EUR / USD
The EURUSD strengthened, approaching the key 1.1600 level once again, as continued market dovishness weighs on the dollar index. Markets are now heavily pricing in a Fed rate cut for December, with probability surging to over 80%, while the ECB maintains a more hawkish stance focused on bringing inflation to target.
Attention now turns to the Fed’s latest Beige Book, which may offer additional insight into regional economic conditions. However, we believe that the government shutdown has created gaps in the data flow, leaving policymakers without the comprehensive evidence typically required to justify an imminent move. Even so, if market expectations continue to firm, the situation risks becoming self-fulfilling: while the Fed stresses its data-dependent approach whenever possible, it will also be mindful of the financial stability implications of surprising markets at a moment when hedging against a no-cut outcome appears limited. In our view, this dynamic could increasingly shape the narrative as the December meeting approaches, weighing on the dollar prospects.
Technical analysis reveals significant volume accumulation near 1.159, with key moving averages converging around 1.1600, establishing a critical resistance zone that could determine the pair's medium-term direction. As a result, we maintain a firmer outlook for the pair in the medium term, with moving averages serving as resistance and 1.1500 as a support area in the meantime.
USD / JPY
USD/JPY continues to demonstrate significant strength, maintaining levels around 156.50 while trading consistently above the trend support level.
The recent approval of a 21.3 trillion yen stimulus package by the Japanese government has added complexity to the currency dynamics, while expectations of Federal Reserve rate cuts in December 2025 are providing some support for the Japanese currency. Moreover, despite Japanese policymakers citing a potential for a December hike, market expectations remain firmly dovish until January, further undermining the yen’s value.
Technical analysis suggests a bullish scenario could emerge if the pair breaks above 157.73, with the psychological level of 158.00 serving as the next target. However, Japanese authorities remain vigilant and prepared to intervene in currency markets, if necessary, particularly during periods of potentially thin liquidity such as the US Thanksgiving holiday.
The market's attention is firmly focused on upcoming inflation, which is expected to quicken to 2.8%, potentially underscoring the need for further hikes. However, we expect that, given the BOJ's more conservative approach to monetary policy tightening, the case for a December hike might be unlikely, keeping the yen weaker.
GBP / USD
The GBP/USD pair has shown notable strength following the UK's autumn Budget announcement, with Chancellor Rachel Reeves's £26 billion tax increase plan and the OBR's increased fiscal headroom of £22 billion contributing to positive market sentiment. The pound's initial strengthening reflects market confidence in the fiscal approach, despite the tax measures being largely back-loaded toward the decade's end. The immediate decline in yields reflects growing confidence that borrowing requirements and interest rate risks may prove more manageable than previously feared.
Technical analysis reveals a promising upward trajectory, with the pair moving from 1.3160 to 1.3240, supported by a bullish RSI reading of 58 and strong support at 1.301. The currency pair's positive momentum is further reinforced by the dollar's broader weakness, driven by growing expectations of Federal Reserve rate cuts, while markets are simultaneously pricing in an 80% probability of the Bank of England easing in December 2025.
The technical outlook suggests potential for further gains, with a possible target of 1.3300, although confidence is limited above this level, as concerns about the back-loaded nature of the UK's fiscal consolidation measures and their long-term impact on sterling temper this optimism.
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