USD/JPY: Fed and the Bank of Japan have different tasks

With the start of weekly trading, GBP/USD continues to trade in a narrow range of 1.2573–1.2490 near 1.2581. The low volatility of currency pairs during the holiday period and weak macroeconomic indicators in the UK are holding back the pound's attempts to regain lost ground.According to the National Statistical Service of Great Britain (ONS), the country's economy showed zero growth in the third quarter, which increased the risks of recession, although analysts had expected a decrease of 0.1%. In addition, industrial production decreased by 0.7% in October, and the composite business activity index dropped to 50.5 points, reflecting business concerns about a 40 billion pound tax increase initiated by the government. In such circumstances, hopes for a positive effect from the political stability caused by a strong parliamentary majority were not justified.These factors also limit the Bank of England's ability to continue lowering the interest rate from the current level of 4.75%. In August, the regulator began easing policy for the first time since 2020, lowering the rate from 5.25%, but further steps have been postponed. The head of the Bank of England, Andrew Bailey, supported the preservation of current parameters, which was supported by five more members of the Monetary Policy Committee, while three others supported a 25 basis point rate cut, citing weakening demand and the labor market. Despite this, the decrease in inflation to 1.7% in September indicates the partial effectiveness of the measures taken, although the rising cost of electricity has again pushed inflation above the target 2.0%.Against this background, the United States is showing more stable economic dynamics. Despite the slowdown in the dollar index, which is trending sideways around 108.00, the outlook for the currency is positive. A possible trigger for the changes will be the economic policy of Donald Trump, who may impose import duties after his inauguration on January 20. If this happens, the British economy will be hit, given the significant exports of cars, equipment, chemicals and pharmaceuticals to the United States.In such circumstances, the pound's inability to show sustained growth increases the likelihood of a continuation of the GBP/USD downtrend in the coming months.Technical analysis for GBP/USD for todayOn the daily chart, the pair is correcting, remaining within the descending channel with the boundaries of 1.2660–1.2100. Attempts to update the autumn lows were unsuccessful.Technical indicators confirm the sell signal: the EMA lines of the alligator indicator maintain a significant distance from the signal line, and the awesome oscillator (AO) indicator forms descending bars in the sell zone.Trading recommendations- Short positions: open when the price is fixed below the 1.2500 level with a target of 1.2350. The stop loss is 1.2600.- Long positions: open after the breakdown of the 1.2610 level with a target of 1.2770. The stop loss is 1.2500.

FOREX Fundamental analysis for EUR/USD on December 30, 2024The US dollar is moving towards the end of the year with the best performance since 2015, having strengthened by more than 7% against key global forex currency indices. The main driver of this rally was the steady growth of the US economy, which allowed the Federal Reserve to minimize the depth of the monetary policy easing cycle. As a result, interest rates in the United States will remain higher than in other regions, including the Eurozone, which creates the prerequisites for a further decline in the EUR/USD pair to parity.Central banks usually act synchronously, focusing on the leader, which is usually the Fed. However, in conditions of varying rates of economic growth, following the Federal Reserve can have negative consequences for less stable economies. The United States, thanks to fiscal incentives and rapid productivity growth amid the introduction of artificial intelligence technologies, has withstood the toughest policy tightening cycle in recent decades. In contrast, the Eurozone economy turned out to be less prepared for such conditions.Europe still has not reached its pre-crisis GDP growth trajectory. This is due to insufficient fiscal support, lower labor productivity, and the consequences of the geopolitical conflict in Ukraine, including the energy crisis. In the context of high interest rates, the Eurozone economy is showing weak adaptation, and in the second half of the year, its GDP is likely to show zero growth.The ECB's attempt to continue following the Fed, which is planning a pause in policy easing in early 2024, could prove disastrous. For example, the head of the National Bank of Austria, Robert Holzmann, believes that the ECB will need more time to lower rates due to rising energy prices and the weakening of the euro, which increases inflationary pressures.In such circumstances, the IMF's forecasts for 2025 for the eurozone, which are already noticeably inferior to those of the United States, risk not being justified. An additional pressure factor is Donald Trump's policy, which includes fiscal incentives to accelerate US GDP growth and trade tariffs aimed at weakening the economies of the partners.The only chance for the ECB to avoid deepening the gap may be a faster rate cut compared to the Fed. However, over the next 1-3 months, this is likely to lead to a fall in the EUR/USD pair to parity.The main risk for such a scenario remains possible difficulties with the implementation of Donald Trump's election program. Financial markets, based on expectations from the so-called "red wave", have already incorporated most of the positive scenarios into quotes. If these expectations are not met, a pullback of the EUR/USD pair may follow, which will become a new selling opportunity towards the 1.03 and 1.00 levels.

FOREX Fundamental analysis for EUR/USD on December 27, 2024Against the background of discussions about which of Donald Trump's election promises can be realized, it is more correct to ask another question: can the US economy maintain the high growth rates demonstrated in 2024? The resilience of the American economy to the Fed's unprecedentedly harsh monetary measures in 2022-2023 has become a key factor in ensuring the dollar's status as one of the strongest currency indices on the Forex market this year.A strong economy implies a strong currency, which is confirmed by macroeconomic data. The forecast of the Federal Reserve Bank of Atlanta points to US GDP growth of 3.1% in the fourth quarter, while the European outlook remains weak — Bloomberg experts do not expect Eurozone GDP growth of even 1% in 2024. This divergence is becoming the main driver of the EUR/USD depreciation.The main factor in the difference between the Old and New Worlds is labor productivity. In the United States, it has been growing at 2% and above for five consecutive quarters. According to the forecasts of the Congressional Budget Office, if the average productivity growth is 1.1%, the US national debt will increase from 99% of GDP in 2024 to 116% of GDP by 2034. However, if productivity increases to 1.6%, the debt burden will decrease to 108% in ten years. The technological boom associated with artificial intelligence can raise this figure to 2.5–3%, which is comparable to the innovative spurts of the past — the introduction of jet engines in the 1960s and the development of the Internet in the 1990s.High productivity is the basis for fiscal incentives and tax breaks, which in turn accelerates GDP growth. Donald Trump's policies of fiscal stimulus and deregulation reinforce these trends. Due to this, the US economy significantly outperformed the European one in 2024, which led to a decrease in EUR/USD by almost 6%.The prospects for 2025 also point to increased economic divergence. While the United States continues to attract investment in high-tech sectors, Europe is facing political crises that, alas, are holding back growth.However, the EUR/USD pair's path to parity may be uneven. Temporary factors such as the rally in stocks in the United States, an increase in the number of unemployed receiving benefits to 1.9 million people, the highest level since 2018, as well as an improvement in China's GDP forecast to 4.5% in 2025, may provide short-term support for the euro.However, in the long term, the divergence in economic growth between the United States and Europe, reinforced by Trump's measures and the Fed's slower rate cuts, will send EUR/USD to parity. Unsuccessful attempts by the pair to overcome the resistance levels of 1.0425, 1.047 or 1.051 will be signals for the formation of short positions.

FOREX Fundamental analysis for EUR/USD on December 24, 2024The US dollar, thanks to the Fed's decision to suspend interest rate cuts and Donald Trump's controversial policy, is showing its best quarterly results since 2022. Uncertainty in the markets is growing, forcing investors to look for safe assets, one of which remains the dollar. Attempts by the EUR/USD bulls to develop an offensive are facing stiff resistance.Donald Trump has previously stated that a strong dollar creates economic difficulties, reducing the competitiveness of American companies. However, his plans to implement an "America First" strategy, including fiscal stimulus and trade tariffs, only exacerbate this problem. The growth of the American economy against the background of a slowdown in other countries attracts capital to the United States, strengthening the dollar. Speculators, in turn, increased the volume of long positions to the maximum since May.In 2024, the dollar holds the lead among other forex currency indices due to its undervaluation. Forecasts for the end of 2023 suggested that the Fed's tight monetary policy would slow US GDP growth to 1%, but the reality turned out to be different — the economy is ready to grow by 3%. Expectations of a decrease in Treasury bond yields also failed to materialize — instead, they increased. The start of the rate reduction cycle, which was forecast for early 2024, occurred only in September.Interestingly, major financial institutions expect further declines in bond yields in 2025. Their consensus forecast assumes a drop in the yield of 10-year securities to 4.25%, which is lower than current levels. This is based on assumptions about a slowdown in the economy and continued easing of the Fed's policy. However, an alternative scenario assumes that due to fiscal incentives, growing budget deficits and inflationary pressures, rates will rise, strengthening the dollar.But the uncertainty remains. Perhaps Donald Trump will not be able to implement his initiatives, inflation in the United States will slow down, and the economy will begin to cool. In this case, the euro may strengthen sharply even against the background of the weakness of the eurozone and the continued reduction of ECB rates.In the meantime, the market is preparing for the holidays, being in a consolidation phase. Low volatility of currency pairs can provoke sharp movements in EUR/USD, including a breakdown of support at 1.0385. However, perhaps the best solution would be to take a wait-and-see attitude during this period of uncertainty.

USD/CHF analysis on December 23, 2024Since the beginning of the week, USD/CHF has been moving in a corrective trend, trading around 0.8933. The strengthening of the Swiss franc, supported by the monetary policy of the Central Bank, almost returned the asset to the levels of the beginning of last week.At the last meeting, the Swiss National Bank lowered the interest rate by 50 basis points to 0.50%. This was the most significant step in monetary policy easing in the last decade. The reason for this decision was lower-than-expected inflation, which is projected to reach zero in 2025. In addition, the construction price index for the period from April to October increased by 0.1% and reached 115.2 points, which is the highest since 2019. The annual growth rate was 0.5%.The US dollar index is holding at around 107.50. The decline in the growth rate of the base index of personal consumption expenditures caused a negative market reaction. In November, the indicator was 0.1% month-on-month against 0.3% earlier, and remained at 2.8% year-on-year, falling short of the projected 2.9%. The income of the population also slowed down from 0.7% to 0.3% during this period.USD/CHF technical analysis for todayOn the daily chart, technical indicators confirm the buy signal. The fast EMAS of the alligator indicator show a break from the signal line, and the awesome oscillator (AO) histogram forms correction bars in the positive zone.Trading recommendationslong positions when the price is fixed above the level of 0.8960 with a target of 0.9090. The stop loss is placed at 0.8900.sale is possible when the level of 0.8900 is broken down and fixed below, with a target of 0.8780. The stop loss should be set at 0.8950.

The NZD/USD pair is consolidating around 0.5658 amid weak economic data from New Zealand.In the third quarter, the country's GDP decreased by 1.0%, and in the second quarter, the figure was revised to -1.1%. After a short period of growth, the economy has been declining for two consecutive quarters, indicating the beginning of a recession. 11 of the 16 industries recorded negative dynamics, with manufacturing, business services and construction the most affected. GDP per capita decreased by 1.2%, continuing to fall for the eighth consecutive quarter.The US dollar index adjusted to 107.40 after reaching annual highs. The slowdown in personal consumption expenditures in the United States in November from 0.2% to 0.1% in monthly terms and an annual increase to 2.4% put pressure on the dollar. Core costs excluding food and energy remained stable at 0.1% and 2.8%. Household incomes decreased from 0.7% to 0.3% over the same period.On the daily chart, the pair is correcting near the support line of the descending channel, the boundaries of which are in the range of 0.5740–0.5600.Technical indicators confirm the continuation of the downtrend. The fast EMAs of the alligator indicator remain below the signal line, and the histogram of the awesome oscillator indicator (AO) forms correction columns in the negative zone.- It is recommended to open short positions when the level of 0.5620 breaks down with a target of 0.5480. The stop loss is set at 0.5680.- Long positions will be relevant if the price is fixed above the level of 0.5690. The nearest target will be 0.5830. We will place the stop loss at 0.5620.

FOREX Fundamental analysis for EUR/USD on December 23, 2024The market was so afraid of the FOMC's December forecasts that it began to wonder if the Fed had completed its monetary easing cycle. This caused the EUR/USD pair to fall to a two-year low. However, the slowdown in the growth of the American index of personal consumption expenditures (PCE) and the dovish statements by the Fed representatives somewhat dampened the ardor of the bears. Even Donald Trump's threats against the EU could not affect the dynamics of the pair.In November, PCE grew by only 0.1%, which was the lowest since May. The core index also slowed to 2.8% year-on-year. The head of the Federal Reserve Bank of New York, John Williams, insists on further rate cuts, and Mary Daly from the Federal Reserve Bank of San Francisco agrees with the forecast of two stages of policy easing in 2025. Austin Goolsbee of the Federal Reserve Bank of Chicago assumes that the cost of borrowing will decrease over the next year and a half.Even the words of Cleveland Fed President Beth Hammack, who voted to keep the rate at 4.75%, did not alarm investors. She believes that further rate cuts are possible if inflation continues to slow down. The drawdown of PCE to 0.1% supports the likelihood of policy easing as early as January. Derivatives have reduced the probability of a pause in the Fed's actions from 95% to 89%.Despite the rise in yields on Treasury bonds and US stock indices, the EUR/USD bulls remain active. Even Donald Trump's statement about possible tariffs on the EU if Europe does not increase purchases of oil and gas from the United States did not cause them serious concerns. This looks strange against the background of the EU's policy of abandoning Russian gas and expanding the share of American LNG to 48%.Although the EUR/USD bears have temporarily retreated, their positions remain strong. HSBC analysts do not expect the dollar to weaken in 2025. Manulife Investment Management sees the need to improve the global economy in order to reduce the USD index, but there are no signs of this yet. Deutsche Bank predicts a decline in the EUR/USD pair to the parity level.We recommend using EUR/USD pair corrections followed by a rebound from the resistance levels of 1.0465 and 1.0500 to form or strengthen short positions.

AUD/USD analysis on December 20, 2024AUD/USD is consolidating near the 0.6221 mark. The pair is in a sideways trend with a downward trend. This is due to the high popularity of the US dollar, which puts pressure on the Australian currency.According to the Australian Bureau of Statistics (ABS), household wealth continued to grow for the eighth consecutive quarter in the third quarter, rising 2.4% to AUD$401 billion. The total amount of wealth reached 16.9 trillion, which is 9.9% more than a year earlier. The main growth drivers were an increase in the value of real estate and savings in pension funds. Meanwhile, expected inflation rose from 3.8% to 4.2% in December, exceeding the Reserve Bank of Australia's target range of 2.0–3.0%. This increases the likelihood of maintaining the current monetary policy of the regulator for a long time. Analysts expect the first rate cut not earlier than spring, but with a further increase in inflation, the decision may be postponed until the second half of the year.The US dollar index is trading at 108.10, updating yesterday's highs. In the third quarter, US GDP grew to 3.1% (against the expected 2.8%), the number of initial applications for unemployment benefits decreased to 220,000, and repeat applications decreased to 1,874 million. Sales volumes in the secondary housing market in November also showed a significant increase of 4.8%, reaching 4.15 million.AUD/USD technical analysis for todayOn the daily chart, the AUD/USD pair adjusted and left the "expanding formation" figure with the boundaries of 0.7100–0.6250. The indicators indicate a strengthening of the downtrend. The EMA lines of the alligator indicator are directed downwards and are below the signal line, while the Awesome Oscillator histogram remains in the negative zone.Trading recommendationssale will be relevant if the price drops below the level of 0.6190 with a target of 0.6080. The stop loss is 0.6250.buy is considered when the pair is fixed above the 0.6250 level with a target of 0.6370. The stop loss is 0.6200.