1. FX Outlook
  2. Daily FX Report
Daily FX Report

Markets Eye Packed Data Day

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EUR / USD

EUR/USD continues to demonstrate resilience, continued to post gains against the dollar, despite looming trade tensions between the US and EU ahead of the August 1st tariff deadline. Technical analysis reveals a bullish stance as the currency pair trades above major moving averages, with the 20-day SMA at 1.17 providing support and the RSI at 62 indicating sustained buying momentum.

The European Central Bank's monetary policy stance remains cautious, with markets anticipating one more 25bp rate cut by year-end, while expectations for two Fed cuts in 2025 continue to influence the pair's dynamics. A potential breakthrough in US-EU trade negotiations, similar to the recent US-Japan agreement, could remove significant headwinds for European exporters and provide further upside for the euro.

The immediate technical outlook suggests potential for continued upward movement, with a break above 1.181 possibly targeting 1.190, though traders should remain vigilant of support at the 50-day SMA near 1.16. Recent improvements in eurozone consumer confidence, reaching a 4-month high of -14.7, provide additional fundamental support for the euro's strength against the dollar.

USD / JPY

USD/JPY is experiencing heightened volatility, continuing its fall to 146.50, amid a significant US-Japan trade deal that reduced tariffs on Japanese imports to 15% and secured a $550 billion Japanese investment commitment. Political uncertainty has emerged as a critical factor following the Japanese ruling coalition's loss of its upper house majority, adding complexity to the currency pair's outlook.

The Bank of Japan's monetary policy direction has become clearer after Deputy Governor Uchida suggested the trade deal could accelerate interest rate normalization, while Japanese government bond yields have reached multi-year highs with the 10-year yield touching 1.6%. 

Technical analysis shows the pair trading below its 200-day moving average at 149.60, constrained between support at 145.75 and resistance at 148.67. A potential bearish breakout below the 20-day moving average at 146.20 could trigger a decline toward support at 142.28.

GBP / USD

GBP/USD continues to cautiously edge higher, with technical indicators showing momentum towards the 20-day moving average at 1.356. Recent price action has pushed the pair from 1.35 to 1.36, with strong afternoon buying pressure suggesting institutional interest in sterling positions.

While the UK faces headwinds from fiscal concerns and potential tax hikes in 2025, the pound appears undervalued based on traditional metrics, with the currency finding additional support from improving global trade sentiment and reduced market anxiety around tariffs. 

The pair's immediate technical outlook remains constructive as it tests resistance near the 20 SMA, with potential for an extension toward 1.38 if upcoming economic data, particularly inflation and employment figures, provide support. However, the sustainability of these gains hinges on the pair maintaining position above the critical 50-day moving average at 1.35. This is likely to keep the pair trading cautiously higher in the near term.

Economic Calendar

24072025

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Disclaimer

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This report was prepared with the assistance of artificial intelligence.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

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