EUR / USD
EUR/USD has demonstrated remarkable strength, reaching fresh yearly highs near 1.164 and achieving an impressive 8.4% gain over the past twelve months. The euro's ascent is primarily driven by a combination of improving Eurozone economic indicators, particularly evidenced by Germany's Ifo Business Climate index rising to a 13-month high of 88.4 in June and a broadly weakening US dollar environment.
The Federal Reserve's growing dovish stance, with key officials signalling openness to rate cuts, has significantly pressured the dollar, while reduced safe-haven demand following the Israel-Iran ceasefire has further contributed to USD weakness. Technical indicators support the bullish outlook, with the pair maintaining positions above all key moving averages - the 200-day SMA at 1.08, 50-day at 1.137, and 20-day at 1.146, forming a bullish alignment.
A potential break above 1.165 could catalyse momentum toward the 1.17 handle, though traders should note that the euro's strength appears more attributable to dollar weakness rather than robust Eurozone fundamentals, suggesting potential vulnerability to shifts in market sentiment.
USD / JPY
USD/JPY has shown significant weakness following reduced geopolitical tensions between Israel and Iran, which has diminished safe-haven demand for the US dollar. Recent technical analysis indicates a decisive break lower, with the pair falling from 146.2 to 144.7. However, support in the form of shorter-term moving averages currently at 144.50 are suggesting a lack of strong bearish momentum below these levels in the near term.
The monetary policy divergence between the US and Japan continues to influence the currency pair, with Fed Chair Powell's dovish comments contrasting against the Bank of Japan's moderate stance regarding potential rate hikes. The technical outlook suggests that a reclaim of the 144.5 level could trigger a bullish reversal targeting 146.2.
The combination of easing geopolitical risks, evolving central bank policies, and persistent Japanese inflation pressures has created a challenging environment for the USD/JPY pair, with the technical structure favouring a modest downside in the immediate term.
GBP / USD
GBP/USD rallied once again, primarily driven by a notable de-escalation in Middle East tensions and improving global risk sentiment, which has particularly benefited the risk-sensitive British pound. Technical analysis reveals a robust upward trajectory, with the pair breaking above key moving averages and establishing fresh highs around 1.36, supported by substantial trading volume indicating strong institutional participation.
The pair's positive momentum is further enhanced by broad US dollar weakness, stemming from concerns over US fiscal policy and potential shifts in global reserve currency preferences. However, the Bank of England's monetary policy stance remains cautious with three members advocating for immediate rate cuts.
The divergence between improving risk sentiment and deteriorating UK economic fundamentals, coupled with the Federal Reserve's careful approach to monetary policy, creates a complex outlook for GBP/USD, with potential upside toward 1.37 if current momentum persists, though risks of a correction toward 1.32 remain if prices retreat below the crucial 50-day moving average at 1.34.
