EUR / USD
EUR/USD has opened significantly higher on the open, pushing through significant resistance levels and reaching multi-year highs near 1.18, supported by robust institutional buying. The sentiment eased by the end of the day as the pair struggled above this level, eventually coming back to 1.178.
The European Central Bank's successful management of inflation, which hit the target of 2.0% in June, has provided fundamental support for the euro while mounting US fiscal concerns surrounding the proposed $3.3 trillion Republican tax bill continue to weigh on the dollar.
Technical indicators suggest the pair is in overbought territory with an RSI of 74, trading well above major moving averages, particularly the 20-day SMA at 1.155, which could trigger a short-term correction toward 1.150.
While market sentiment remains bullish, ECB officials have signalled that euro strength beyond $1.20 could become problematic for monetary policy, potentially warranting intervention if the appreciation continues unchecked.
USD / JPY
USD/JPY weakened, dropping below critical technical levels including both the 20-day and 50-day SMAs at 144.78 and 144.60 respectively. The yen's strength has been bolstered by improved business sentiment among large manufacturers, as evidenced by the Bank of Japan's Tankan survey showing an increase to 13 from 12 in Q2.
BOJ Governor Ueda's comments about gradually rising inflation through 2026, coupled with the suggestion that current policy rates remain below neutral, indicate a measured approach to monetary policy tightening that could further support the yen. The US dollar's broader weakness has been exacerbated by market expectations of Federal Reserve rate cuts and concerns over the US fiscal outlook, with Trump's tax proposals potentially adding $3.3 trillion to the deficit.
From a technical perspective, while the pair has found temporary support near 143.00, sustained trading below this level could trigger additional downside movement toward 142.28. The combination of improving Japanese economic fundamentals, potential BOJ policy normalisation, and widespread dollar weakness suggests continued pressure on USD/JPY in the near term.
GBP / USD
GBP/USD maintained levels above 1.37, supported by the UK's resilient service sector and robust employment figures, while the US economy shows increasing signs of deceleration. Technical indicators remain firmly bullish with the RSI at 67, and prices are trading well above major moving averages, particularly showing significant distance from the 200-day SMA at 1.29.
The pair's technical outlook suggests potential for further upside movement, with a possible target of 1.40 if the current resistance at 1.38 is breached, though traders should monitor the crucial support at the 20-day moving average of 1.3575.
The broader fundamental landscape, including reduced UK trade barriers with both the US and EU, combined with the dominant service sector's ability to shield the British economy, provides additional tailwinds for sterling's appreciation against the dollar. The US dollar faces additional headwinds from uncertainty surrounding trade policy and ongoing Senate deliberations over the $3.3 trillion tax-and-spending bill, further supporting the bullish case for GBP/USD.
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