EUR / USD
EUR/USD continued to show signs of moderate weakness, with the pair seen approaching a crucial 20 SMA support level of 1.1670. Trade tensions between the US and EU continue to escalate, with President Trump's threat of 30% tariffs creating uncertainty in currency markets. Additionally, the eurozone's fragile economic outlook, marked by a modest 0.9% GDP growth forecast, continues to weigh on the euro despite expectations of moderating inflation approaching the ECB's 2.0% target.
Technical analysis reveals the pair trading above major moving averages, though momentum indicators suggest waning bullish sentiment as the RSI declined to 53. The 20 SMA support will be key for the pair to suggest further weakness toward the 50-day moving average at 1.15.
The broader fundamental picture shows improving eurozone conditions as the region transitions from stagflation to a low-inflation recovery, supported by lower energy costs and structural reforms, though trade uncertainties continue to cast a shadow over the currency pair's potential upside. We expect the pair to edge lower in the near term, retesting the 20 SMA level.
USD / JPY
USD/JPY continued to demonstrate bullish momentum, maintaining levels above critical technical indicators, including the 50-day SMA at 144.69 and the 20-day SMA at 145.42, suggesting a strong upward trend. The pair's recent climb from 147.13 to 147.73 reflects persistent dollar strength against the yen.
The Japanese yen faces multiple headwinds, including the BOJ's relatively dovish stance and potential US tariffs of 25-30% on Japanese exports, which create substantial uncertainty in the market. Political factors are adding further pressure, with Japan's upcoming Upper House election raising concerns about fiscal deterioration due to campaign promises, while global institutional investors appear to be increasing their USD/JPY long positions in anticipation of continued yen weakness.
Technical analysis suggests that if the pair maintains momentum above 147.70, it could target resistance at 148.00 before challenging the 200-day SMA at 149.26. We expect the pair to remain above the shorter-term moving averages in the meantime.
GBP / USD
GBP/USD sold off once again, driven by a combination of a technical reversal and the dollar strength. Technical analysis reveals a concerning pattern, with the currency pair trading below both its 20-day and 50-day moving averages, while the RSI at 34 suggests approaching oversold conditions.
The Bank of England's acknowledgement of below-potential economic growth, coupled with a weakening labour market evidenced by declining permanent placements, has led to a 90% probability of a rate cut in August. Market participants are closely monitoring upcoming UK inflation data, which is expected to remain around 3.4%, which could significantly influence the timing of potential BOE rate cuts.
The immediate technical outlook suggests that while 1.33 serves as a crucial support level, a breach could accelerate the decline toward the 100-day moving average at 1.3250.
Economic Calendar
