EUR / USD
EUR/USD continued to weaken, largely driven by the recent US-EU trade agreement that implements 15% tariffs on European goods, with markets discounting the tariff risk premium. Technical analysis reveals a bearish trend as the pair broke below key moving averages of 20 and 50 SMAs, with the price dropping from 1.159 to 1.154, accompanied by heavy selling volume during European trading hours.
The euro's weakness has been compounded by European leaders' negative reactions to the trade deal, particularly from Germany and France, while the ECB's latest inflation expectations survey showed improvement with the 1-year outlook easing to 2.6% from 2.8%. Market sentiment remains cautious ahead of crucial US economic data releases, including PCE inflation figures and the July jobs report, which could influence Federal Reserve policy decisions, with markets currently pricing a 66% probability of a rate cut in September. The technical outlook suggests potential for further decline, with the next significant support level at 1.144, though oversold conditions indicated by an RSI of 37 may provide some temporary relief.
The combination of improving US economic fundamentals, the advantageous trade deal for the US, and the broader implications for Eurozone economic prospects suggests this bearish trend could persist through year-end.
USD / JPY
USD/JPY held steady, struggling to break above the previous day's high of 148.60. The Bank of Japan maintains its dovish stance, with former Deputy Governor Nakaso indicating rate hikes are unlikely before 2026 despite elevated inflation of 3.7% year-over-year. The recent US-Japan trade agreement, which includes reduced tariffs on Japanese automobiles to 10%, has improved the outlook for export-oriented corporations while reducing safe-haven demand for the yen.
Technical analysis shows the pair trading between critical moving averages, with the 50-day MA at 145.40 and the 200-day MA at 149.60, suggesting a well-defined trading range. The combination of negative real interest rates in Japan and widening yield differentials with the US continues to weigh on the yen, while the resumption of Japanese investment flows into foreign bonds adds further downward pressure on the currency.
The pair's recent price action indicates minimal volatility, maintaining a narrow trading range near the key resistance level of 148.65. A breakthrough above 148.65 could trigger a bullish move toward the 200-day moving average at 149.0, while a decline below the 20-day moving average at 147.5 might initiate a bearish correction.
GBP / USD
GBP/USD continued to weaken, having declined from 1.34 to 1.33, with the downside pressure stopped by the 100 SMA support at 1.33. The US dollar is finding support from the recent US-EU trade agreement and the Federal Reserve's anticipated hold stance, with market data showing only a 2.6% probability of a July rate cut.
The British pound faces multiple challenges, including concerns about the UK's manufacturing and services sectors' performance under the new trade environment, while the Bank of England grapples with balancing inflation concerns against economic growth risks. Technical analysis reveals oversold conditions with an RSI at 35, though strong institutional interest has been observed around the 1.33 level, suggesting potential price stabilisation.
The currency pair's outlook looks to be stabilising at current levels as markets process the implications of new global trade arrangements and diverging monetary policy trajectories between the US and UK, with critical support at the 100-day SMA of 1.33 serving as a key level to watch.
Economic Calendar
