Forex News

• WTI holds near two-week highs as holiday-thinned trade limits volatility.
• US-Venezuela tensions provide modest support to crude prices.
• Technical indicators show improving momentum, though downside risks remain below the $60 level.

West Texas Intermediate (WTI) Crude Oil trades little changed on Wednesday as markets slip into holiday mode, with prices hovering near two-week highs amid thin liquidity. The US benchmark remains underpinned by rising tensions between the United States and Venezuela, which have added a modest geopolitical risk premium. At the time of writing, WTI is trading around $58.33 per barrel, pausing after a three-day advance.

From a technical perspective, the daily chart points to a modest recovery in WTI, with prices reclaiming the 21-day Simple Moving Average (SMA) near $58.04. Buyers re-emerged last week after prices revisited the psychological $55 level, limiting further downside following the test of year-to-date lows.

On the upside, overhead moving averages could cap gains, with the 50-day SMA near $58.58 acting as immediate resistance. The next hurdle is seen around the $60 psychological level, where the 100-day SMA currently aligns near $60.71. Unless a decisive break above the $60 mark materialises, downside risks are likely to persist.

On the downside, failure to sustain a move above the 21-day SMA could expose initial support near $56.50, followed by the $55.00 round figure. A break below this zone would reopen downside risks toward multi-year lows.

Momentum indicators are starting to turn more constructive. The Relative Strength Index (RSI) hovers near the 50 mark after rebounding from near-oversold levels. The Moving Average Convergence Divergence (MACD) extends above the Signal line and stands in positive territory, with a modestly widening positive histogram hinting at improving bullish momentum.

• Initial Jobless Claims in the US fell by 10,000 in the week ending December 20.
• The US Dollar Index holds steady near 98.00 in the American session.

There were 214,000 Initial Jobless Claims in the week ending December 20, a decrease of 10,000 from the previous week's unrevised level, the US Department of Labor (DOL) reported on Wednesday. This reading came in better than the market expectation of 223,000.

In this period, the 4-week moving average declined by 750 to 216,750.

"The advance number for seasonally adjusted insured unemployment during the week ending December 13 was 1,923,000, an increase of 38,000 from the previous week's revised level," the DOL noted in its press release.

Market reaction

The US Dollar Index showed no immediate reaction to this report and was last seen posting small daily gains at 97.92.

• GBP/JPY holds near multi-year highs as thin holiday trade keeps price action range-bound.
• Persistent Yen weakness continues to support the cross.
• Technically, the RSI is cooling from overbought levels, pointing to near-term consolidation.

The British Pound (GBP) trades slightly lower against the Japanese Yen (JPY) on Wednesday, though thin holiday trading conditions are keeping price action contained within a tight range. At the time of writing, GBP/JPY trades around 210.60, holding firm near year-to-date highs and its highest level since August 2008.

The Japanese Yen has remained broadly weak this year, as fiscal concerns under the new leadership of Sanae Takaichi and a gradual pace of monetary policy normalisation continued to weigh on the currency. Against this backdrop, GBP/JPY is up around 6.9% year to date, reflecting persistent policy divergence between the UK and Japan.

From a technical perspective, the daily chart continues to reflect a strong uptrend, marked by a clear sequence of higher highs and higher lows, with prices holding comfortably above key moving averages.

That said, the Relative Strength Index (RSI) is easing from overbought territory and hovers around 68, signalling a risk of a mild pullback or consolidation before the next leg higher. A sustained recovery could see the pair push beyond the 212.00 handle, extending the broader bullish trend.

On the downside, initial support is seen in the 208.50-208.00 zone, where the 21-day Simple Moving Average (SMA) sits near 208.13. A decisive break below this short-term average would weaken the bullish structure and open the door for a deeper pullback toward the 50-day SMA around 205.22, followed by the 100-day SMA near 202.57.

Meanwhile, the Average Directional Index (ADX) is holding near 27, signalling that the trend remains strong, even as momentum cools in the near term.

• EUR/GBP retreats around 0.8725 early Wednesday in the European session, down 0.10% on the day
• The Bank of England’s cautious tone after its rate cut strengthens the British currency
• Limited expectations of European Central Bank rate cuts in 2026 could help limit the downside

EUR/GBP trades in negative territory around 0.8725 on Wednesday at the time of writing, extending a sequence of declines that began earlier in the week. The pair remains under pressure as the Pound Sterling (GBP) benefits from the Bank of England’s (BoE) relatively hawkish communication. At the same time, the Euro (EUR) limits the downside from the perception that the European Central Bank’s (ECB) easing cycle is approaching its end.

The Pound Sterling appreciates after the BoE delivered a widely expected 25-basis-point cut to its benchmark interest rate, bringing it to 3.75% at its latest meeting. This marks the first reduction since last summer, but the overall message from policymakers is seen as cautious. BoE Governor Andrew Bailey noted that rates are on a gradual downward path, while warning that each additional cut would become a more delicate decision due to still-persistent inflation. This guidance reinforces the view that the BoE is not embarking on an aggressive easing cycle.

Market expectations broadly align with this assessment. According to Reuters, investors believe the Bank of England will deliver at least one further rate cut in the first half of next year, with nearly a 50% chance of a second move before year-end. This outlook for a slow and measured easing path supports the Pound Sterling and acts as a headwind for EUR/GBP in the near term.

On the Eurozone side, the European Central Bank maintains a more wait-and-see stance. The ECB kept its three key interest rates unchanged at its latest meeting, marking the fourth consecutive time it has held them steady. ECB President Christine Lagarde said the institution is in a “good position” and stressed that all options remain on the table. Money markets currently assign less than a 10% chance of an ECB rate cut as early as February 2026, suggesting that the easing cycle may be close to completion.

This relative divergence between a cautious but already easing Bank of England and an ECB that remains on hold helps to contain price action in the cross. With trading volumes thinning ahead of the year-end holiday period, EUR/GBP is likely to trade more calmly, with downside pressure limited as long as monetary policy expectations remain broadly unchanged.