2024.12.30 FXON Market Analysis (December 23 to December 29)
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Weekly FX Market Review and Key Points for the Week Ahead
In the foreign exchange market for the week that ended on December 29th, fewer traders participated in the market due to the Christmas holidays, resulting in limited price fluctuations. In the USDJPY, the yen continued to weaken. The pair briefly rose to the 158 yen level. However, no significant trend was observed.
The EURUSD and GBPUSD also fluctuated in a narrow range. Overall, it was a week without any major events that moved the market.
December 23 (Mon)
The USDJPY climbed to the lower 157 yen range early in the week as speculation that the pace of U.S. interest rate cuts would slow led to a rise in U.S. 10-year yields.
Meanwhile, the U.K.'s GDP figure for the July-September quarter was revised down to 0.0% (forecast: 0.1%), reaffirming the bleak state of the economy. However, the impact on the GBPUSD was limited.
On the other hand, the annualized number of new home sales in the U.S. for November almost met expectations at 664,000 (forecast: 665,000), which had a limited impact on the market.
December 24 (Tue) - 25 (Wed)
As more traders took their Christmas holidays, the quieter market greatly reduced liquidity. The USDJPY hovered around the lower 157 yen range.
Bank of Japan (BOJ) Governor Kazuo Ueda did not provide any new monetary policy indications in his December 25th (Japan time) speech, which had little impact on the market. The EURUSD and GBPUSD also lacked momentum. As with the yearly winter holiday season, the market was quiet.
December 26 (Thu)
The dollar strengthened against the yen following the lower-than-expected number of the U.S. initial jobless claims (result: 219,000, forecast: 223,000). The USDJPY briefly touched the 158 yen level, a five-month high. However, the upward momentum quickly faded, and the pair was pushed back into the upper 157 yen range.
There were no major economic releases from the Eurozone or the U.K. The EURUSD and GBPUSD remained in a narrow trading range.
December 27 (Fri)
As the end of the year approached and there was little news, the market remained quiet throughout the day.
The USDJPY stayed in the upper 157 yen range without significant fluctuations. The EURUSD and GBPUSD remained stagnant, with no clear direction.
Economic Indicators and Statements to Watch this Week
(All times are in GMT)
January 3 (Fri)
15:00 U.S.: December ISM Manufacturing PMI
This Week's Forecast
The following currency pair charts are analyzed using an overlay of the ±1 and ±2 standard deviation Bollinger Bands, with a period of 20 days.
USDJPY
The BOJ's cautious stance on raising interest rates has led to the widespread view that it will take time for the interest rate differential between Japan and the US to shrink.
Although the pair's uptrend is likely to continue, it will move within a limited range because a handful of traders participate in the market during the New Year holiday period. So, it may be best to wait and see.
Next is an analysis of the USDJPY daily chart.
The pair has been fluctuating between +2σ and +1σ for the past week. The Bollinger Bands on the daily chart form an upward band walk. Although the pair has fallen back after reaching the 158 yen level, the upward middle line indicates that the uptrend is likely to continue.
We continue with an analysis of the USDJPY weekly chart.
On the weekly chart, four consecutive positive candlesticks appear, meaning that the pair has remained in an upward trend for each week in December. The pair is likely to head to the key resistance level of 160 yen.
EURUSD
The EURUSD appeared to have hit bottom amidst a lack of major events which can impact the market by the end of the year.
However, the European Central Bank is expected to make additional interest rate cuts in the wake of political turmoil and the sluggish economy. Therefore, the selling of the euro is likely to continue. As with the USDJPY, the low liquidity in the market during the holiday season suggests that it is best to wait and see.
Next is an analysis of the EURUSD daily chart.
The pair has concluded its downtrend and is now approaching the middle line. If it breaks through the current resistance line at the 1.044 level, the next target will be at around the 1.06 level.
We continue with an analysis of the EURUSD weekly chart.
On the weekly chart, the EURUSD had fluctuated within a wide range since 2022. However, the landscape has changed as the pair broke below the range and is now fluctuating within the new range of 1.0629 and 1.0334. The downtrend band walk also appears on the chart. If the pair breaks below 1.033, the downtrend is likely to accelerate.
GBPUSD
The bleak outlook for the British economy makes it difficult for the GBPUSD to break out of its downtrend. The dollar's behavior is likely to continue affecting the pair. As with the EURUSD, it's probably best to wait and see, as fewer traders will be participating in the markets during the holiday season.
Now, we analyze the daily GBPUSD chart.
On the daily candlestick chart, the GBPUSD has been fluctuating in a boxed range since it rebounded from the -2σ level. The pair closed Friday's session by breaking above the -1σ level. If the pair breaks above the middle line, it will head towards the next target of 1.28.
We continue with an analysis of the GBPUSD weekly chart.
During the light trading week, the pair stayed in the middle of the range between -1σ and -2σ. The gradually declining middle line indicates that it is better to keep in mind the possible continuation of the downtrend, as the pair may fall to 1.2299, the low set in April 2024.
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