EUR / USD
EUR/USD continues to exhibit remarkable strength, primarily driven by growing concerns surrounding US fiscal policy and persistent trade tensions, with the US Dollar Index falling below the critical 100 level. Technical indicators strongly favour the euro, as the currency pair maintains its position above both the 50-day moving average at 1.1132 and the 200-day moving average at 1.0799, suggesting a robust upward trend.
The euro zone's impressive current account surplus, reaching a nine-month high in March, provides fundamental support for the currency's appreciation, while global investors increasingly seek alternatives to US dollar assets. Market sentiment appears particularly focused on President Trump's expansive tax proposals, which could potentially increase national debt by up to $5 trillion, further weakening confidence in US assets.
A continuation of the bullish trend could see prices targeting the recent high of 1.14, though we caution that sustained gains will depend on continued deterioration in US economic data and political stability. As a result, traders should remain vigilant of potential bearish reversals back to the 50-day moving average, which could trigger a significant decline toward the support level at 1.074.
USD / JPY
USD/JPY has shown notable weakness, with the currency pair declining and trading significantly below major moving averages, particularly the 200-day SMA at 149.66. This downward movement is primarily driven by the Japanese Yen's increasing strength, supported by fundamental shifts in Japan's monetary landscape and bond market dynamics.
The Bank of Japan's gradual pivot toward monetary tightening, combined with rising domestic inflation pressures, has created a strong foundation for the Yen's appreciation, while the recent Japanese government bond auction saw its weakest demand since 2012, pushing yields higher and narrowing the interest rate differential with US Treasuries. Adding to the dollar's weakness are growing concerns about US fiscal risks and credit quality, with credit default swap spreads reaching levels reminiscent of the 2011 debt ceiling crisis.
Technical analysis suggests immediate resistance levels at 144.62 and 145.93, corresponding to the 20-day and 50-day SMAs, respectively. However, the trend support at 143.80, which held today, suggests that the pair needs further impetus to move significantly lower.
GBP / USD
GBP/USD has demonstrated remarkable strength, primarily driven by the unexpected surge in UK inflation to 3.5% in April, significantly exceeding market forecasts and the Bank of England's projections. Although, we caution that temporary factors, such as increases in energy costs likely influenced April's UK inflation surge. The sharp increase in services inflation to 5.4% has particularly caught the market's attention, leading to a substantial reduction in rate cut expectations for the Bank of England, with markets now pricing in just one 25-basis point cut for 2025.
From a technical perspective, the currency pair exhibits a robust bullish structure, trading comfortably above all major moving averages. The US dollar's broader weakness, influenced by concerns surrounding Trump's tax bill and Moody's recent downgrade, has created an additional tailwind for the pair.
The technical outlook suggests potential for further upside movement, with the pair eyeing the 1.345 resistance level, while the RSI at 60.71 indicates room for additional gains before reaching overbought conditions. The combination of strong fundamental drivers and positive technical indicators points to a continued bullish bias for GBP/USD, though traders should remain vigilant of upcoming UK retail sales data and US PMI figures, which could influence the pair's trajectory.
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