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Daily FX Report

Subdued Dollar Keeps FX Elevated

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Authors
Daria Efanova

Daria Efanova Head of Research

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EUR / USD

EUR/USD weakened on the back of a bounce in the dollar. The recent Eurozone inflation data for May dropped to 1.9%, falling below the ECB's 2% target, fuelling expectations for monetary policy easing. Market participants have priced in a 97% probability of a 25 basis point rate cut at the upcoming ECB meeting, while political instability in the Netherlands adds to the euro's challenges.

The technical landscape shows the currency pair finding crucial support at the 50 DMA at 1.12. The combination of technical indicators and fundamental factors suggests a period of consolidation ahead, with the 1.146 level serving as a critical resistance point, while a breakdown below the converged moving averages at 1.12 could trigger accelerated selling pressure toward 1.123.

USD / JPY

USD/JPY strengthened but remained capped by the resistance levels in the form of moving averages. Recent price action shows a moderate upward movement from 142.7 to 144.0, with strong institutional participation supporting the bullish momentum. This prompted the pair to completely erase the previous day's losses.

The pair's trajectory is being significantly influenced by global trade tensions, particularly the new US tariffs on steel and aluminium imports, which pose potential risks to Japan's export-dependent economy. Moreover, technical analysis suggests stalling upside potential, given that the pair maintains its position below the 50-day moving average at 144.90.

BOJ Governor Ueda's reluctance to forcefully raise rates without clear evidence of sustained economic recovery continues to weigh on the yen, while the dollar index struggles to break above the 100 threshold, creating a tight range for the USD/JPY outlook.

GBP / USD

GBP/USD edged slightly lower as the pair struggled above the 1.355 resistance level, maintaining the overall strength. UK economic fundamentals appear healthy, characterized by better-than-expected manufacturing data and strong housing market performance, while the US dollar faces challenges from disappointing manufacturing figures and an uncertain Federal Reserve policy stance.

The technical analysis reveals a strong support structure for GBP/USD, with multiple moving averages providing a foundation at 1.34, 1.33, and 1.28, respectively. The recently announced UK-US trade deal and the Bank of England's measured approach to monetary policy adjustments provide additional support for sterling's stability.

The pair's immediate outlook suggests the potential for further upside movement if it breaks above the 1.355 resistance level. Recent trading volumes peaked during the US session around 1.350, indicating significant market interest at these levels, which could serve as a pivotal point for future price action.

Economic Calendar

04062025

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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