Euro, sterling in retreat mode to start the new year

January is already promising some big moves in the major currencies space and we’re off to a rather decent start. The euro and sterling are being offered in European morning trade, both stumbling lower across the board. Of note, EUR/USD is now down to its lowest since November 2022 while GBP/USD is down to its lowest since May.

Looking to the EUR/USD chart above, the sinking towards parity remains very much on the cards with the technicals also lining up. With political uncertainty also set to cast a large shadow over Europe in the first half of the year, it might be tough to feel optimistic about the euro or euro-related assets at this point.

That is not to mention the potential headwind of Trump tariffs also set to enter into the picture.

It’s tough to pick at support levels for EUR/USD at the moment and that is the danger for the pair as any further drop could well be exacerbated by the lack of supportive elements.

As for GBP/USD, the drop today looks to solidify a weekly break under 1.2500. And that will cast the focus on the support from the April low near 1.2300 next.

A hotter dollar continues to make a case for a downside move in the pair, especially with the selloff in the bond market in December. That’s certainly a spot to be mindful about even if there might be a short-term retracement in January. 10-year yields in the US are down 4 bps to 4.536% today while 10-year yields in the UK are down 1.5 bps to 4.558% currently.

This article was written by Justin Low at www.forexlive.com.