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Daily FX Report

Yen’s Decline Defies Dollar Softness

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Authors
Daria Efanova

Daria Efanova Head of Research

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EUR / USD

EUR/USD has demonstrated significant upward momentum, driven primarily by a weakening dollar following Fed Governor Bowman's dovish remarks suggesting potential rate cuts by July. Despite concerning eurozone economic indicators, including a contractionary manufacturing PMI of 49.4, the euro has managed to find support above key technical levels, with the pair trading comfortably above all major moving averages.

The reduction in European exposure to dollar-denominated assets, combined with substantial dollar selling during Asian trading hours, has contributed to the pair's strength, pushing it nearly 1% higher to reach 1.157. Despite Iran's response to strike US bases in Qatar, safe-haven demand for the dollar remained subdued, further supporting the euro's ascent.

The pair's immediate outlook appears constructive as long as it maintains its position above 1.155, though Fed Chair Powell's upcoming Congressional testimony could significantly influence near-term price action, with the recent multi-month high of 1.161 serving as a key target for bulls.

USD / JPY

USD/JPY has shown significant volatility amid heightened geopolitical tensions, particularly following US strikes on Iranian nuclear facilities and subsequent threats to global oil supply. Japan's heavy dependence on oil imports has placed considerable pressure on the yen, contributing to its approximately 3% decline since the Israel-Iran conflict began on June 13. Despite Japan's core inflation reaching 3.7% year-over-year in May, which typically would support currency strength, the yen's traditional safe-haven status has been overshadowed by concerns about deteriorating trade balances.

Technical analysis reveals the pair trading above key short-term moving averages of 144.5, with recent price action showing a surge toward 148.0 before experiencing a sharp reversal. The heavily skewed speculative positioning toward yen weakness, suggests potential for further upside movement in the USD/JPY pair. 

The technical outlook remains cautiously bullish above the 144.5 support level, though the 100-day moving average at 146.70 presents significant resistance for any sustained upward momentum.

GBP / USD

GBP/USD has demonstrated significant strength, pushing through key resistance levels to reach 1.35, supported by broad-based dollar weakness and robust sterling demand. Recent dovish comments from Federal Reserve officials have contributed to the dollar's decline against major currencies, including sterling.

European institutional investors are leading a notable shift away from dollar-denominated assets, with their dollar positioning reaching multi-year lows, while Asian markets have witnessed consistent dollar selling pressure. Technical analysis reveals a bullish bias for the pair, with price action maintaining position above all major moving averages and the 50-day moving average at 1.34, providing strong support. The immediate resistance level sits at 1.355, with potential for further upside movement towards 1.363 if positive economic data materializes. 

The scale of potential dollar reallocation is substantial, potentially providing additional tailwinds for GBP/USD appreciation.

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Disclaimer

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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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