EUR / USD
EUR/USD faced growing pressure as divergent monetary policy stances between the Fed and the ECB continue to shape market dynamics. The dollar has found support from the Federal Reserve's cautious rate stance and positive sentiment following the US-UK trade deal announcement, while the euro has weakened on expectations of potential ECB rate cuts by June.
European economic data shows mixed signals, with German industrial production rising 3% month-over-month in March, yet broader Eurozone weakness persists as the ECB signals potential rate cuts by June. The diverging monetary policy paths between the Fed and ECB, combined with widening bond yield spreads favouring the US, create downward pressure on the euro.
Technical indicators suggest immediate support at the 1.12 level, with further support levels at the 50-day moving average of 1.1062 and 1.08. The pair declined during the day, especially after encountering significant resistance at the 20-day moving average of 1.1348.
The pair's future movement hinges on two critical factors: the upcoming US-China trade talks in Switzerland and the ability to break the 1.12 support level, given the technical selling at these levels persists.
USD / JPY
USD/JPY has demonstrated remarkable strength, primarily driven by the dollar strength following the Fed's cautious stance and positive news surrounding the US-UK trade deal, with the latter representing the first step towards favourable trade conditions for other economies while the 90-day tariff pause remains in effect.
Recent trade developments, including the US-UK trade agreement and potential progress in US-China relations, have weakened the yen's safe-haven appeal and contributed to the pair's upward momentum.
Technical analysis shows the pair successfully breaking through the 20-day moving average at 143.22, with strong trading activity pushing prices toward the 146.35 resistance level marked by the 50-day moving average.
The combination of fundamental drivers and technical indicators suggests continued bullish sentiment for USD/JPY, though the 50-day moving average could present a significant challenge for further upside movement. A break above this is crucial to suggest further technical upside for the pair.
GBP / USD
GBP/USD held steady despite major headline excitement surrounding significant monetary policy and trade developments, with the Bank of England's recent 25 basis point rate cut to 4.25% occurring against a backdrop of internal policy division. Despite the rate reduction, sterling has shown remarkable resilience, largely supported by the announcement of a landmark US-UK trade agreement that substantially reduces tariffs on British automobiles and eliminates duties on steel and aluminium exports to the US.
The pair edged lower from 1.33 to 1.32, encountering strong resistance at 1.34. The combination of monetary easing and improved trade clarity could provide a stabilising effect on sterling.
Global investors' renewed interest in UK assets may provide additional support for the pound in the medium term. However, the currency pair's immediate direction appears contingent on its ability to defend the crucial 1.32 support level, with a potential bearish scenario unfolding if support at 1.31 fails to hold.
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