EUR / USD
EUR/USD weakened on the back of a stronger dollar performance, dropping from multi-year highs of 1.18 to 1.174. Technical indicators suggest a turning point in the market, with a weakening RSI of 67, though the pair maintains its position above key moving averages, including the 20-day SMA at 1.1590 and the 50-day SMA at 1.1420.
The European Central Bank has expressed concerns about the euro's 14% appreciation this year, as it could potentially lead to inflation falling below targets, while the Federal Reserve's less dovish stance post strong labour figures narrows the yield differential between the two economies. Recent economic indicators favour the euro, with the eurozone's services sector returning to growth in June; however, given that the pair was driven more by the dollar, today's labour figures indicate that momentum in the pair could start to shift, should the US sentiment continue to improve.
The immediate technical outlook suggests that while sellers could push the pair below 1.16 if they defend the 1.14 support level, there's also potential for a moderate bearish correction rather than a trend change.
USD / JPY
USD/JPY has shown significant upward momentum, breaking above key technical levels with a move from 143.69 to 145.19, supported by robust US employment data that exceeded expectations. The Bank of Japan's cautious stance amid ongoing trade tensions with the US continues to influence the currency pair's dynamics, with BOJ board member Takata indicating potential policy tightening contingent on trade negotiation progress.
President Trump's scepticism about reaching a trade deal with Japan and threats of substantial tariffs are creating headwinds for the yen, while the upcoming Japanese upper house elections add another layer of uncertainty that markets haven't fully priced in. Technical indicators reveal strengthening bullish sentiment, with the pair now trading above key short-term moving averages, though remaining below the significant 200-day moving average at 149.63.
Global investors have been reducing their long yen positions from April's peak levels, primarily due to the high cost of maintaining positions in the low-yielding currency against higher US rates, suggesting potential for further upside movement toward the 146.15 resistance level.
GBP / USD
GBP/USD held its nerve yesterday as political uncertainty surrounding Chancellor Rachel Reeves and concerns over UK fiscal policy weighed heavily on sterling sentiment. Recent welfare spending concessions have created substantial pressure on public finances, causing market scepticism about the government's fiscal discipline despite Prime Minister Starmer's public support for Reeves.
The technical outlook remains cautiously neutral, with the pair trading in a tight range near 1.36, supported by key moving averages but struggling to breach the crucial 1.37 resistance level. The fundamental picture is further complicated by the Bank of England's indication of gradual rate reductions, contrasting with a robust US jobs report that exceeded expectations and may delay Federal Reserve rate cuts.
The deteriorating UK economic landscape, characterised by rising unemployment and weaker growth prospects compared to European counterparts, combined with the technical resistance at 1.37, suggests the pound may face continued pressure in the near term, particularly if support at the 50-day moving average (1.35) fails to hold.
