Euro Holds at 1.0525 as Yen Strengthens (12.05.2024)

Euro volatility surged with French political uncertainty, with EUR/USD holding near 1.0525, supported by PMI data despite dollar strength.

The Japanese Yen edged closer to 150 per dollar as expectations for a December rate hike grew, while dovish BoJ remarks tempered gains. Gold steadied above $2,640, benefiting from geopolitical tensions and a slowdown in the US services sector, increasing the likelihood of a Fed rate cut. Meanwhile, GBP/USD hovered above 1.2700 ahead of key data releases, and silver held at $31.30, with traders eyeing US Initial Jobless Claims for further direction.

Euro Volatility Rises on French Uncertainty

The EUR/USD exchange rate started the day trading around 1.0525. Despite the dollar strengthening throughout the week and the pair showing a negative trend, it managed to close the last two days in positive territory and remains in the green at the time of writing. After the French government’s collapse yesterday, the EUR/USD pair did not experience the expected weakness, indicating that the political event had already been priced in.

The PMI data released yesterday, which exceeded expectations, appears to have contributed to the pair’s relatively strong performance. Today, the U.S. unemployment data set to be released will be critical in determining the pair's direction.

From a technical perspective, 1.0570 is the key initial resistance level, with a break above it potentially targeting 1.0600 and 1.0660. On the downside, 1.0450 is the first major support, followed by 1.0400 and 1.0330 if the price moves lower.

Yen Strengthens with Rate Hike Promises

The Japanese yen edged closer to 150 per dollar, recovering some of the losses from the previous session, despite dovish remarks from Bank of Japan board member Toyoaki Nakamura. Nakamura voiced concerns over the sustainability of wage growth and noted signs of economic weakness, hinting that he may oppose a rate hike in December. In contrast, BOJ Governor Kazuo Ueda signaled over the weekend that further rate hikes are "nearing," with economic data continuing to meet expectations. He also highlighted the importance of momentum in the upcoming fiscal 2025 wage negotiations. Currently, markets are pricing in a 60% chance of a 25 basis point rate hike in Japan this month, up from about 50% in recent weeks.

From a technical perspective, 151.00 appears to be the key initial resistance level, with a break above it potentially targeting 152.00 and 153.00. On the downside, 149.40 is the first major support, followed by 148.70 and 148.20 if the price moves lower.

Slowdown in Services Supports Gold Prices

Gold remained above $2,640 per ounce on Thursday, staying within a narrow trading range as investors evaluated the Federal Reserve's monetary policy outlook ahead of an important jobs report. On Wednesday, Fed Chair Jerome Powell suggested that officials would proceed cautiously with rate cuts while emphasizing the strength of the US economy. However, this perspective was called into question by recent data showing a more significant slowdown in the services sector in November. The data also increased the likelihood of a 25 basis point rate cut in December, which supports gold by lowering the opportunity cost of holding non-yielding assets. 

Gold continued to benefit from political instability in South Korea and France, the ongoing Russo-Ukrainian war, and tensions in Israel, with the potential for conflict with Lebanon if the truce with Hezbollah breaks down.

Technically, 2660 is the key initial resistance level, with a break above it potentially targeting 2690 and 2710. On the downside, 2600 is the first major support, followed by 2575 and 2545 if the price moves lower.

Pound Holds Before the Construction PMI Report

The GBP/USD pair maintains a slight positive bias for the third consecutive day, trading just above 1.2700 during Thursday’s Asian session, though lacking strong bullish momentum and staying below Monday's weekly high.

The US Dollar consolidates as traders await Friday's US Nonfarm Payrolls (NFP) report, a key market catalyst. Expectations of a less dovish Federal Reserve have pushed US Treasury yields higher, supporting the Greenback. Investors anticipate higher inflation from Trump's tariff policies and expansionary measures. Cautious remarks on rate cuts from Fed Chair Jerome Powell and other FOMC members on Wednesday further lifted Treasury yields and the USD.

Geopolitical risks, including the ongoing Russia-Ukraine conflict and concerns over trade wars, also provide support for the safe-haven USD. Meanwhile, GBP bulls remain cautious following expectations that Bank of England (BoE) Governor Andrew Bailey will implement four interest rate cuts in 2025, which is limiting the upside potential for the GBP/USD pair.

The UK Construction PMI report is expected to show the market direction, as well as the usual weekly Initial Jobless Claims data from the US later in the North American session. However, the immediate market response is expected to be limited as attention remains fixed on the US NFP report, which will likely play a crucial role in shaping the Fed's next policy move.

For the GBP/USD pair, 1.2750 appears to be the key initial resistance level, with a break above it potentially targeting 1.2830 and 1.2900. On the downside, 1.2610 is the first major support, followed by 1.2540 and 1.2470 if the price moves lower.

Silver Steadies at $31.30, Focus on US Data

Silver is trading near $31.30 on Thursday morning, following a sharp rebound triggered by yesterday’s US data release. Today’s price action is expected to be influenced by the upcoming US Initial Jobless Claims report, keeping traders cautious.

From a technical standpoint, $31.50 serves as the initial resistance level, with a breakout potentially paving the way toward $32.00 and $32.50. On the downside, $30.70 is key support, with additional levels at $30.20 and $29.80 if prices dip further.