EUR / USD
The EUR/USD pair is currently positioned at a critical juncture, with technical indicators suggesting a period of consolidation near the 1.1600 level, bounded by key moving averages. The Fed’s increasingly dovish outlook, including an 85% probability of a December rate cut, continues to support the pair’s fundamental value.
If market expectations for a Fed cut 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, we expect the Fed to keep rates unchanged in December, which could cause the USD to rally; however, given the postponed expectations of further easing, this upside is likely to be short-lived.
In the meantime, technical analysis suggests that a breakthrough above 1.1670 could catalyse a significant rally toward September's peak of 1.187, although the pair must first overcome current resistance levels, which we believe are unlikely in the near term.
USD / JPY
USD/JPY’s moves were muted yesterday, as shorter trading weeks in both Japan and the US limit investor appetite.
The technical picture shows the pair maintaining levels above the trend support, currently positioned at 156.20. We believe that at current levels, Japanese authorities are likely to remain on alert; however, periods of thinner liquidity have effectively limited the currency pair's upward momentum, keeping the risk for potential intervention moderate but stable.
A decisive break above 157.73 could trigger a move toward 158.00, though the combination of intervention risks, potential BOJ policy shifts, and a fully priced-in December cut from the Fed suggests increasing downside risks for USD/JPY in the coming months, with 152.45 serving as a critical support level.
GBP / USD
GBP/USD posted minor intraday moves around the previous day’s highs of 1.3240 as markets continue to digest Chancellor Reeves' budget announcement, which revealed substantial tax increases of £26 billion while maintaining £22 billion in fiscal headroom for contingencies.
While the initial announcement was interpreted as optimistic, markets are now starting to focus on the longer-term implications of these changes. The Office for Budget Responsibility has downgraded the UK's growth forecasts for 2026 to 1.4%, and the tax burden is expected to reach a record 38% of GDP, weighing on the pound’s fundamental prospects.
This, coupled with the Bank of England's dovish stance, which has markets pricing in a high probability of a quarter-point rate cut in December, could create downward pressure on the pound in the coming weeks. The support at 1.3000 appears crucial to suggest a potential for longer-term pair weakness.
Economic Calendar
(no major events today)
