EUR / USD
EUR/USD's rise paused yesterday, indicating a lack of market appetite for new highs. However, the pair also tested and failed to hold prices below the 1.0900 mark, emphasising uncertainty about its near-term outlook. This week's agreement discussion on European defence spending and potential developments regarding Ukraine has provided support for the euro, helping it to remain elevated.
Now, the pair faces significant resistance in the 1.095-1.10 zone, suggesting potential consolidation in the near term given stretched technical indicators. The immediate outlook appears contingent on maintaining support above 1.089. A breakdown below this level could trigger a deeper correction toward the confluence of moving averages near 1.050, marking a critical level for maintaining the current bullish structure.
The immediate outlook for EUR/USD sees potential headwinds from the EU's planned retaliatory tariffs on $28 billion of US goods in April, with technical analysis suggesting the 1.095 as a robust resistance level before 1.1000. Should bearish pressure emerge, the pair might seek support at 1.088, with a potential deeper correction toward the 200-day moving average at 1.0722 if this level fails to hold. We anticipate that the pair will stay in the upper range of trading in the near term.
USD / JPY
The USD/JPY pair strengthened yesterday as markets struggled below the 148.00 level, prompting the pair to close higher at 148.20. Technical analysis reveals that multiple moving averages, including the 200-day SMA at 152.10 and 50-day SMA at 153.21, act as resistance levels, suggesting limited upside in the near term.
Major Japanese corporations have agreed to substantial wage increases for the third consecutive year, providing support for the long-term Yen performance and increasing the likelihood of further Bank of Japan monetary tightening. Despite Japan's Q4 GDP growth being revised downward to 2.2%, the combination of wage growth developments and inflation outlook continues to support the case for BOJ policy normalisation. At the same time, the BOJ maintains a cautious stance, with Governor Ueda expressing concerns about global economic uncertainty while remaining prepared for bond-buying operations.
Looking ahead, the technical setup suggests that while a break above 149.25 could target 150.72, failure to hold current support levels might lead to a retest of levels below 147. We expect the pair to struggle above the 150.00 mark in the near term.
GBP / USD
GBP/USD displayed positive momentum, maintaining positions between 1.2930 and 1.2980, with technical indicators suggesting a moderately bullish stance. Recent US inflation data has shown signs of cooling, with February CPI at 2.8% year-over-year, below expectations of 2.9%, providing initial support for sterling against the dollar.
The fluctuations in increasing tariffs on steel and aluminium imports by the US from 25% to 50% and then back to 25% have created significant market uncertainty, though the pound continues to find support from the dollar's broader weakness. The narrowing yield spreads between US and UK government bonds have reduced the dollar's interest rate advantage, potentially offering continued support for sterling.
However, the currency pair faces notable resistance in the 1.3000-1.3050 zone, and its near-term direction will largely depend on trade developments and US economic data. The technical outlook remains positive as long as the pair maintains its position above the immediate support at 1.285.
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