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Daily FX Report

FX Pulls Back Amid Dollar Strength

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Authors
Daria Efanova

Daria Efanova Head of Research

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EUR / USD

EUR/USD edged lower, with recent price action showing a decline to 1.129 despite the euro's broader structural resilience against the dollar. Strong institutional support for the euro is evident through ECB President Lagarde's strategic push to establish it as a global reserve currency, although ongoing economic challenges in key EU economies like Germany partially offset this.

Technical analysis reveals a critical juncture for the pair, with price action consolidating between the 20-day moving average support at 1.1268 and resistance near 1.130. The immediate outlook appears contingent on upcoming US-EU trade negotiations and FOMC minutes, with market participants particularly focused on the Federal Reserve's stance on inflation and potential rate cuts. 

The near-term direction will likely be determined by a breakthrough above 1.130, which could target recent highs or a breakdown below 1.1268, potentially leading to a test of support at 1.175. A fall below these levels would require a strong macroeconomic impetus or a major reversal in the dollar narrative, which we do not anticipate in the near term.

USD / JPY

USD/JPY continues to show resilience amid complex market dynamics, with recent trading activity maintaining levels below key moving averages despite broader uncertainties. The Japanese economy faces significant headwinds as weak demand at government bond auctions, particularly in the super-long sector, reflects diminishing institutional investor interest and growing concerns about Japan's fiscal position.

Bank of Japan Governor Ueda's acknowledgement of trade-related uncertainties and the central bank's readiness to adjust policy suggest potential volatility ahead for the currency pair. Technical analysis indicates a mixed outlook, with the pair trading above the trend support but remaining below the 20-day moving average of 144.87.

The US dollar remains fundamentally dampened by continued uncertainty around trade deals and longer-term fiscal concerns. The structural environment continues to favour the yen's strength against the dollar, barring any significant positive surprises in Japanese economic data or major policy shifts from the Bank of Japan.

GBP / USD

GBP/USD dipped slightly below the 1.35 level yesterday, but its sustained longer-term strength suggests limited appetite for a broader trend reversal. The currency pair's strength is supported by sticky UK inflation data and robust retail sales figures, which have led markets to price in fewer rate cuts from the Bank of England compared to the Federal Reserve.

The International Monetary Fund's upgraded UK GDP forecast for 2025 to 1.2% provides additional backing for sterling, while recently signed trade deals with India and the US contribute to positive market sentiment. 

Technical indicators suggest moderate bullish momentum with an RSI of 58.76, though the pair faces immediate resistance at 1.35 with a potential upside toward 1.36 if breached. The outlook remains constructive despite potential headwinds from the upcoming UK Spending Review on June 11, with key support levels established at 1.33 and the 50-day SMA at 1.32, providing a buffer against downside risks.

Economic Calendar

29052025

Contents

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

This report was prepared with the assistance of artificial intelligence.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

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