EUR / USD
EUR/USD continued to face headwinds as the pair struggled above the 100 DMA of 1.0532 once again. Technical analysis indicates a neutral-to-bullish bias, with the pair trading above key moving averages but remaining below the significant 100 DMA, while maintaining support at the convergence of multiple technical indicators near 1.0400.
Germany's 0.2% economic contraction in Q4 2024, coupled with sharp export declines, underscores the broader challenges facing the Eurozone, while US consumer confidence experienced its steepest decline in three-and-a-half years. The Federal Reserve's hawkish stance on maintaining higher rates, driven by persistent inflation concerns, contrasts with the ECB's increasingly neutral position, as evidenced by statements from key officials including Bundesbank President Nagel suggesting potential rate cuts.
The pair's immediate trajectory appears constrained between resistance at 1.053 and support at 1.040, with potential for upward movement toward 1.060 if bullish momentum persists.
USD / JPY
USD/JPY remained below the 150 level yesterday, driven by a combination of fundamental and technical factors. Japan's improving economic indicators, particularly accelerating service sector inflation, have strengthened the case for Bank of Japan monetary policy normalisation, providing substantial support for the yen. The interest rate differential between the U.S. and Japan has notably narrowed, with Japanese government bond yields reaching multi-year highs and overnight index swaps fully pricing in a BOJ rate hike by September.
Market sentiment has turned increasingly bearish on the dollar following disappointing U.S. economic data, while heightened geopolitical tensions have boosted safe-haven demand for the yen.
Technical analysis suggests potential for deeper declines toward the 147.00 level if current weakness persists, especially if the 150.00 resistance level holds.
GBP / USD
GBP/USD has demonstrated resilience in recent trading sessions, maintaining stability despite significant headwinds from Trump's trade policies and tariff threats. The sterling's strength can be partially attributed to a broadly weakening US dollar, which has declined approximately 3.5% against major currencies since the beginning of January.
Market sentiment appears mixed, with technical indicators showing the pair trading above both 1.2600 and the 100-day moving average at 1.2641, while remaining below the near-term resistance at 1.2678. The Bank of England's cautious stance, highlighted by chief economist Huw Pill's emphasis on measured rate decisions, is heightening expectations of two 25 basis point rate cuts.
Recent price action shows modest upward momentum, with the pair reaching 1.267 amid elevated trading volumes, suggesting potential for further gains. The pair's future trajectory will largely depend on its ability to maintain position above 1.2600, with a potential upside target at 1.2678.
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