EUR / USD
EUR/USD edged lower yesterday, showing signs of weakening buying pressures. However, the price struggled to stay below the support level of 1.0850, as indicated by the longer lower wick on yesterday's candle. This suggests that investors are uncertain about the pair's future direction. Germany's proposed €500 billion infrastructure package offering potential support while trade tensions create significant headwinds. Recent price actions reflect a cautious market as traders evaluate competing fundamental drivers.
The technical landscape remains challenging on the upside, with market sentiment and technical indicators pointing toward potential near-term consolidation before a possible move lower toward 1.080, as the benefits of German fiscal stimulus may take time to materialise against the backdrop of continued trade tensions.
USD / JPY
USD/JPY weakened once again yesterday as the pair struggled above the 148.00 level. Recent comments from BOJ Governor Ueda suggesting balance sheet reduction, combined with strong Japanese wage growth for the third consecutive year, indicate a hawkish shift in Japan's monetary stance.
The technical outlook reinforces this bearish sentiment, with USD/JPY trading below all major moving averages, suggesting persistent downward momentum. Market participants are pricing in potential BOJ rate increases, with expectations of rates reaching 1.0% by year-end, while simultaneously anticipating 50-75 basis points of easing from the Federal Reserve amid a softening US economy.
The combination of Japanese institutional investors' significant overseas equity purchases, and safe haven demand due to geopolitical tensions further supports the yen's strength against the dollar. A sustained break below 147.50 could accelerate the bearish momentum, potentially driving the pair toward deeper support levels of 146.50.
GBP / USD
GBP/USD held its nerve yesterday, with the pound maintaining relative strength despite mixed economic signals. Technical analysis reveals a predominantly bullish stance, with the pair trading above key support of 1.2900 and showing elevated RSI levels, suggesting sustained upward momentum.
Recent US economic data, particularly softer inflation figures with February's CPI and PPI below expectations, has created headwinds for the dollar and provided support for sterling. However, escalating trade tensions, particularly President Trump's tariff threats against multiple trading partners, have introduced significant market uncertainty that could impact currency movements.
The Bank of England's anticipated steady rate position, with markets pricing in only a small chance of a cut at the March 20 meeting, provides fundamental support for the pound. While the pair shows potential to breach the 1.3000 level in the near term, several risk factors warrant attention, including the upcoming March 26 UK budget event and potential gilt market pressure from the EU bond market spillover, which could trigger a correction toward support at 1.25.
Economic Calendar
