EUR / USD
EUR/USD has come under significant pressure, primarily driven by Trump's announcement of planned 25% tariffs on EU goods, causing the currency to plummet near the $1.0450 level. However, the reaction was relatively muted, as the technical support at 50 DMA at 1.0390 held firmly.
The European economic landscape presents mixed signals, with sentiment improving to a 5-month high of 96.3 in February, yet the ECB is expected to implement multiple rate cuts throughout the year, starting with a 25bps reduction at its March meeting. Trading activity intensified during the European afternoon session, with substantial selling pressure pushing the pair to test support at 1.040, reflecting growing concerns about the impact of trade tensions on European economic growth.
The near-term outlook appears challenging for the euro, with uncertainty surrounding tariff implementation likely to maintain downward pressure, as the pair trades around the 50 and 100 DMA resistance levels.
USD / JPY
USD/JPY strengthened yesterday, as the pair retested the robust resistance of 150.00 level. However, markets rejected prices above this level, prompting a close at 149.93. Current support is stabilising at 148.75.
BOJ Governor Ueda's concerns about global economic uncertainty, particularly regarding U.S. trade policies, have added a layer of complexity to the pair's movements. The BOJ's rate hike to 0.5% in January, coupled with growing expectations for further tightening amid solid economic growth and persistent inflation, has strengthened the yen's position. Japanese policymakers appear comfortable with recent yen strength, while the Federal Reserve's dovish tilt and potential rate cuts in 2025 create an interesting dynamic for the pair's future trajectory.
Technical analysis suggests that a break above 150.15 could trigger a bullish move toward the cluster of moving averages above 152.00, while a bearish scenario would involve retesting recent lows below 148.80.
GBP / USD
GBP/USD weakened by 0.6% decline from 1.27 to 1.26, with heightened trading activity concentrated around the latter level. Trump's aggressive trade policies, particularly the implementation of tariffs on multiple trading partners and threats of "reciprocal" tariffs on European goods, have created a climate of uncertainty that strengthens the dollar's safe-haven appeal while simultaneously weakening sterling's position.
The technical landscape appears bearish, as the pair approach the 1.2600 level. The BOE faces a complex monetary policy challenge, needing to balance the risks of imported inflation from potential tariffs against signs of economic weakness, which further complicates sterling's outlook.
The pound's vulnerability is exacerbated by the UK's significant exposure to European trade uncertainty, as Trump's tariff threats create additional complications for British exporters. While US economic data shows some signs of softening, with rising jobless claims, the dollar maintains its strength due to inflation concerns and its status as a safe-haven currency during periods of heightened geopolitical risk.
A potential bullish reversal would require buyers to defend the current price zone at 1.26 with the 1.27 level maintaining a firm resistance level.
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