EUR / USD
The EUR/USD pair faces downward pressure amid contrasting economic conditions between the US and Eurozone. Producer prices in the US surged to 3.3% YoY in July, marking a staggering 1% increase from June. The dollar appreciated as expectations of continued Fed dovishness became less certain.
The European economy's challenges persist, showed by a 1.3% decline in industrial production in June and modest Q2 2025 growth of 0.1%, contributing to the euro's weakness. Technical analysis reveals the pair has broken below the critical 50-day moving average at 1.17, finding temporary support near the 20-day moving average at 1.16, while market expectations have shifted to price in a 93% probability of a smaller 25-basis point Fed rate cut in September.
The pair's immediate technical outlook suggests potential further weakness, with crucial support at 1.155 serving as a pivotal level that, if breached, could trigger a decline toward 1.14. The closely watched Trump-Putin summit, will likely influence the pair's near-term direction as markets seek clarity on monetary policy trajectories.
USD / JPY
While yesterday's PPI surprised benefitted the dollar, lifting the USD/JPY pair to 148.0, monetary divergence continues to drive the currency pair. USD/JPY remains under pressure, with markets now anticipating potential BOJ rate hikes while the Fed is still expected to cut rates in September. US Treasury Secretary Bessent's remarks about the BOJ being "behind the curve" on inflation have strengthened the yen at the time of unprecedented political pressure on the Fed to cut rates.
Japanese economic fundamentals show signs of improvement, with Q2 GDP expected to rebound to a modest 0.1% YoY and core inflation remaining above the BOJ's 2% target, supporting the case for monetary tightening. Technical analysis reveals the currency pair finding strong support at the 50-day moving average of 146.74, though it faces significant resistance at the 200-day moving average of 148.61.
The widening interest rate differential outlook continues to weigh on USD/JPY, with markets pricing a 65% probability of another BOJ rate hike before year-end. While the pair has shown recovery potential above key technical levels, maintaining momentum above the 30-day VWAP will be crucial for any sustained bullish movement.
GBP / USD
The GBP/USD pair maintains a broadly bullish technical structure, trading above its 200-day moving average of 1.31, despite recent consolidation around the 1.355 level where strong institutional activity has been observed. The UK's economic performance has provided fundamental support for sterling, with Q2 2025 GDP growth of 0.3% outperforming most G7 peers, particularly driven by strong services sector activity.
However, the currency pair faces headwinds from both domestic and external factors, as the Bank of England's recent rate cut to 4% revealed divisions within the Monetary Policy Committee regarding inflation risks. The pound's near-term direction appears increasingly dependent on inflation dynamics, with the BoE forecasting inflation to peak at 4.0% in September, while unexpected US producer price increases have complicated the Federal Reserve's policy outlook.
Technical analysis suggests potential for further upside if the pair can break above resistance at 1.363, which could pave the way for a move toward July's peak of 1.378. The RSI reading of 58 indicates moderate upward momentum, though support at 1.35 needs to be maintained to prevent a deeper correction toward the early August low of 1.315.
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