EURUSD: No light at the end of the tunnel
EURUSD is down by 4.78% year-to-date and has been stuck in a range since the ECB signaled the end of its rate hike cycle more than a year ago. Despite a boost from a dovish Fed, the euro has struggled due to the ECB’s rate cut policy, a stagnated economy, political instability, and geopolitical conflicts in Ukraine and the Middle East, pushing the pair to a two-year low of 1.0330.
Looking into 2025, volatility is likely to continue with ongoing divergences in monetary policy between the ECB and the Fed, political jitters, and potential tariff headwinds from Trump. The technical picture also displays a grim outlook.
Although the pair escaped a bearish break below a rectangle, with the technical indicators pointing to oversold conditions, there is no guarantee that the price could transition to a sustainable uptrend.
The bearish double top formation and the rejection from the 2008 resistance trendline near 1.1213 and around the 61.8% Fibonacci retracement of the 2000-2008 upleg sent a red warning in September. Then, the 20-weekly exponential moving average (EMA) crossed below the 50-weekly EMA after failing to move above the 200-weekly EMA, further strengthening the case of a bearish reversal.
If the pair sinks below 1.0470 and 1.0330, it may initially pause near the 1.0200 level before and then test parity within the 0.9900-1.0075 zone. Moving lower, the price could visit the tentative support line, which connects the 2000 and 2022 lows, at 0.9670.
For bulls, breaking above 1.1200-1.1250 is key, but resistance at 1.0610 and 1.0800-1.0850 followed by some challenging sessions around the 200-weekly SMA at 1.0930 could hold the pair back. A move past 1.1200-1.1250 could open the door to 1.1485-1.1600.
The mean estimate for the end of 2025 from 50 key global financial institutions reporting to Refinitiv is at 1.0500, with forecasts ranging between 1.1130 and 0.9900.
GBPUSD: May chase more gains
GBPUSD did not have an impressive performance either but a political shift to the left in July and a relatively more conservative rate cut policy from the Bank of England offset selling pressures, leaving the pair with a negligible gain of 0.36% year-to-date.
Inflation is back above the central bank’s 2.0% target and the impact from the new fiscal budget, which forces businesses to increase their social insurance contribution in April, is unknown. With futures markets suggesting a relatively gradual monetary easing, and the UK chancellor hoping for an ambitious economic partnership with the EU, GBPUSD could remain supported. However, a struggling economy and trade disputes could prevent a trend continuation toward the pre-pandemic levels above 1.4000.
Having rotated near a familiar ascending trendline, there is potential for a continuation higher as both the RSI and the stochastic oscillator have changed direction to the upside. A confirmation could come above 1.2800, while a completion of a golden cross between the 50- and 200-weekly simple moving averages (SMAs) could fuel more optimism, shifting the spotlight toward the next barrier at 1.3045-1.3212. A steeper increase could face a major battle within the 1.3400-1.3525 area.
Alternatively, a slide below 1.2530 could see a test of the 50% Fibonacci retracement of the 2021-2022 downtrend at 1.2285. If that floor cracks, the selloff could exacerbate toward the 1.2020 support area or even lower to the 38.2% Fibonacci of 1.1820. Additional declines from there would downgrade the long-term picture.
The mean estimate for December 2025 from 50 key global financial institutions reporting to Refinitiv is at 1.2800 versus 1.2672 predicted for December 2024. The highest forecast is at 1.3600 and the lowest is at 1.2000.
USDJPY: Could sail through the waves
USDJPY is up 8.11% year-to-date, rebounding from a summer sell-off to remain above 150.00 as the Fed leaned towards gradual rate cuts.
With President Trump lifting his threat to fire Jay Powell before his term ends in 2026, monetary guidance could produce continuity. The greenback has been benefiting from resilient economic conditions. Hence, the health of the US economy and particularly inflation and employment expectations could be key catalysts for the greenback as investors are uncertain about the impact of Trump’s potential deep tax cuts and import tariffs. On the other hand, potential rate hikes delivered by the BoJ could weigh on the pair.
Technically, USDJPY seems to be trading within a bullish channel, recently setting a foothold near its 20- and 50-weekly SMAs at 149.75. If that floor holds and the bulls pierce through the 156.60 wall, the recovery phase could extend toward July’s multi-year top of 161.94 or mark a new higher high near the channel’s upper band currently seen near 164.60. Then, the spotlight could fall on the steep ascending line at 168.35, a break of which could see an acceleration toward 174.85.
Still, the technical outlook is not completely out of risks. A bearish head and shoulders pattern could take shape if the price confirms a lower high at 156.73 and subsequently corrects below the 139.00 area. If the 200-weekly exponential moving average (EMA) currently at 137.00 proves fragile too, the pair could suffer a painful decline toward 131.92.
The mean estimate for December 2025 from 50 key global financial institutions reporting to Refinitv is at 147.00 versus 151.75 predicted for December 2024. The highest forecast is at 160.00 and the lowest at 125.00.
