EUR / USD
EUR/USD held its nerve on the back of continued dollar weakness, showing technical strength above key support of 1.15, retesting and rejecting prices above 1.16. Recent ECB commentary suggests balanced inflation risks and confidence in current policy, while wage pressures in the Eurozone have eased to levels aligned with central bank objectives.
The pair's recent upward momentum carried it to 1.161, with strong institutional interest evident in trading volumes and a bullish RSI reading of 64. Technical indicators point to continued strength, with the formation of higher lows suggesting potential for further gains above current levels.
However, the fundamental challenge of the Eurozone's energy import reliance, combined with geopolitical tensions from the Iran-Israel conflict, may limit sustained upside movement despite favourable rate differentials and current technical strength.
USD / JPY
USD/JPY is displaying bullish momentum, trading above key technical indicators including both the 20-day and 50-day moving averages at 143.94 and 144.07 respectively. The Bank of Japan's cautious approach to policy normalization, with expectation of maintaining its policy rate at 0.5% amid external uncertainties, continues to influence the pair's movements.
While Japanese inflation remains above target, the BOJ's gradual stance on reducing government bond purchases from ¥400 billion per quarter is contributing to moderate yen weakness. The currency pair has experienced increased volatility due to competing forces of safe-haven flows and geopolitical risks, particularly tensions in the Middle East.
The pair's immediate direction appears contingent on the relative hawkishness between BOJ Governor Ueda and Fed Chair Powell this week, with markets currently pricing in two Fed rate cuts by year-end. Technical analysis suggests potential upside targets at 146.14 and 148.51 if buyers maintain momentum above 144.81, though failure to hold above the 50-day moving average could trigger a bearish reversal toward support levels at 143.40.
GBP / USD
GBP/USD is displaying a strong technical position, trading above multiple key moving averages, including the 20-day MA at 1.35 and the 50-day MA at 1.335, indicating a robust bullish structure. However, the pair faces significant near-term challenges as both the Federal Reserve and Bank of England prepare to announce their monetary policy decisions this week, keeping market participants cautious.
Recent UK economic data has raised concerns, with upcoming UK CPI data expected to show inflation holding at 3.5%, could significantly influence the Bank of England's decision-making process. The US Dollar's current weakness near 98.00 is providing some underlying support for the pair, though gains remain capped as investors await crucial central bank decisions.
The technical outlook suggests potential upside movement if buyers can overcome resistance at 1.362, which could pave the way for a move toward 1.37.
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