EUR / USD
EUR/USD faced moderate headwinds as the pair struggled to break above the 1.12 resistance level. The temporary trade truce between the US and China, featuring substantial tariff reductions from both sides, has introduced a period of cautious optimism in currency markets, though the deal's 90-day limitation maintains an element of uncertainty. Moreover, the softer US inflation reading of 2.3% year-over-year, combined with the ECB's likely rate cut in June following Germany's cooling inflation, suggests diverging monetary policy paths that could pressure the euro.
Technical analysis reveals the pair's recent decline, moving from 1.122 to 1.118, with critical resistance established at the 1.12 level. The currency pair maintains support above the 50-day SMA at 1.1102, creating a tight trading range.
A breakthrough above the near-term resistance cluster could propel the pair toward 1.156, while a breach below the 50-day SMA might trigger a decline toward 1.10, with possible extension to the 200-day SMA at 1.0793. In the meantime, we expect the pair to trade in a narrow range, as investors gauge the euro's long-term outlook.
USD / JPY
USD/JPY weakened, with recent price action showing a modest correction as the pair approaches the 50 SMA level of 146.19. Technical indicators suggest a cautiously bearish outlook, with the next support level at 145 and resistance at 147.05.
The Bank of Japan's conservative monetary policy stance, maintaining rates at 0.50%, continues to influence the currency pair's movements, while robust wholesale inflation data in Japan hints at potential future rate adjustments. The yen's traditional safe-haven status and persistent price pressures in Japan are providing underlying support for the currency, particularly amid global trade uncertainties.
Market participants should closely monitor the key technical levels, with a breakthrough below 146 which could trigger a modest correction to 145.
GBP / USD
GBP/USD continues to defend the 1.32 support level, holding above it yesterday. Recent UK GDP growth of 0.7% in Q1 2025 has provided some support for sterling. The Bank of England's cautious monetary policy stance, particularly regarding inflation and labour market conditions, remains a crucial factor in sterling's performance against the dollar.
The currency pair's medium-term outlook appears to be shaped by the diverging economic trajectories between the UK and US, with potential volatility ahead as markets digest both technical signals and fundamental economic data.
We expect the pair to hold above the current support level by the end of the week.
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