Exchange rate forecasts today: US dollar, British pound, Japanese Yen, Euro and Australian Dollar

By Gary Howes

Our morning currency forecast note sees the British pound and US dollar remain favoured to advance further while the Australian dollar, Yen and Euro face a mixed outlook.

The new week has started with soft Chinese growth in Q4, a large earthquake in New Zealand’s north island and slower industrial production reading in Japan. The US 10-year yields hit 2.8157% on Friday, the lowest since December 11th, the US dollar index eased from 81.30 (double top).

Among the G10 majors, NZD was among the biggest losers vs. US dollar this Monday ahead of the CPI report due later today. As suspected, EUR started the week downbeat and rebounded from 1.3508; while in Turkey, the political tensions sent USDTRY to the fresh all-time high of 2.2508. The Central Bank of Turkey will give policy verdict tomorrow.

Below are our latest short to medium term forecasts, for our longer-term forecast coverage please refer to this section.

Note: Our FX quotes are taken from the wholesale spot markets. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Euro Dollar Exchange Rate Forecast (EUR/USD)

"From the Eurozone, focus will be on the survey data with German ZEW and ‘flash’ PMIs for January released this week. Little change is expected from last month in the sentiment indicators; however any surprises will likely set the tone for EUR/USD which has been under some pressure over the past week. On a break below the 1.3500 level in EUR/USD, there is little in the way of support ahead of retracement level support at 1.3437." - Lloyds Bank Research.

"Mixed US economic data did manage to drag EUR-USD below 1.36 and more range trading is likely to prevail today between 1.35 and 1.3570 given the very light daily calendar and the US holiday." - UniCredit Bank.

"EURUSD started the week weaker. The pair retreated to 1.3508 on stronger bearish momentum. As the sentiment turns mild, stops are building sub-1.3500. Option bets are skewed on the downside for the week ahead. We remains sellers on rallies." - Swissquote Bank.

"Further selling extended this morning to test support at 1.3524, a close below which would be negative, triggering a deeper sell-off to 1.3296. Resistance is at 1.3699." - Gareth Berry at UBS.  

ICN Financial say:

"The drop last Friday broke the bullish key support level of the ascending channel as showing on graph reversing trading below 1.3665 levels to negative and might extend the downside move this week.

"Of note, stabilising below 1.3520 is required to confirm bearishness and limit any bullish correction. Linear Regression Indicators and MACD are negative. But momentum indicators require stability below 1.3595 so the pair won’t respond to the oversold signals showing on Stochastic.

"Based on the above, sell the pair below 1.3560 targeting 1.3470, 1.3365 then 1.3295 and stop-loss above 1.3665

"If the stop-loss was triggered, buy the pair above 1.3665 targeting 1.3715, 1.3770 then 1.3830 and stop-loss below 1.3590."

MIG Bank tell us:

"EUR/USD remains in a corrective phase after its failed attempt to break the resistance at 1.3832 (25/10/2013 high), as can be seen by the recent lower lows. The support at 1.3524 is challenged. Other supports can be found at 1.3490 and 1.3400. Hourly resistances stand at 1.3583 (16/01/2014 low) and 1.3650 (16/01/2014 high)."

Pound dollar exchange rate forecast (GBP/USD)

"Strong UK retail sales in December (+2.8% mom) boosted cable on Friday, but its inability to rally much above 1.64 indicates caution for a more sustained rally at the moment. Markets will likely await the release of the unemployment report and BoE minutes on Wednesday. Selling EUR-GBP into rally, especially above 0.8280/0.83, still seems profitable." - UniCredit Bank.

"Having tested the main support at 1.6317, the risk is for extension of the consolidation phase within a bullish trend. Next support is at 1.6220. Resistance is at 1.6517 ahead of 1.6622." - Gareth Berry at UBS.

"GBP/USD may test higher to 1.6618 (12.90) and 1.6747 (13.00), with support at 1.6159-1.6260 (12.54-12.62)." - Citigroup.

Luc Luyet at MIG Bank says:

"GBP/USD has bounced sharply near the support at 1.6305. A short-term bullish flag is favoured as long as the initial support at 1.6396 (intraday low) holds. Hourly resistances stand at 1.6464 and 1.6517.

"The break of the major resistance area between 1.6381 and 1.6466 favours a further long-term rise towards the strong resistance at 1.7043 (05/08/2009 high). However, a break of the support at 1.6220 would negate this positive outlook. Another key resistance lies at 1.6747 (28/04/2011 high)."

Euro pound forecast

Piet Lammens at KBC Markets says:

"We look out whether the euro decline will continue. At least for now, there is no indication that the euro is preparing a comeback. Sustained trading below the 0.8225 support hurts the technical picture of EUR/GBP. Such a break can already occur today, but we need confirmation via more strong UK data to before speaking about a new upleg of sterling.

"In this respect, Wednesday’s UK labour market data might play an important role. A sharp decline in the number of unemployed and/or the unemployment rate will raise speculation that the BoE might be forced to raise rates earlier than expected."

MIG Bank, in a technical note to clients, says:

"EUR/GBP moved sharply lower on Friday. Prices are now challenging the recent lows at 0.8231 (09/01/2014 low, see also the support at 0.8225). An initial resistance lies at 0.8251 (intraday high). A more significant resistance can be found at 0.8286 (15/01/2014 low).

"In the longer term, despite the successful test thus far of the support at 0.8523, the underlying bearish trend remains negative. We favour further gradual weakness towards 0.8160 (61.8% retracement of the 2012-2013 rise)."

Australian dollar forecasts

Swissquote Bank: "Trend and momentum indicators signal the end of the upside correction; the MACD to consolidate in the red zone for a close below 0.8875. After having hit 8-year low of 1.0543 last week, AUDNZD recovers to 1.0674 following news of earthquake on New Zealand’s north island. The bias remains on the downside; the next targets are placed at 1.0500 (psychological level) then 1.0432 (2005 low)."

"As a reaction to last week’s decline, the immediate risk appears to be for a short-term recovery which should be limited to resistance at 0.8883. The broader potential remains for a test of strong support at 0.8545." - Gareth Berry at UBS.

Dollar Yen Forecast

MIG Bank analyst Luc Luyet says:

"USD/JPY has thus far failed to invalidate its succession of lower highs since the start of the year. As a result, we favour further short-term weakness towards the recent lows at 102.86. Hourly supports can be found at 103.87 (50% retracement) and 103.54 (intraday low). A break of the hourly resistance at 104.48 (17/01/2014 high) is needed to improve the short-term technical structure.

"The failure to break the resistance at 105.50 (61.8% retracement of the decline that started in June 2007) coupled with general overbought conditions favours a corrective phase towards the support at 101.63. A strong support lies at 99.57 (19/11/2013 low, see also the 200 day moving average), while a major resistance stands at 110.66 (15/08/2008 high)."

ICN Financial say:

"USDJPY moved lower on Friday, and starts the week under pressure retesting 103.85 support area, which if broken may signal further downside towards 102.85. Overall, the sideways bias is expected to dominate this week , among the potential symmetrical triangle shown on chart. Accordingly, we expected sideways movement this week."