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EUR/USD, USD/JPY Forecast: Two trades to watch

Article By: ,  Senior Market Analyst
November 27, 2024 10:30 AM

EUR/USD rises cautiously ahead of German GFK data & post-Fed minutes

  • German GFK consumer confidence is expected to fall to -18.6
  • Fed December rate cut expectations rise post-Fed minutes
  • EUR/USD rises above 1.0450 – 1.05 zone

EUR/USD is rising after modest losses yesterday as investors await German GFK consumer confidence and a US data dump ahead of Thanksgiving tomorrow.

German consumer confidence is expected to fall slightly to -18.6 in December from -18.3, an 18-month high reached in the previous month. The data comes after German IFO business climate data earlier in the week fell by more than expected, doing little to curb winter recession worries and amid ongoing political uncertainty.

Weak data from the eurozone’s largest economy, combined with worries over trade tariffs from Trump, sees the outlook for the region deteriorating, which could fuel outsized ECB rate cut expectations.

The ECB is expected to cut rates in December, and the market is trying to gauge whether this will be a 25- or 50-basis-point cut. Should jumbo rate cut expectations rise, the EUR could come under further pressure.

The USD is falling after the market lifted rate cut expectations, which rose following the release of the FOMC minutes yesterday and ahead of several key US data releases later today before tomorrow's Thanksgiving break.

The FOMC minutes showed that policymakers supported a gradual approach to rate cuts, given the stronger-than-expected US economic data and amid fading concerns over the health of the labour market.

The Fed meets again in December, and the market is pricing in a 66% probability of a 25 basis point rate cut, up from 59% before the minutes were released.

EUR/USD forecast – technical analysis

EUR/USD fell from a peak of 1.12 to a low of 1.0330 in under two months. The price has recovered from the 1.0330 low, rising back above 1.0450, the 2023 low, as it tests the falling trendline resistance at 1.0550, a modestly positive sign.

However, the trend remains bearish until there is more evidence that the bottom is in. Should EUR/USD hold above 1.0450 and 1.05 region, buyers could look towards resistance at 1.06.

However, a break below 1.0450 – 1.05 could open the door to 1.03 and beyond.

 

USD/JPY falls to a 3-week low ahead of US core PCE data

  • USD tracks treasury yields lower
  • US core PCE is expected to rise to 2.8% from 2.7%
  • USD/JPY falls below the 200 SMA

USD/JPY is falling for a third straight day amid U.S. dollar weakness and as US treasury yields continue to ease, following the post-election rise to 4.50%.

Yields have eased following the announcement of Trump’s treasury secretary, Scott Bessent, earlier in the week. The market sees Bessent as a moderate hand.

The USD is also falling following the minutes of the November 3rd meeting, which showed that policymakers supported a gradual approach to cutting interest rates going to stone recent U.S. economic data. The market is pricing in the 66% chance the December rate cut up from 59% ahead of the release of the minutes.

Today, the focus is turning towards the US core PCE, the Fed's preferred gauge for inflation. Core PCE is expected to rise to 2.8%, up from 2.7%, while personal spending is expected to ease slightly to 0.3% from 0.5%.

US jobless claims, durable goods orders, and new home sales will also be released. Stronger than forecast data could lift the USD.

The yen benefited yesterday from Trump’s trade tariff threats, driving some safe-haven demand. Traditional safe-haven Gold also pushed higher. Japan's economic calendar is relatively quiet until Friday, so there has been little other news flow driving the strong gains in the yen.

USD/JPY forecast – technical analysis

USD/JPY’s rally from 139.50 ran into resistance at 156.74 before rebounding lower. The price has broken below the rising trendline dating back to 2022 and the 200 SMA at 152.00 and is approaching the November low at 151.30. A break below here creates a lower low, and the chart starts to look bearish.

Sellers, supported by the RSI below 50 and the bearish crossover on the MACD, will look to extend losses towards 150.80, the 50% Fib level of the 162 high and 139.50 low. Below here, 148.20, the 38.2% Fib level, comes into focus.

On the upside, buyers will need to retake the 200 SMA and 153.40, the 61.8% Fib level, and the rising trend resistance to bring 1555 and 156.74, the November high, into focus.

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