EUR / USD
EUR/USD remained elevated, supported by both technical indicators and fundamental factors in the current market environment. The pair's position well above major moving averages, coupled with an RSI of 70, suggests strong upward momentum despite being in overbought territory.
The European Central Bank's cautious stance amid improving Eurozone economic conditions, combined with Europe's growth-supportive fiscal policies, provides fundamental support for the euro. The dollar faces persistent structural weakness due to rising US debt and budget deficits, while reduced safe-haven flows following the easing of Middle East tensions have further diminished dollar demand.
The technical outlook suggests potential for further gains toward 1.190 if the pair breaks above 1.181 resistance, though the overbought RSI conditions could trigger a corrective move toward support at 1.135.
USD / JPY
USD/JPY held its nerve Friday, as the pair faced continued uncertainty amid several crucial macro factors shaping the currency pair's trajectory. The imminent July 9 deadline for US reciprocal tariffs represents a major risk event, with potential outcomes ranging from severe risk aversion if high tariffs are implemented to improved risk appetite if postponed.
The Bank of Japan's stance remains dovish compared to the Federal Reserve, which maintains restrictive policy with rates at 4.25-4.50%, though markets have trimmed expectations for Fed rate cuts following strong US employment data. Japanese wage data and producer prices due this week will be closely watched for signals about domestic inflation pressures and potential BOJ policy shifts.
Trade tensions between the US and Japan have escalated with threats of a 35% tariff on Japanese goods, which could strain Japan's economic outlook and the BOJ's policy path. The combination of divergent monetary policies, trade uncertainties, and upcoming economic indicators suggests continued volatility for USD/JPY, with the currency pair's direction likely to be heavily influenced by developments in U.S.-Japan trade relations and central bank policy signals in the near term.
GBP / USD
GBP/USD faces growing headwinds as markets brace for Trump's July 9 tariff deadline, with potential new levies ranging from 10-70% on countries without finalized trade deals. While the UK has secured a preliminary agreement with reduced auto tariffs at 10%, uncertainty remains around steel and pharmaceutical sectors.
Recent strong US jobs data showing 147,000 new payrolls in June has reduced expectations for immediate Fed rate cuts, providing some support for the dollar despite its recent weakness. The Bank of England's dovish stance and the UK's fiscal challenges are weighing on sterling, with markets pricing in an 80.8% probability of a rate cut at the August meeting.
Trade negotiations between major economies like the EU, Japan and India remain fluid, injecting additional volatility into currency markets. The technical picture shows GBP/USD consolidating below resistance at 1.3789, with support around 1.3500, as traders await clarity on the trade landscape and monetary policy direction.
Economic Calendar
