EUR / USD
EUR/USD continued to demonstrate notable strength, primarily driven by mounting concerns over the US fiscal position following Moody's recent downgrade of US sovereign credit rating from Aaa to Aa1. The euro has found additional support from improving EU-UK relations and the finalisation of a provisional post-Brexit agreement, while the dollar faces pressure from dovish Federal Reserve rhetoric and ongoing fiscal concerns.
Technical analysis reveals the pair's consolidation above crucial levels at 1.12 and approaching the 1.13 mark, with the 50-day moving average providing robust support for the current uptrend. The European Central Bank's anticipated rate-cutting cycle, expected to begin in June, has had minimal impact on euro sentiment due to broader dollar weakness and an improved European geopolitical landscape.
A potential breakthrough above the resistance level at 1.13 could pave the way for further gains toward 1.14, though traders should remain cautious of a possible bearish reversal if prices breach the 50-day moving average support. Overall, the longer-term outlook for the euro remains constructive.
USD / JPY
USD/JPY continued to weaken, primarily driven by structural changes in Japan's monetary landscape and shifting global market dynamics. The Bank of Japan's gradual policy normalisation, combined with rising domestic inflation expectations, has created a supportive environment for the yen.
Technical analysis reveals the pair trading below crucial resistance levels, including the 50-day moving average of 145.90 and the 200-day moving average of 150.00, suggesting a bearish bias in the near term. However, the trend support, currently at 144, is providing robust technical support, and a shorter candle body yesterday indicates waning selling pressure. Technical indicators confirm this, with the RSI seen tailing off on the upside in the neutral territory.
The narrowing interest rate differential between the two countries and Japan's active stance against currency volatility indicate continued pressure on USD/JPY, with technical support levels at 144 serving as a crucial threshold that, if breached, could trigger further decline toward the April low of 139.92.
GBP / USD
GBP/USD demonstrated notable strength, underpinned by the Bank of England's hawkish stance on interest rates and persistent UK inflation concerns, while simultaneously benefiting from a broadly weakening US dollar environment. Recent UK economic data, including Q1 GDP growth of 0.7% and annual growth of 1.3%, have helped alleviate immediate recession fears and bolstered sterling's position.
The pair's technical outlook remains constructive, with current trading levels comfortably above key moving averages, including the 20-day MA at 1.3318, the 50-day SMA at 1.3143, and the 200-day SMA at 1.2879. The US dollar faces multiple headwinds, including Moody's credit rating downgrade and dovish Federal Reserve commentary, which have created favourable conditions for further GBP appreciation.
The recent Brexit agreement covering energy cooperation and defence partnerships through 2038 has reduced structural uncertainty around sterling, though upcoming UK inflation data remains crucial for determining the currency pair's near-term trajectory. A potential break above the resistance level at 1.344 could pave the way for further gains toward 1.350, while the DMAs provide immediate support for the pair.
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