EUR / USD
EUR/USD strengthened once more yesterday, closing the day at the upper end of the trading range above 1.0900. This trend is primarily driven by Germany's ambitious €800 billion defence package and joint borrowing initiatives that signal stronger European economic prospects. Recent US economic indicators, including weaker-than-expected retail sales and declining manufacturing data, coupled with Trump's expanding tariff policies, have placed significant pressure on the dollar's performance.
The technical landscape appears favourable for the euro, with the pair retesting the 1.0900 mark, suggesting continued appetite above this level. Market expectations for close to three Fed rate cuts in 2025, exceeding the Federal Reserve's projected two cuts, further undermine dollar strength, while the ECB's more hawkish stance on maintaining higher rates for longer adds support to the euro.
The currency pair's immediate outlook suggests the potential for further gains, with key resistance at 1.093 and the psychological level of 1.100 serving as upside targets, though maintaining support above 1.080 remains crucial for continued bullish momentum.
USD / JPY
USD/JPY continued to strengthen yesterday, breaking above the 149.00 resistance level. The pair recovered from touching a five-month low of 146.52 in the previous week. Technical analysis reveals a gradual upward movement, supported by a stable foundation above the 20-day moving average of 149.06.
The Bank of Japan's cautious stance on monetary policy, with expectations of rate maintenance at 0.5%, continues to influence the yen's moves, while Governor Ueda's concerns about global economic uncertainties add another layer of complexity to the currency's outlook. The technical landscape shows the pair positioned below crucial resistance levels, with the 150.00 being critical. A break above it would suggest continued upward pressure.
Market sentiment appears increasingly favourable toward the yen, with institutions projecting USD/JPY to reach 139 by year-end as Japan progresses toward exiting its deflationary environment. However, the currency pair's future trajectory will likely be heavily influenced by developments in US-led trade tensions, and central bank policies, with immediate technical resistance at 150.00 serving as a key level to monitor.
GBP / USD
GBP/USD jumped higher, pushing toward the significant psychological level of 1.300, supported by the Bank of England's expected firm monetary stance and comparatively high interest rates. Technical indicators paint a mixed picture, with the currency pair trading above all major moving averages while simultaneously showing overbought conditions with an RSI of 71. The pair's recent strength has been particularly evident in mid-day trading sessions, where substantial volume increases around the 1.298 level suggest strong buyer interest.
Despite the positive momentum, several factors warrant careful consideration, including continued global trade tensions and their potential impact on UK exports. The sustainability of the sterling rally appears contingent on both the evolution of trade disputes and upcoming central bank decisions, with key meetings scheduled for the Federal Reserve, Bank of Japan, and Bank of England this week. Critical support levels are established at the 20-day and 200-day SMAs, both around 1.28, which could become significant if profit-taking emerges at current elevated levels.
The positive spillover effects from European fiscal stimulus initiatives, particularly Germany's increased spending plans, are providing additional tailwinds for sterling, though the overbought conditions might cause a pair to struggle to breach the 1.2900 without a fundamental trigger.
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