Due to the choppiness, I want to see a closing price above 425.10 before entering a new long trade. The recent higher volatility and swings up and down near the highs are a sign that the bullish trend may be coming to an end.

Unfortunately, Coffee futures are quite expensive and usually just too large for retail traders, but there is an ETF called COFF which can be used to participate in increases in the price of Coffee. However, note that this ETF does not always cleanly mirror the price action of coffee futures, so if you are using the ETF, be careful.

Corn futures have been breaking to new highs recently, with the price of Corn trading at a new multi-month high price on Friday. The price action last week is the most bullish of any of the three major commodities which have recently made significant new high prices.

Many analysts question the bullish trend here, seeing the jump in corn prices as an essentially seasonal development, and sure to end soon. This may be true, but I think when trading commodities it is better to be guided by the price than by your own preferred fundamental supply and demand scenario logic.

I think Corn is a buy only if it makes a new daily high closing price, and this does look quite likely to happen as Friday’s close was just a whisker off that.

I will be prepared to enter a new long trade only if we see Corn futures make a new 6-month high closing price at the end of any day over the coming week, above 498.

I see the best trading opportunities this week as:

• Long of the NASDAQ 100 Index.
• Long of the S&P 500 Index following a daily close above 6118.71.
• Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,926.
• Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498.
• Long of Coffee futures (COFF etf can also be used) following a daily close of the next C future at or above 425.10.

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February 15, 2025 – Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Posts 2025 Best Rate on Dollar Retreat

Two elements have undermined the US Dollar (USD) over the last 24 hours, but the Pound Sterling (GBP) has made headway.

As markets closed, the Pound to Dollar exchange rate (GBP/USD) was seen trading at 1.25863, while the Dollar to Pound exchange rate (USD/GBP) was at 0.79452.

There has been some relief that the Administration has not moved immediately to impose reciprocal tariffs while lower yields have also undermined the US currency.

Although there are significant doubts surrounding the UK economy, the Pound has been one of the principal winners in global markets.

GBP/CHF, for example, hit 6-month highs just above 1.1400.

The Pound to Dollar (GBP/USD) exchange rate has strengthened to 2025 highs just below 1.2600.

UoB commented; “There has been a sharp increase in momentum, and we expect GBP to strengthen further.” It sees initial resistance at 1.2600 and 1.2650.

The Pound to Euro (GBP/EUR) exchange rate has edged above the 1.2000 level.

President Trump announced the potential for reciprocal tariffs on international trade partners overnight.

There will be no immediate move to impose tariffs with the Commerce Department engaged in complex calculations and an outcome is expected by April, although there could be a longer delay.

Rabobank commented; “Although the tariffs could cause upheaval in global trade, there is still plenty of hopium that world leaders will try to strike a deal with the US president.”

According to ING, “The outcome is likely to be perhaps some eye-wateringly large tariffs against some of the key countries with which the US runs a goods deficit. The EU will certainly be in the cross-hairs since it looks like Trump is using the threat of tariffs as leverage against the EU’s digital service tax.”

ING added, “We have already been using the assumption of peak trade pressure in the second quarter of this year. The above looks consistent with that and it’s why we think the dollar will move a little stronger into the second quarter. This means the current dollar dip should be a correction rather than a meaningful new trend.”

MUFG, however, is concerned that the Administration will be looking at non-tariff factors in deciding action.

In this context, the bank is also not convinced that the dollar retreat will be sustained; “Taking everything into consideration, we are not convinced that the initial US dollar sell-off on the back of investor relief that the “reciprocal tariffs” will not be implemented until at least April will be sustained for long.”

The headline US producer prices data was slightly stronger than expected, maintaining inflation concerns. However, The components that feed through into the PCE prices index were weaker than expected.

Given that the Federal Reserve targets the PCE prices index, the data offered some reassurance.

MUFG commented, “While it does not provide justification for the Fed to cut rates soon, it has helped to bring forward expectations for the timing of the next Fed rate cut a little.”

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TAGS: Pound Dollar Forecasts