EUR / USD
EUR/USD remains range-bound as conflicting macroeconomic signals continue to foster consolidation, with the pair trading within a narrow 0.29% range and closing near 1.185. We see the latest US employment report, which showed 130,000 jobs added, reinforcing expectations that the Federal Reserve will remain on hold, with futures pricing roughly a 94% probability of unchanged rates at the next meeting. However, weaker retail sales and an 8.4% decline in existing home sales have tempered dollar strength and prevented a decisive breakout.
Technically, the pair remains positioned above key supports, including the 200-day moving average at 1.17 and the 50-day moving average near 1.18, while resistance is clustered around the 20-day moving average near 1.19 and the late January high at 1.204. The RSI near 56 signals neutral momentum following a substantial rally over the past year. We expect near-term direction to hinge on the upcoming US CPI release, as markets assess whether inflation moderates enough to validate current Fed pause expectations. A softer print could see EUR/USD challenge resistance, while persistent inflation would likely support the dollar and cap upside.
USD / JPY
USD/JPY is facing increasing downward pressure as diverging monetary policy trajectories between the Federal Reserve and the Bank of Japan compress the rate differential. We see markets anticipating multiple BoJ hikes as early as March 2026, supported by wage growth of 2.4% year-on-year and elevated producer prices, while Fed expectations have shifted dovish, with roughly a 92% probability of unchanged rates through mid-2026 and growing expectations for easing beginning in June.
Technically, the pair has fallen sharply by around 0.8% over the past 24 hours, dropping from highs near 153.50 to lows around 152.43 and trading well below resistance at the 50-day SMA near 156 and the 20-day SMA near 155. The RSI at 34.5 indicates oversold conditions, suggesting potential for a tactical rebound. However, we see the 200-day SMA around 152 as a critical inflection level. A decisive break below this zone could accelerate losses toward late-January lows, particularly if narrowing rate differentials trigger further carry trade unwinding. We expect yen strength to remain a dominant theme into mid-2026 if BoJ tightening expectations persist.
GBP / USD
Sterling faces a challenging backdrop as UK growth data continue to disappoint, with fourth-quarter GDP at 0.1% versus expectations of 0.2%, reinforcing expectations that the Bank of England may ease sooner than previously anticipated. We see the BoE’s narrow vote to keep rates unchanged as signalling growing internal support for future cuts, weighing on sterling’s relative appeal. At the same time, stronger US employment data have reinforced expectations that the Federal Reserve will hold rates steady in the near term, supporting the dollar.
Technically, GBP/USD trades below the 20-day moving average near 1.37 and the 30-day VWAP around 1.36, while holding above medium-term support at the 50-day SMA near 1.35 and the 200-day SMA near 1.34. We expect buyers to defend the 1.35 area if the pair is to stabilise; a move back above the 20-day average could allow a retest of the late January high near 1.385. Conversely, a break below the 50-day average would likely expose downside toward 1.348. We see political uncertainty and policy divergence continuing to constrain sterling’s upside potential in the near term.
