EUR / USD
The EUR/USD pair continues to face significant downward pressure, primarily driven by the political crisis in France and disappointing German economic data, with industrial production falling 4.3% month-over-month in August. This data follows another report indicating that German factory orders fell for a fourth consecutive month, primarily due to uncertainties in the export segment, exacerbated by US tariffs implemented earlier this year. Despite the ECB's cautious stance on policy easing, the weakening political momentum in France and weakening growth prospects are weighing on the pair.
Technical analysis reveals bearish momentum, with the pair testing the key 100-day moving average of 1.1616. The support at 1.1600 is now crucial in determining whether the pair will experience a temporary correction or a longer-term trend reversal. The RSI of 40 suggests that there is still room for further downside, with the next support lying at 1.1500.
The combination of sluggish Eurozone growth and renewed US dollar strength as a safe-haven asset suggests growing pressure on the EUR/USD pair in the medium term, capping momentum above the 1.1725 mark, particularly if global risk aversion persists.
USD / JPY
USD/JPY demonstrated remarkable strength, driven primarily by political developments in Japan following Sanae Takaichi's victory in the Liberal Democratic Party leadership contest. Her well-known support for accommodative monetary policy has significantly reduced market expectations for a Bank of Japan rate hike in October, with probability estimates plummeting from 60% to approximately 20%.
The currency pair has shown robust technical momentum, breaking above the 151.94 level and approaching the significant 153 mark, while maintaining positions well above all major moving averages. The political uncertainty, combined with disappointing Japanese wage growth data showing declining real incomes for eight consecutive months, has contributed to a substantial 3% depreciation in the yen against the dollar this week alone.
While the daily RSI reading of 70.60 suggests overbought conditions that could trigger a technical correction, market participants are closely monitoring potential intervention from Japanese authorities, particularly as the currency approaches psychologically important levels.
GBP / USD
GBP/USD faces continued headwinds as the 1.3500 resistance level is capping the pair. Technical analysis reveals a moderately bearish outlook for GBP/USD, with the pair trading below critical moving averages and experiencing some selling pressure during European trading hours. The currency pair's immediate resistance stands at 1.3570, while the September low of 1.333 represents a crucial support level that, if breached, could trigger further downside momentum.
Despite maintaining interest rates at 4.0%, the BOE's cautious stance amid concerns about food inflation and broader economic pressures has contributed to sterling's vulnerability in the FX markets. The combination of domestic policy challenges and technical weakness suggests that GBP/USD may continue to edge lower in the near term, particularly if market sentiment remains risk-averse amid global economic uncertainties.
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