EUR / USD
EUR/USD weakened due the dollar strength that was brought on by positive corporate earnings results from the US. The technical outlook shows the pair hovering near critical support at 1.13, which coincides with the 20-day moving average while maintaining a comfortable buffer above longer-term moving averages.
Growing optimism surrounding US trade relations with key Asian partners has bolstered dollar strength, even as the US economy experienced an unexpected Q1 contraction of 0.3%. Moreover, the ECB's continued easing cycle and cautious stance amid exceptional uncertainty contrast sharply with the Fed's relatively hawkish position, further weighing on longer-term euro prospects.
The combination of fundamental factors, particularly the substantial interest rate differential and technical indicators suggesting vulnerability at current levels, points to continued bearish pressure on EUR/USD in the near term.
USD / JPY
The USD/JPY pair has shown notable strength, driven primarily by the growing risk-on appetite seen in dollar. The BOJ's recent downgrade of growth forecasts to 0.5% for fiscal year 2026 and the delayed timeline for achieving 2% inflation highlight their continued dovish stance, which has also put considerable pressure on the yen.
Technical analysis reveals strong buying momentum as the pair climbed from 143 to 145.3, breaking above the 20-day moving average at 143.3, though remaining below major resistance levels in the form of 50, 100, and 200 MAs. The interest rate differentials continue to favour dollar strength, with the BOJ maintaining its accommodative policy while the Fed remains data-dependent despite recent US economic headwinds, including a 0.3% GDP contraction in Q1 2025.
Market sentiment appears tilted toward continued yen weakness, particularly given Japanese policymakers' growing concerns about US tariff impacts on their export-driven economy, while significant trading volume at 145.3 suggests institutional interest at these levels.
GBP / USD
GBP/USD weakened yesterday on a combination of a weaker dollar and softer UK data, with manufacturing data revealing a seventh consecutive month of contraction in the UK sector. Despite these challenges, the pound has shown technical resilience, keeping above the robust 1.3250 support level, which is yet to suggest potential for a trend change.
Technical indicators remain supportive, with the pair maintaining positions above key moving averages, including the 200-day MA at 1.31 and the 50-day MA at 1.30, suggesting underlying strength in the current market structure.
The currency pair's immediate outlook appears balanced between support at 1.32 and resistance at 1.34, with institutional investors maintaining significant long positions despite recent profit-taking after reaching three-year highs. While short-term volatility may emerge from the upcoming UK-EU summit and local elections, sterling should maintain overall firmness against the dollar in the longer term.
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