GBP/USD, EUR/USD Prices, Analysis and Charts

• JOLTs, ADP, and NFP reports released this week.
• How dovish was Fed Chair Powell at the last FOMC meeting?

The US dollar is keeping hold of most of Tuesday’s gains as expectations of an aggressive series of US rate cuts are pared back. Going into the end of 2023, CME Fed Fund probabilities at one stage showed markets expecting 175 basis points of rate cuts this year with the first move seen in March. This has now been reduced by a quarter of a point to 150 basis points of cuts. The late-December dovish tone was fuelled by Fed Chair Powell at the last FOMC meeting and today’s release of the minutes of this meeting may show that the market’s interpretation of Chair Powell’s remarks may have been misplaced.

Later in today’s session, we have the first of three US jobs reports this week with the November JOLTS job openings release at 15:00 UK. Job openings have fallen steadily over the last two years, and are expected to fall further today, tightening labor market conditions.

On Thursday the December ADP report is released at 13:15 UK, while on Friday the latest US NFP report is released at 13:30 UK.

For all market-moving data releases and events, see the real-time

Tuesday’s tightening of rate expectations forced US bond yields higher, giving the US dollar a boost. The US dollar index (DXY) popped sharply higher and is now close to negating the recent bearish pennant pattern seen at the end of December last year. The DXY chart remains bearish overall but a short period of consolidation around these levels cannot be discounted.

US Dollar Index Daily Chart

The recent bout of US dollar strength has put the brakes on cable’s multi-month rally. After touching a five-month high of 1.2828 on December 28th, the pair are now eyeing 1.2600. A clean break below the 38.2% Fibonacci retracement level at 1.2628 will see 1.2600 tested before the 200- and 50-day simple moving averages at 1.2532 and 1.2517 respectively come into play.

GBP/USD Daily Chart

IG retail trader data shows 57.98% of traders are net-long with the ratio of traders long to short at 1.38 to 1.The number of traders net-long is 32.60% higher than yesterday and 30.90% higher from last week, while the number of traders net-short is 10.10% lower than yesterday and 19.98% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP / USD prices may continue to fall.

EUR/USD has lost two big figures since the late December high print of 1.1193 but remains in an uptrend for now. The first level of support is seen off the 23.6% Fibonacci retracement at 1.08645, followed closely by the 50- and 200-day simple moving averages at 1.0849 and 1.0845.

EUR/USD Daily Chart