As we head into Wednesday, December 18, 2024, the forex markets are bracing for heightened volatility driven by significant economic data releases, with the Federal Reserve’s interest rate decision and UK CPI figures dominating headlines. Traders are closely watching these events, as they could set the tone for major currency pairs through year-end.
In the currency markets, the GBP/USD pair surged higher following strong UK labor market data and is now poised for further moves as traders anticipate the latest CPI figures. Meanwhile, the USD/JPY pair dropped sharply due to profit-taking and weakening U.S. Treasury yields, but all eyes remain on the Fed’s updated projections. The USD/CAD climbed amid weaker oil prices and stronger U.S. retail sales data.
GBP/USD
Technicals in Focus
The GBP/USD pair climbed to 1.2725 after breaking through key resistance at 1.2700, driven by stronger-than-expected UK labor data and positive risk sentiment. On the technical front, the MACD is bullish, showing a widening histogram, while the Stochastic Oscillator has entered overbought territory, signaling potential resistance near 1.2750. The 14-day RSI remains positive at 61, reflecting strong bullish momentum.
Trading Strategy: Neutral to Buy
- Buy above 1.2700 with targets at 1.2750-1.2780, with a stop loss below 1.2660.
- Sell below 1.2660, targeting 1.2625-1.2600, with stops above 1.2700.
USD/JPY
Technicals in Focus
The USD/JPY pair fell to 153.20, retracing from highs near 154.20 amid weakening U.S. yields and a cautious risk-off tone ahead of the Fed decision. The MACD has turned bearish, crossing below the signal line, indicating downside momentum. The Stochastic Oscillator remains oversold, suggesting limited room for further declines. The 14-day RSI dropped to 39, pointing to short-term bearishness.
Trading Strategy: Neutral to Sell
- Sell below 153.50 with targets at 153.00-152.70, with a stop loss above 153.80.
- Buy above 153.80 for a move toward 154.20-154.50, with stops below 153.50.
USD/CAD
Technicals in Focus
The USD/CAD pair advanced to 1.4300, supported by weaker oil prices and stronger-than-expected U.S. retail sales data. On the technical side, the MACD remains bullish above the zero line, while the Stochastic Oscillator signals overbought conditions, suggesting a possible retracement. The 14-day RSI sits at 65, indicating strong upward momentum.
Trading Strategy: Neutral to Buy
- Buy above 1.4280 with targets at 1.4320-1.4350, with a stop loss below 1.4250.
- Sell below 1.4250, targeting 1.4220-1.4190, with stops above 1.4280.
Market Outlook
Looking ahead, all eyes will be on the U.S. Federal Reserve’s interest rate decision and updated economic projections, which are expected to influence the dollar’s trajectory. Traders will also scrutinize UK CPI data for insights into the Bank of England’s next steps on monetary policy. Additionally, developments in Canada’s inflation figures and oil price trends will remain critical for the USD/CAD pair.
Overall, markets are expected to remain highly reactive to key data, with volatility likely to increase as traders assess the implications of central bank decisions and economic signals.