EUR / USD
EUR/USD held steady as recent economic indicators and policy developments paint a complex picture for both currencies. Technical analysis shows the pair trading between key moving averages, with price action above the 20-day SMA at 1.135, though struggling to maintain momentum above the critical 1.14 level.
The European economy's weakness, evidenced by March's 0.1% retail sales decline, combined with the ECB's likely June rate cut, creates substantial pressure on the euro. Meanwhile, the Federal Reserve's cautious stance and maintenance of rates at 4.25-4.50% potentially supports dollar strength, though uncertainty remains due to ongoing trade tensions and policy developments.
The currency pair's immediate trajectory appears bearish, with growing selling pressure emerging during late trading sessions, while the upcoming US-China trade talks and potential US-UK trade deal announcement could introduce additional volatility to the market. The 1.12 level serves as a crucial support level, with a break below potentially targeting the 50-day SMA at 1.11.
USD / JPY
USD/JPY edged higher as it defended the 20 SMA support at 143, with moderate gains primarily driven by the divergent monetary policies between the Federal Reserve and the Bank of Japan. The BOJ's cautious approach to rate hikes, influenced by growing external risks and trade uncertainties, contrasts sharply with the Fed's wait-and-see stance amid increasing economic risks.
Technical analysis reveals modest upward momentum, with the pair trading between 143.28 and 144.15, while maintaining support near the 20-day moving average at 143.12. A potential bullish breakout above 145.51 could target the 50-day moving average at 146.41, though this movement remains contingent on overcoming significant resistance levels.
The pair's future trajectory appears heavily dependent on both trade relations between major economies and central bank policies, with Japanese policymakers actively working to protect their export-dependent economy from potential tariff impacts. We expect moderate gains up to 145 to persist in the near term.
GBP / USD
GBP/USD remained elevated despite recent UK service sector data revealing contraction in April for the first time since October 2023. Market sentiment remains cautious ahead of the Bank of England's anticipated 25 bps rate cut today, while trading activity has concentrated around the 1.332 level, where bearish momentum has gained dominance. The potential US-UK trade agreement, which could include reduced tariffs on steel and automobiles, presents a possible catalyst for sterling recovery, though this optimism is tempered by the NIESR's downgraded UK growth forecast to 1.2% for 2025.
Technical analysis indicates the pair is consolidating between the 20-day moving average at 1.3296, which has now crossed above the technical candles, providing a strengthening resistance on the upside. At the same time, the 1.328 support level is emerging as a crucial threshold that could determine the pair's near-term direction.
The pound's trajectory appears increasingly dependent on both the specifics of the US trade agreement and the Bank of England's forward guidance on monetary policy, particularly regarding the pace of future rate cuts. While a 25bps cut from the BOE traditionally acts as tailwind to the pair, given that the move is already priced in, the outlook for GBPUSD is more dependent on the technical support in the near term.
