EUR / USD
EUR/USD strengthened, primarily driven by growing scepticism towards the US dollar amid escalating trade tensions and dovish Federal Reserve signals. Recent technical analysis shows strong upward momentum, with the pair climbing 0.84% to reach 1.144, maintaining positions well above critical technical indicators, including 1.13.
The combination of Trump's decision to double steel and aluminium tariffs to 50% and China's accusations of US trade deal violations has created significant headwinds for the dollar, while Fed Governor Waller's dovish comments about potential rate cuts have further weakened the greenback's position. Despite the European Central Bank's anticipated 25bp rate cut, the euro has remained robust, supported by ECB President Lagarde's strategic positioning of the euro as a viable alternative amid international de-dollarization trends.
Technical indicators suggest continued bullish sentiment, with increased institutional participation evident in trading patterns, while Morgan Stanley's forecast of significant Fed rate cuts through 2026 points to potential further euro appreciation against the dollar.
USD / JPY
USD/JPY weakened as escalating US-China trade tensions and Trump's announcement to double steel and aluminium tariffs drive safe-haven flows into the Japanese yen. Technical analysis reveals bearish momentum, with the pair declining from 143.8 to 142.7 and trading below the critical 50-day moving average at 144.90.
The Bank of Japan's potential shift toward monetary tightening, contrasting with the Federal Reserve's dovish signals for potential rate cuts in 2025, creates a fundamental backdrop supportive of yen strength. The deteriorating US manufacturing sector, evidenced by the ISM Manufacturing PMI falling to 48.5 in May, combined with Fed Governor Waller's comments suggesting possible rate cuts, has further weakened the dollar against the yen.
A bearish continuation could see the pair testing strong support at 139.9, particularly if global risk sentiment worsens, though a bullish reversal remains possible if buyers can defend recent lows of 142.50 and push prices above the 20-day moving average at 144.7. Market participants are closely monitoring upcoming speeches from Bank of Japan Governor Ueda for additional signals about potential policy shifts, while geopolitical tensions continue to support the yen's safe-haven appeal.
GBP / USD
GBP/USD strengthened, primarily driven by broad-based US Dollar weakness and the Bank of England's relatively hawkish stance. Recent Federal Reserve commentary suggesting potential rate cuts has further pressured the US Dollar, while Bank of England policymaker Mann's emphasis on monetary policy considerations has helped maintain Sterling's resilience.
Technical analysis reveals strong institutional interest, with the pair approaching 1.36 before encountering resistance and finding support at 1.35, near the 20-day moving average of 1.34. The currency pair's positive momentum is reinforced by its position above both the 50-day and 200-day moving averages, though the daily RSI reading of 63 suggests approaching overbought conditions.
Despite global market uncertainties, including US-China trade tensions and mixed manufacturing data, the pound has maintained relative stability, benefiting from the UK economy's perceived insulation from these external pressures.
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