As we head into Friday, December 20, 2024, global markets are poised for a session marked by notable economic data releases and key monetary policy decisions. Central bank updates, including the Federal Reserve’s rate decision and the Bank of Japan’s cautious stance, have created waves in the forex market. The U.S. dollar’s resilience remains under scrutiny as traders react to a series of economic reports, including GDP figures and labor market data.
GBP/USD
Technicals in Focus
The GBP/USD pair experienced significant volatility, falling sharply to a low of 1.2550 following the Bank of England’s (BoE) policy decision to maintain interest rates at 4.75%. The pair’s sharp decline was fueled by dovish tones in the BoE’s meeting minutes, suggesting a cautious outlook on future hikes.
On the technical side:
- MACD: Showing strong bearish momentum with a divergence below the zero line.
- RSI: Moving into oversold territory, indicating potential exhaustion in selling pressure.
- Stochastic Oscillator: Suggests further downside momentum as it remains in the lower range.
Trading Strategy: Neutral to Sell
- Sell below 1.2580-1.2550 with targets at 1.2500-1.2450 and stops above 1.2600.
- Alternatively, consider buying above 1.2600 with a target of 1.2650-1.2700.
USD/CAD
Technicals in Focus
The USD/CAD pair saw a dramatic intraday spike to 1.4375 before retreating slightly, as robust U.S. GDP data supported the dollar. However, Canadian retail sales data painted a mixed picture, limiting further upside for the pair. Oil price fluctuations also influenced the Canadian dollar, with WTI crude prices easing from recent highs.
On the technical side:
- MACD: Bullish momentum is fading, indicating potential for consolidation.
- RSI: Neutral, hovering around 50, suggesting a balanced market.
- Stochastic Oscillator: Overbought territory, signaling a possible pullback.
Trading Strategy: Neutral to Buy
- Buy above 1.4350-1.4375 with targets at 1.4400-1.4450 and stops below 1.4320.
- Alternatively, consider selling below 1.4320 with a target of 1.4270-1.4250.
USD/JPY
Technicals in Focus
The USD/JPY pair surged to 157.50 after the Bank of Japan (BoJ) maintained its ultra-loose monetary policy. The pair’s sharp upward trajectory was bolstered by safe-haven flows into the U.S. dollar amid strong U.S. economic data.
On the technical side:
- MACD: Strong bullish momentum, with histograms expanding above the zero line.
- RSI: Near overbought territory, suggesting limited room for further upside.
- Stochastic Oscillator: Overbought, indicating potential for a short-term correction.
Trading Strategy: Neutral to Buy
- Buy above 157.00-157.50 with targets at 158.00-158.50 and stops below 156.50.
- Alternatively, consider selling below 156.50 with a target of 156.00-155.50.
Market Outlook
Looking ahead, market participants will focus on Friday’s U.S. Core PCE Price Index and personal spending data, critical indicators for inflation trends. In addition, Canadian retail sales data will provide further direction for the USD/CAD pair. Traders will also monitor speeches from key policymakers, including Fed members, to gauge future policy direction.
Overall, the forex market is expected to remain sensitive to data-driven moves and central bank updates, with potential for heightened volatility as traders digest key economic developments.