EUR / USD
EUR/USD faces growing headwinds as the ECB adopts a notably dovish stance, with officials indicating further rate cuts ahead of other major central banks due to subdued inflationary pressures in Europe. Recent economic indicators paint a concerning picture for the Eurozone, particularly with services PMI dropping into contractionary territory at 49.7 in April, suggesting underlying economic weakness that could pressure the euro.
Despite these challenges, major financial institutions have turned bullish on the euro, raising their EUR/USD targets. The pair's immediate technical outlook suggests potential for upward movement if buyers can defend support at 1.126 and break through resistance at 1.151.
Despite a weaker macroeconomic backdrop, the softer decline in the euro suggests that continued dollar weakness is likely to support the pair at elevated levels in the near term.
USD / JPY
USD/JPY jumped higher as the pair rejected prices below the September low of 140, prompting the pair to approach 143 by the end of the day. The pair's technical outlook shows a modest recovery while remaining below key technical indicators, including the 20-day, 50-day, and 200-day moving averages.
The BOJ's upcoming policy meeting from April 30 to May 1 is drawing particular attention, as previous expectations for rate normalization are being tempered by global economic uncertainties and fragile domestic consumption. Forward swaps now estimate only 16bps worth of hikes from the BOJ vs 26bps at the start of the month.
With dollar weakness still having room on the downside, the yen is likely to remain elevated in the near term.
GBP / USD
GBP/USD edged lower yesterday as recent economic data from the UK points to significant challenges, particularly with the S&P Global composite PMI falling to 48.2 in April, indicating economic contraction. The currency pair has demonstrated relative resilience despite these headwinds, maintaining a modest decline in recent trading and operating within a controlled range between 1.325 and 1.332.
Technical indicators remain broadly supportive, with the pair trading above key moving averages and maintaining a bullish RSI reading of 62.59, suggesting underlying strength in the current market structure. However, the deteriorating UK economic conditions, marked by declining business confidence and weakening labour market conditions, pose significant risks to sterling's performance in the medium term.
The manufacturing sector's continued contraction and the impact of US trade tariffs on UK exports present substantial headwinds that could challenge the currency pair's current technical strength. While immediate technical support remains at 1.325, with potential for movement toward 1.35 on a break above 1.342, the fundamental economic pressures facing the UK economy may limit upside potential in the coming periods.
Economic Calendar
