GBP/USD Under Pressure as Dollar Gains; Eyes on Rate Decisions
EUR/USD
Prediction: Decrease
Fundamental Analysis:
EUR/USD declined sharply midweek, dropping over 1.75% and slipping below 1.0750, a level not seen since July. The U.S. Dollar gained strength as the market reacted to former President Donald Trump emerging as the leading candidate in the presidential election. Wednesday’s trading saw significant selling pressure on EUR/USD, which reached new multi-month lows near 1.0685-1.0680, as investors considered the implications of a potential “Red Sweep.” The pair also dropped convincingly under the 200-day moving average at 1.0870, suggesting the possibility of further declines.
Meanwhile, the U.S. Dollar Index surged past 105.00, buoyed by rising U.S. yields and a decrease in German bund yields. The Federal Reserve is anticipated to announce a 25-basis-point rate cut on Thursday, contrasting with the European Central Bank’s cautious stance after lowering its deposit rate to 3.25%. Trump’s win could lead to new tariffs on European and Chinese imports, potentially driving up inflation and influencing the Fed’s approach to rate cuts. The relative strength of the U.S. economy over the eurozone suggests that Dollar strength may persist in the near term.
Technical Analysis:
EUR/USD could face additional losses, with a potential drop toward the November low of 1.082 and then the June low at 1.0666. To the upside, resistance lies at the November high of 1.0925, followed by the 55-day SMA at 1.1000 and the 2024 peak of 1.1214. As long as EUR/USD remains below the 200-day SMA at 1.0869, weakness is expected to continue. The four-hour chart shows renewed selling pressure, with initial support at 1.0682, followed by 1.0666 and 1.0649. The RSI is around 31, signaling oversold conditions.
XAU/USD
Prediction: Decrease
Fundamental Analysis:
Gold prices edged up during the Asian session, but strong bullish momentum remains absent, keeping prices close to a three-week low reached on Wednesday. Optimism about potential economic growth under Trump’s presidency has buoyed market sentiment. In the closely contested election, Donald Trump won 277 electoral votes, surpassing the 270 needed to secure the presidency in January 2025. This has strengthened the U.S. Dollar, pushing gold prices down to recent lows near $2,652.29, with little sign of reversal.
Trump’s victory also propelled U.S. stock indexes to new records, while government bonds declined, causing Treasury yields to climb to multi-week highs. The 2-year note yield rose to 4.28%, while the 10-year yield reached 4.46%. Ahead of the Federal Reserve’s monetary policy announcement on Thursday, markets are anticipating a 25-basis-point rate cut. Investors will pay close attention to Chairman Powell’s comments on Trump’s impact on U.S. economic policy.
Technical Analysis:
The daily chart for XAU/USD indicates persistent bearish pressure. Technical indicators are declining after moving into negative territory, showing a sharp downward trend. The pair has slipped below the bullish 20 SMA, now near $2,714. Although the 100 and 200 SMAs remain bullish, they are far below the current price, which could hint at a potential rebound. On the 4-hour chart, the pair has fallen below all moving averages, with the 20 SMA accelerating the drop. However, it remains above the 100 and 200 SMAs. Longer-term averages are losing upward momentum, while technical indicators remain highly oversold.
GBP/USD
Prediction: Decrease
Fundamental Analysis:
GBP/USD fell below the 1.2900 mark on Wednesday as the U.S. Dollar strengthened amid the clear outcome of the presidential election. Both the Bank of England and the Federal Reserve are expected to announce quarter-point rate cuts on Thursday. Early Wednesday saw sharp declines as the Dollar gained strength on election results. After a short-lived rebound in the European morning, GBP/USD hovered around 1.2900.
The Dollar rose following reports that Donald Trump had won Georgia and North Carolina—two previously contested battleground states. Trump has secured 267 of the 270 electoral votes needed to win, with leads in Michigan and Wisconsin still undecided. The election results led to a rise in U.S. Treasury bond yields, creating caution around aggressive Fed easing. U.S. stock index futures are showing gains of 1.8% to 2.7%, suggesting a strong market opening, which could limit Dollar gains and provide some support for GBP/USD.
Technical Analysis:
The RSI on the 4-hour chart remains below 50, suggesting weak recovery potential. Support lies at 1.2850, followed by 1.2800, which is aligned with the 200-day SMA. If GBP/USD can hold above 1.2900, it could continue recovering toward 1.2930, with further resistance at 1.3000, where the 100-day SMA is situated.
USD/JPY
Prediction: Increase
Fundamental Analysis:
USD/JPY is currently experiencing a bullish consolidation following its recent rally to the highest level since late July. The rise is fueled by speculation that Japanese authorities may intervene to support the yen, though uncertainty remains around potential rate hikes from the Bank of Japan. Rising U.S. bond yields have also added pressure on the yen. Analysts see Trump’s win as a longer-term positive for the Dollar, particularly with his stance on increasing tariffs on imports. Focus now turns to the Federal Reserve’s anticipated 25-basis-point rate cut, while recent BoJ meeting notes suggest no imminent rate hikes, which adds further pressure to the yen.
Technical Analysis:
USD/JPY hit a four-month high near 154.40 during Wednesday’s European trading session as the Dollar continued to outperform following Trump’s expected victory. The Dollar Index, measuring the Dollar against six major currencies, rose above 105.00. USD/JPY was last trading at around 154.50, with daily momentum steady and an increasing RSI, indicating potential upside. Resistance levels are identified at 155 and 156.50 (76.4% Fibonacci retracement), while support is found at 151.60 (200 DMA) and around 150.60/70 (50% Fibonacci retracement from July high to September low, 100 DMA).
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