EUR / USD
EUR/USD weakened after the market rejected prices above the 1.15 level, closing the day at 1.142. However, this appears to be more of a technical retracement rather than a shift in trend, as the dollar remains weak due to concerns about the independence of the Federal Reserve and US trade policies. Recent political pressure on Fed Chair Powell has significantly weakened the dollar, creating an environment where the euro benefits from safe-haven flows despite the eurozone's economic challenges.
Technical analysis reveals the pair is trading in overbought territory with an RSI of 67.53, though the broader uptrend remains intact with significant support levels at the 1.12 and 1.10 support. While recent selling pressure has emerged, pushing prices slightly lower during the day, institutional activity around 1.148 suggests strong interest at these price points.
The pair's trajectory remains heavily dependent on developments surrounding Fed independence and trade negotiations, with potential for reaching 1.16 again primarily through dollar weakness rather than euro strength.
USD / JPY
USD/JPY started the day on the back foot, reflecting increasing worries about the US economic outlook. However, as it neared the critical September 2024 low of 139.89, the market rebounded, indicating that there was a lack of immediate appetite in pushing prices below this level.
The Bank of Japan's lower-than-expected core CPI of 2.2% suggests reduced pressure for immediate monetary tightening while Japanese officials continue to defend against accusations of currency manipulation. Technical analysis indicates potential for further upside if the pair maintains momentum above 141.50, with the 20-day SMA at 145.92 serving as a key target.
The yen's appreciation has been bolstered by safe-haven flows and broad-based dollar weakness, though Japanese policymakers remain concerned about the impact of excessive currency strength on their export sector during this period of trade uncertainty. We expect the pair to struggle below the 140 level in the meantime.
GBP / USD
GBP/USD posted moderate losses yesterday as the pair struggled above a crucial resistance of 1.34, prompting a close at 1.333. Technical indicators suggest the pair is approaching overbought conditions, with an RSI of 69, though yesterday's inside candle does not point to the trend change.
The Bank of England's dovish pivot, with anticipated rate cuts starting in May, contrasts sharply with the Federal Reserve's more hawkish stance, creating a fundamental backdrop that could pressure sterling in the coming months. Despite the UK's economic challenges, including a downgraded IMF growth forecast of 1.1% for 2025, the pound has demonstrated resilience, primarily due to broader dollar weakness rather than sterling strength.
The currency pair's movements are increasingly dictated by safe-haven flows and market sentiment, with potential upside momentum if prices break above 1.342, while a breach below 1.331 could trigger a correction toward the 20-day moving average at 1.3046.
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