Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

EUR/USD and EUR/GBP benefit while USD/JPY takes a hit from change in U.S. inflation expectations

The euro has made gains against the dollar and sterling, while USD/JPY has fallen back.

EUR/USD stabilises thanks to a change in inflation expectations

While a more hawkish Federal Reserve (Fed) rate hike path still looks probable, the Euro seems to be benefiting from an outsized move in inflation expectations.

Yesterday EUR/USD dropped to but then bounced off the one-month support line. Today it is expected to range trade between it, the late December low and the November-to-December channel support line at $1.129 to $1.1272 on the one hand and last week’s high at $1.1365 on the other hand.

The cross is currently heading towards minor resistance which sits between the mid-December and 29 December highs at $1.136 to $1.1369. Key resistance remains to be seen between the late November and December peaks at $1.1382 to $1.1386. While the cross stays below it, the one-year downtrend remains in play.

EUR/GBP continues to hover above the £0.8335 to £0.8332 support zone

EUR/GBP has so far managed to hold above this year’s lows to date at £0.8335 to £0.8332, a fall through which would push the December 2016, April 2017, December 2019 and February 2020 lows at £0.8313 to £0.8277 to the fore, though. This area represents key long-term support which is expected to underpin the cross when first revisited.

While the £0.8335 to £0.8332 area continues to offer support, resistance along the one-month downtrend line at £0.835 is to be retested and, if broken through, the October and late December lows and last few days intraday highs at £0.8365 to £0.8381 as well.

​While the next higher early January high at £0.8418 isn’t overcome, the downtrend (in place since September of last year), remains intact.

USD/JPY remains on the back foot

USD/JPY continues to come off its early January four-year high at ¥116.35 and slides towards minor support seen between the mid-November high and this year’s low to date at ¥114.97 to ¥114.95.

A tumble through the ¥114.95 low would likely provoke a deeper sell-off towards the mid-December high at ¥114.27. On the way down minor support can be spotted at the ¥114.70 October high and at the ¥114.44 early November high.

Immediate downside pressure should be maintained while the currency pair stays below yesterday’s high at ¥115.85.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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