Forex Friday

The EUR/USD managed to bounce back to the $1.05 area after testing liquidity below this month’s earlier low of 1.0460 this morning, where traders apparently took profit after a 5-day losing run. The EUR/USD outlook remains negative, however, even if ECB President Christine Lagarde was not as dovish as some might have expected given the political and economic situations in the Eurozone.

The USD/JPY forecast is subject to change greatly in the coming weeks with US CPI due next week followed by FOMC and BoJ decisions the following week.

USDJPY, Silver Forecast: As the final BOJ meeting for 2024 approaches, combined with holiday season trends, the Yen and Silver are poised for potential bullish rebounds. However, the strength of the Dollar rally remains in question.

Weak GDP figures saw interest rates traders fully price in three 25bp RBA cuts by Feb 2026. And AUD/USD could have traded much lower on Wednesday, were it not for a stronger yuan coming to the Aussies rescue later in the day.

Today's growth figures are unlikely to force the RBA into any easing action, but it has been enough to weigh on the Australian dollar and ASX 200. And this could allow EUR/AUD to continue higher after a 4-day retracement.

We will maintain our bearish EUR/USD forecast for the time being. This pair remains rooted in a bear trend, not just because of the threats of tariffs in 2025, but more so because of weakness in the eurozone economy and therefore the potential for more ECB rate cuts than from the Fed in the US, where even a December rate cut is not fully priced in, let alone cuts in 2025, after Trump’s election victory.

Against a backdrop of weakening economic data, looming tariffs from the US in 2025 and a struggling Chinese economy (bad for Eurozone exports), the euro outlook remains negative, putting pairs such as the EUR/USD and EUR/JPY into focus – the latter having just formed a bearish technical signal.

With Kashkari throwing the word ‘pause’ into the mix ahead of a US CPI report, traders should brace themselves for further USD gains should it come in hotter than expected.

GBPUSD, Gold Analysis: Growing economic uncertainty, coupled with upcoming US elections, rising geopolitical tensions, and easing monetary policies, is boosting both the US Dollar Index and Gold, while pressuring the British Pound toward critical support levels.

With so much going on in the Middle East and given the weekend risk, the initial NFP-related market reaction for indices may not hold into the close. But the dollar looks strong and backed by several supporting factors now. So, the EUR/USD outlook remains bearish heading into the weekend.

Today, the GBP/USD is down mainly because of a small rebound in US dollar against all major currencies, with the exception of the yen which soared back on the back of news Shigeru Ishiba, regarded as a supporter of the Bank of Japan’s plan to gradually hike rates, won the vote for leadership of Japan’s ruling party.

EURUSD, DXY Outlook: The EURUSD is just one resistance level away from a potential bull run above its July 2023 high, while the DXY continues to respect the July 2023 support levels. Next week’s US employment and ISM PMI indicators are expected to be critical in confirming either a reversal or a breakout for both pairs.

Judging by price action in the FX and rates markets, investors are certainly looking for a dovish rate decision. This could be in the form of a surprise 50 basis point cut, or 25 bps cut with a strong hint of at least one 50 bps cut in the remaining 2 meetings later this year. Ahead of next week’s central bank bonanza, when the Bank of England and Bank of Japan will also decide on their own monetary policies, the US dollar forecast remains bearish.

EURUSD, Gold Analysis: Following the ECB’s priced-in rate cut decision and growing uncertainty over the global political landscape, both EURUSD and Gold are showing positive trends. With the upcoming FOMC meeting, high volatility is expected in the near term.

Despite the uptick in wages, this was a rather weak jobs report. Not only did the headline data show only a modest +142K rise in nonfarm jobs in August (vs. +165K expected), revisions reduced reported employment for June and July sharply - by a good 86K.

EURUSD, DXY Analysis: Both the EURUSD and the US Dollar Index (DXY) are hovering around critical levels that could determine whether we see a trend reversal or confirmation. These levels are closely tied to the extremes of December and July 2023, with market participants eagerly awaiting policy decisions to solidify the trends.

USDJPY Outlook: With Tokyo’s Core CPI reaching 2024 highs and key economic data from the US on the horizon, the USDJPY chart is positioned for either intensified bearish pressures or a potential hold above the critical 140 barrier.