EUR / USD
EUR/USD strengthened yesterday as the pair rejected prices below the 1.13 support level, prompting a close at 1.1388, creating a tight trading range. Moreover, the strength was driven by improving German business sentiment, as evidenced by the better-than-expected Ifo Business Climate report, which rose to 86.9 in April from 86.7 in March.
Technical analysis reveals robust positioning, with the pair trading comfortably above multiple key moving averages, suggesting a strong underlying uptrend. The dollar faces mounting pressure from Deutsche Bank's bearish outlook, citing concerns over twin deficits and diminishing global appetite for US debt, while potential Federal Reserve rate cuts as early as June could further weaken the greenback.
The euro's upward trajectory is additionally supported by evolving ECB policy expectations, with Governing Council member Rehn hinting at possible rate adjustments, though the pair faces immediate resistance at 1.156, with potential for extension toward 1.17 if this level is breached.
USD / JPY
USD/JPY weakened yesterday, closing at around 142.50, well below all major moving averages, including the 200-day SMA at 150.12. The Bank of Japan's less hawkish monetary policy stance is now widening the yield differential to the US policy path. However, the long-term bullish sentiment for the yen persists despite the current bearish momentum in the medium term.
Technical analysis indicates that while immediate resistance lies at 144.70, a break above this level could trigger a recovery toward the 146.19 level, though a bearish continuation might test support levels near 139.90. The currency pair's movements are being further influenced by evolving US-Japan trade dynamics and Treasury Secretary Bessent's measured approach to currency discussions, while Japan's Finance Minister Kato maintains that exchange rates should be determined by market forces.
The yen's recent appreciation against the dollar reflects both market concerns about US economic growth prospects and complex geopolitical factors, including Japan's consideration of increased US soybean purchases and its stance on trade relations with China.
We expect a modest gain for the pair in the short term; however, the longer-term narrative remains supportive for the yen.
GBP / USD
GBP/USD remained resilient yesterday, with the pound maintaining strength above 1.32 and 1.33 levels, respectively. The pair's stability is particularly impressive given the backdrop of downward revisions to UK GDP growth projections, now estimated at 0.9% for 2025 and 1.2% for 2026.
The Bank of England's anticipated 25 basis point rate cut at the May 8 meeting, along with market expectations of 0.84% in total rate cuts this year, suggests a carefully managed monetary policy approach that could influence the pair's trajectory. Technical analysis indicates potential for further upside movement, with a break above 1.34 possibly leading to tests of the 1.35 level, though immediate support at 1.32 remains crucial for maintaining bullish momentum.
While US-imposed trade tariffs have impacted the UK business environment, the direct effects on GBP/USD have been notably contained, suggesting underlying market confidence in the currency pair's stability in the near term.
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