EUR / USD
EUR/USD continues to demonstrate weakness amid a complex interplay of macroeconomic and political factors, weighing on the euro. Technical analysis indicates a bearish trend as the pair trades below key moving averages, with significant support at 1.1560 being tested during high-volume European trading sessions.
The US economy's resilience, as evidenced by robust Q2 GDP growth of 3.8%, contrasts sharply with Europe's challenges, although the Federal Reserve's potential rate cuts have somewhat tempered the dollar's strength. German wholesale prices, showing a 1.2% year-over-year increase, add to the European Central Bank's monetary policy challenges. Meanwhile, the pair's positioning below key technical indicators, such as the 20-day moving average, reinforces the bearish sentiment.
The combination of political uncertainty in Europe, diverging economic fundamentals, and geopolitical risks suggests continued vulnerability for the euro, with potential downside targets at 1.1500 and 1.14000, should current support levels fail to hold.
USD / JPY
USD/JPY maintains a strong bullish trajectory, supported by both technical indicators and fundamental factors, with current trading levels well above key moving averages, suggesting sustained upward momentum. The recent political turmoil in Japan, marked by the collapse of the governing coalition, has created uncertainty around the nation's leadership and monetary policy direction. This political instability, combined with Sanae Takaichi's known preference for loose monetary policy, has pushed back market expectations for BOJ policy tightening to 2026, fundamentally supporting yen weakness.
The technical outlook remains positive as the pair trades above multiple support levels, with potential for further gains if it breaks above the resistance at 153.18. While the Federal Reserve is expected to implement two more rate cuts this year, the widening policy divergence between the Fed and BOJ continues to favour dollar strength against the yen.
The combination of Japan's increasingly dovish outlook and robust technical indicators suggests the path of least resistance for USD/JPY remains to the upside, with 155.71 serving as a potential target level.
GBP / USD
The GBP/USD continues to face significant downward pressure, as multiple technical indicators suggest a deteriorating market structure. The currency is trading below critical moving averages and encountering resistance at key levels. The pair's confined trading range near the 1.3300 mark reflects current market uncertainty. At the same time, increased safe-haven flows to the US dollar amid global political instability have further weakened the pound's position.
The Bank of England's unclear policy trajectory, combined with persistent concerns over UK inflation and scrutiny of the upcoming budget, has created additional headwinds for the British pound. Technical analysis indicates that while a potential bullish scenario could emerge if support at the 200-day moving average holds, the current RSI reading of 40 suggests growing bearish momentum that could push the pair toward the August low of 1.315. The complex macroeconomic landscape, including US-China trade tensions and the US government shutdown, continues to influence currency movements, though recent conciliatory comments have helped ease immediate concerns.
Markets are currently pricing in two Federal Reserve rate cuts by year-end. In contrast, domestic challenges such as UK housing market stress and labour market softness continue to weigh on sterling's performance against the dollar.
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