EUR / USD
EUR/USD experienced major fluctuations during the day brought on by the initial implementation of tariffs from the US, followed by subsequent 25% retaliation from Europe and, finally, a reversal of the US tariffs, which resulted in the tariff rate on the EU being reduced to 10%. This resulted in major adjustments in the Fed's and the ECB's monetary policy path, with 78bps and 84bps worth of cuts now priced in for the remainder of the year, respectively.
Still, the pair held above the robust 1.0900 support level, further underscoring the euro's resilience in the face of a volatile dollar. The dollar's challenged status as a reserve currency, evidenced by China and Russia's shift towards alternative currencies for energy trades, combined with the euro finding support from dollar weakness, indicates potential structural changes in currency dynamics.
The pair's immediate technical outlook appears contingent on the defence of the 20-day moving average at 1.0871, with the potential for movement towards this level as markets continue to digest the tariff reversal during the European hours today. While we expect to see moderate weakness, the longer-term outlook points to continued euro resilience.
USD / JPY
USD/JPY experienced significant volatility yesterday, with strong price swings reflecting heightened market uncertainty and shifting investor sentiment. Earlier in the day, the Japanese yen's status as a safe-haven currency strengthened amid escalating global trade tensions. However, following the announcement regarding the tariff hike reversal from the US, dollar strength prevailed, prompting the pair to finish the day near the 148.00 mark.
The pair's future trajectory remains heavily dependent on both global trade developments and central bank policies, with a potential bullish scenario emerging above 148.00 and targeting resistance at 151.76. At the same time, technical analysis reveals critical support at 145.79, which recently triggered a strong reversal after the pair initially tested prices below this level. This suggests a stronger bias on the upside in the coming days.
GBP / USD
GBP/USD edged slightly higher yesterday, seemingly unaffected by the announcement from the US to pause the tariff hike on most countries. Given that the UK received a lower tariff rate of 10% relative to its European counterparts, the announcement does not change the trade dynamic between the two countries. Upside momentum during the day was moderate as the pair struggled above the robust 200 DMA resistance level of 1.2813, suggesting a period of consolidation amid heightened market activity.
The Bank of England's concerns about financial stability, coupled with persistent domestic inflation pressures, have created a delicate balancing act that continues to influence sterling's performance against the dollar.
Technical analysis indicates potential for upward movement if the pair can breach the crucial 200 DMA.
Market participants should closely monitor technical resistance and support levels, which could define the pair's next significant move.
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