Currency Pairs Overview: EUR/USD, GBP/USD, and USD/JPY

Forex is one of the most active financial markets in the world, where various currencies are exchanged. Certain currency pairs are particularly in demand.

A significant portion of Forex transactions involves the US Dollar, with about 30% of the total trading volume accounted for by the Euro and US Dollar pair. This is not surprising, considering that the economies of the USA and the European Union are among the largest in the world. The EUR/USD pair is considered the most popular among traders.

Traders prefer to trade such currency pairs due to their high liquidity and favorable trading conditions. If it weren’t for the pursuit of diversification, perhaps everyone would only trade EUR/USD. However, to expand their strategies, traders also pay attention to other currency pairs, whose trading volume often depends on the economic power of the countries to which these currencies belong, such as the British Pound and the Japanese Yen.

Let’s take a look at what is currently happening in the market with these pairs.

EUR/USD

*EUR/USD 4H Chart

Technical Analysis

The pair is trading in a downward channel and is attempting to recover to the upper line of the channel. MACD is in the negative zone, indicating a possible continuation of the decline. The key support level is 1.08014, while the key resistance level is 1.09271.

Fundamental Analysis

The Federal Reserve is likely to keep interest rates unchanged in its January 30-31 meeting. Market focus is on potential future rate cuts, especially after a strong end-of-year rally in stocks and bonds. However, recent strong economic data and policymaker comments have dampened early rate cut expectations. The market is also watching for the U.S. Treasury’s funding announcements and the upcoming U.S. non-farm payrolls report, which is expected to show a slight decrease in new jobs created in January.

GBP/USD

*GBP/USD 4H Chart

Technical Analysis

The British Pound is trading in an upward channel, but it’s too early to call it a confident rise, so this movement is more of a correction. The main support levels are at 1.26118 and 1.26528, while the key medium-term resistance level is at 1.27629. If this level is breached, the next target could be 1.28188. The MACD is not giving clear signals, but it has slightly entered the negative zone, indicating a potential downward correction.

Fundamental Analysis

The British Pound’s recent growth might slow down. The Bank of England is likely to keep interest rates unchanged on February 1, but they might suggest that rates won’t stay high for long. The Pound has been doing well against the dollar recently, partly because it was thought the Bank of England would cut rates slower than the US Federal Reserve. But this might change if the Bank stops warning about raising rates again. Also, investors are worried about the Conservative party possibly cutting taxes a lot in the March Budget before the year-end election, which could be risky for the Pound.

USD/JPY

*USD/JPY 4H Chart

Technical Analysis

Since the beginning of 2024, the currency pair has shown significant growth. The Dollar, being the dominant currency in this pair, has strengthened considerably against the Japanese Yen. This is due to the policy of the U.S. Federal Reserve, in contrast to the Bank of Japan, which does not pursue an aggressive interest rate policy. Currently, there is a consolidation above the level of 146.678. The MACD indicates a pause in growth. There might be a sideways movement within the channel between 146.678 and 148.802.

Fundamental Analysis

Traders are less optimistic now about how soon the Bank of Japan will end its very loose monetary policy. Sid Mathur from BNP Paribas noted that at the end of December, there was a trend of betting more on the Yen, possibly because people expected the U.S. Federal Reserve to ease policies aggressively and the Bank of Japan to quickly normalize its policy. However, in the past few weeks, these expectations have decreased, and so has the betting on the Yen.