CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

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

Article By: ,  Senior Market Analyst
December 5, 2024 11:17 AM

EUR/USD rises despite French government collapse

  • PM Barnier loses a vote of no-confidence, as expected
  • Eurozone retail sales fall -0.5% MoM
  • EUR/USD trades caught between 1.0450 and 1.06

EUR/USD is rising despite the collapse of the French government. French lawmakers passed a no-confidence vote against PM Michel Barnier on Wednesday evening, throwing the country into more political uncertainty and a deeper crisis.

However, both the euro and the French CAC managed to move higher because the collapse of the French government was already priced in. Furthermore, contagion outside of French markets is fairly limited. The risk premium on holding French debt over German debt has risen to its highest level since 2012.

On the data front, eurozone retail sales were weaker than expected, falling -0.5% MoM in October after falling -0.3% in September. The data comes after weak PMI data yesterday showed the eurozone composite PMI fell to a 10-month low.

The ECB is expected to cut interest rates by 25 basis points next week, and the markets are also pricing in around 157 basis points worth of easing by the end of next year, significantly more than the level of easing expected from the Federal Reserve.

The US dollar is trading slightly lower versus its major peers after Federal Reserve chair Jerome Powell's speech yesterday, where he continued support for a slower pace of rate reductions ahead but did nothing to deter from expectations of a December cut.

Attention now turns to US initial jobless claims and comments from fed Barkin.

EUR/USD forecast- technical analysis

After recovering from a low of 1.0330 EUR/USD is consolidating between 1.06 and 1.0450. To extend the bearish trend that has been in place since the end of September, sellers will look to break below 1.0450 to test 1.04 and 1.0330.

Meanwhile, a rise above 1.06 creates a higher high and support the pair towards 1.07

USD/JPY falls with BoJ rate hike bets in focus & ahead of jobless claims data

  • BoJ chatter & safe haven flows support the yen
  • US eases after post-Powell gains; jobless claims are up next
  • USD/JPY falls towards 150.00

USD/JPY resumed its downtrend after rising in the previous session. It is strengthening as traders assess whether the BoJ will hike interest rates again later this month. Known dove policy maker Nakamura said he wasn't opposed to rate hikes, which has helped to strengthen the currency.

BoJ will announce its rate decision on December 19th, and expectations of a hike have been growing following recent comments from Ueda. However, media reports have raised questions over whether the hike will actually happen.

The yen is also benefiting from concerns surrounding South Korea, where the won continues to trade around a 2 year low following a short-lived martial law decree.

The U.S. dollar gained yesterday, but it's inching lower against its major peers today after Federal Reserve Jerome Powell highlighted the strength of the U.S. economy and signaled support for slower rate reductions. However, a December rate cut is still expected, with the market pricing in a 74% chance of a 25 basis point reduction.

Attention is now on US jobless claims, which come ahead of Friday's non-farm payroll report. Expectations are for 215k jobs added, up from 213k. Non-farm payrolls are expected to show 200,000 jobs were added in November up from just 12,000 in October.

USD/JPY forecast – technical analysis

After falling from a peak of 156.75, USD/JPY fell below the 200 SMA before finding support at the 100 SMA at 148.65. The recovery failed to rise above 150.8, the 0.5% Fib retracement of the 162 high and 139 low.

Sellers supported by the RSI below 50 will look to extend the bearish trend below 148.65 towards 148.15 the 38.2% level and towards 145.00.

Should buyers retake 150.80 a move towards 153.85 and 157.10 could be on the cards.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024