As the financial world awaits the U.S. Nonfarm Payrolls data, the currency markets are in flux. Here’s a snapshot of trading updates for EUR/USD, GBP/USD, and USD/JPY.
Modest Gains for EUR/USD
EUR/USD continues its positive trend for the second day in a row this Friday, despite lacking momentum to break out of the previous day’s broader trading range. The currency pair is trading above mid-1.0900s, as market participants eagerly await macroeconomic data from the Eurozone and the United States.
EURUSD Daily Chart
Market Dynamics and Key Influences
The EUR/USD pair experienced a surge during Thursday’s European trading hours but failed to maintain its momentum in the latter half of the day due to rising US Treasury bond yields bolstering the US Dollar (USD). As we shift focus to the US December jobs report, the pair is on the back foot, trading below 1.0950.
EUR/USD Forecast: Potential Rise to 1.1150 – 1.1270 Amid Bullish Market Signals
The EUR/USD asset is poised for a potential rise, with projected levels reaching 1.1150 and possibly extending to 1.1270. Currently, the recommendation for this asset is to BUY, with an entry price or pivot point set at 1.0720. Traders are advised to risk only 1% per trade as a prudent risk management strategy. This forecast is based on daily observations of the spot market. Supporting this bullish outlook is the Relative Strength Index (RSI), which currently presents a mixed to bullish signal.
Effects of Risk Mood and Treasury Bond Yield
A shift towards a positive risk mood early Thursday made it challenging for the USD to find demand. However, after the December ADP Employment Change beat market expectations at 164,000 (versus an expected 115,000), the 10-year US Treasury bond yield rose above 4%, helping limit USD losses.
Anticipated Data Release from Eurostat
Eurostat will release the Harmonized Index of Consumer Prices (HICP), the European Central Bank’s (ECB) preferred inflation measure, for December during the European session. Market analysts predict HICP inflation to rise to 3% annually, up from 2.4% in November. An unexpected increase could help the Euro maintain its position, although EUR/USD movements will likely be heavily influenced by US data later in the day.
Implications of Nonfarm Payrolls (NFP)
The expectation for December’s Nonfarm Payrolls (NFP) in the US is an increase of 170,000, following November’s stronger-than-expected increase of 199,000. The CME Group FedWatch Tool indicates a 65% market expectation of a 25 basis point Federal Reserve (Fed) policy rate decrease in March, down from 85% earlier in the week.
GBP/USD Trading Updates: Ahead of US Nonfarm Payrolls
GBP/USD Rises Towards 1.2700
GBP/USD extends its winning streak into the third day, trading higher around 1.2690 during Friday’s early European hours. Despite a risk-averse market and persistent USD strength, GBP/USD recorded modest gains on Wednesday and continues to edge higher towards 1.2700 early Thursday.
Impact of Hawkish Tone and Capital Outflows
The hawkish tone in the Federal Reserve’s (Fed) December policy meeting minutes, coupled with a significant drop in Wall Street’s main indexes, boosted USD strength mid-week. However, GBP/USD managed to hold steady throughout the day, suggesting that capital outflows from the Euro helped the Pound Sterling remain resilient against its competitors.
Japanese Yen Hits Two-Week Low Against USD
The Japanese Yen continues to trade negatively against the USD for the fourth consecutive day this Friday, with the USD/JPY pair reaching a two-week high during the Asian session. In Thursday’s trading session, the USD/JPY pair experienced a rally, fueled primarily by the strength of the US Dollar and favorable labor market figures, which boosted the Greenback over the Yen as the American economy continued to show resilience.
Resilient US Economy and Dovish Approach by Bank of Japan
A resilient US economy that may not require multiple rate cuts from the Fed, coupled with a dovish approach by the Bank of Japan, could lead to further strengthening of the Dollar against the Yen.
AUD/JPY Forecast: Anticipating a Fall Amidst Bearish Market Signals
The AUD/JPY asset is currently showing signs of a potential fall, with projected levels dropping by 53 to 77 pips. The current recommendation for this currency pair is a SELL, with an entry price or pivot point set at 97.33. The target and take profit level is set at 96.56. As part of a prudent risk management strategy, traders are advised to risk only 1% per trade.
This bearish forecast is based on daily observations of the spot market. Supporting this outlook is the Relative Strength Index (RSI), which is below its neutrality area at 50. The Moving Average Convergence Divergence (MACD) is positive but below its signal line, indicating that it must penetrate its zero line to expect further downside. Furthermore, the price is currently below its 20 and 50 period moving averages, which stand respectively at 97.05 and 97.01.
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