Forex News

The Eurozone Retail Sales, which is a key measure of consumer spending, remains flat month-on-month (MoM) in October, while it was expected to grow by 0.1%, reported by Eurostat on Thursday. In September, the consumer spending measure rose by 0.1%, revised from a negative 0.1%.

On an annualized basis, Retail Sales grew by 1.5%, faster than estimates of 1.4% and the prior release of 1.2%, revised higher from 1%.

FX implications

The impact of the Eurozone Retail Sales data seems negligible on the EUR/USD pair, which trades mildly higher around 1.1680 at the time of writing.

• The Euro picks up from 0.8737 lows against the Pound but is lac¡king acceptence above 0.8750.
• The pair remains on the defensive following a nearly 0.7% sell-off on Wednesday.
• Investors' relief on the UK budget and the upward revision of the UK's GDP have provided an additional impulse to the Pound.

The Euro is picking up from five-week lows near 0.8735 on Thursday, as the Pound loses steam, following Wednesday’s rally. The pair, however, maintains its bearish trend intact, with technical indicators pointing lower and investors upbeat about the details of the UK budget.

A combination of investors' relief amid the GBP 26 billion of annual tax rises contained in the UK’s budget to cover the fiscal deficit, the upwardly revised Gross Domestic Product (GDP) estimations for 2025, and solid UK services activity figures sent the GBP rallying across the board on Wednesday.

Technical Analysis: Support at 0.8737 remains on the bears’ focus

Technically, the pair keeps trading within the bearish channel from mid-November highs, with upside attempts likely to be corrective. The 4-hour Relative Strength Index (RSI) remains below 40, and the Moving Average Convergence Divergence (MACD) is trending lower at levels below zero, signalling a moderate bearish momentum.

The pair attempts to bounce up from the 61.8% Fibonacci retracement of the October-November rally, near 0.8740, although bulls are struggling to find acceptance above 0.8750. Key resistances are at the top of the channel, now at 0.8785, and the December 2 and 3 highs, in the area of 0.8800.

On the downside, Wednesday’s low at 0.8737 remains at a short distance. Further down, the targets are the October 27 low, at 0.8720 and the 78.2 Fibonacci retracement, near 0.8710.

USD/BRL remains range-bound after hitting an interim low near 5.27, with momentum indicators showing potential for a pause in the downtrend, Société Générale's FX analysts note.

Break above 5.43 key for rebound

"USD/BRL has consolidated in a range after forming an interim low near 5.27 in September. The daily MACD shows positive divergence, indicating a slowdown in downward momentum; however, price action has yet to confirm a meaningful rebound."

"Move beyond the recent pivot high at 5.43 is crucial for signalling a short-term up move. Failure to defend 5.27 could lead to extension in decline towards 5.20/5.18 and the lower boundary of the channel drawn since December 2024 near 5.10."

USD/JPY dropped below 155 as a weaker dollar and lower US yields provided support, while markets anticipate a potential BoJ rate hike. Governor Ueda reiterated that current policy is accommodative, though uncertainty over the neutral rate keeps markets cautious, MUFG's FX analyst Lee Hardman reports.

BoJ rate hike expectations support Yen

"The weaker US dollar and drop in US yields has helped to lower USD/JPY back below the 155.00-level overnight. Japanese policymakers will be hoping that building market expectations for a Fed rate cut alongside the BoJ resuming rate hikes this month will provide more support for the yen, and bring an end to the sharp yen weakening trend that has been in place since early October."

"Market expectations for a BoJ rate hike this month were fuelled by the hawkish signal from Governor Ueda at the start of this week. Those expectations have been supported as well by the a Reuters report overnight stating that the BoJ is likely to raise rates this month with the government expected to tolerate such a decision according to three government sources familiar with the deliberations."

"Governor Ueda spoke again overnight in parliament and put forward the view that the current policy rate remains accommodative. However, he was less clear over where the neutral policy rate in Japan. He stated 'unfortunately, it remains a concept that can only be estimated within a fairly wide range at present. We don’t know where it lies, but how much interest rates, nominal ones, will ultimately rise and how much will be appropriate will depend on that'."

EUR/USD has broken above the upper boundary of a descending channel, extending its upward momentum while holding support at 1.1550, Société Générale's FX analysts note.

Momentum pushes EUR/USD toward 1.1730

"EUR/USD recently defended the ascending trend line established since August and gradually crossed the upper boundary of a descending channel. The upward momentum is extending following this breakout."

"The recent pivot low at 1.1550 acts as a short-term support. Defense of this could result in continuation of up move towards 1.1730, followed by the upper limit of its multi-month range near 1.1800/1.1830, which could be an important resistance zone."

The US Dollar (USD) fell below 99, benefiting the pound, NOK, AUD, and NZD, amid signs of weak labor demand and easing service-sector inflation pressures. ADP data showed a 32k decline in private payrolls, while ISM services prices paid dropped sharply, supporting expectations of softer US economic conditions ahead of the FOMC meeting, MUFG's FX analyst Lee Hardman reports.

High-beta currencies gain on softer USD

"The US Dollar has continued to trade at weaker levels overnight after yesterday’s sell-off. The dollar index fell back below the 99.000-level for the first time since late October. The main beneficiaries from the weaker US dollar in recent days have been the high beta G10 currencies of the pound, Norwegian krone, Australian and New Zealand dollars. "

"The latest ADP survey estimated that private employment contracted by -32k in November following an estimated increase of +47k in October. It has supports our view that labour demand remains weak heading into year end. With the release of the nonfarm payrolls report for November delayed until after the December FOMC meeting when it is scheduled to be released on 16th December, FOMC participants will have to rely more on alternative measures of labour market health to assess whether to cut rates this month."

"At the same time, the release of the ISM services survey for November should help to ease concerns over the inflationary impact of higher tariffs on imported goods spilling over into higher prices in the service sector. The prices paid sub-component dropped back sharply by 4.6 points to 65.4 in November. It was the lowest reading since April 2025 and follows an average reading of 69.6 in the previous four months."