EUR / USD
EUR/USD is navigating a period of pronounced structural uncertainty, caught between offsetting macroeconomic forces that have prevented any sustained directional move. We see the US Supreme Court’s invalidation of Trump’s reciprocal tariff authority, followed swiftly by the introduction of a 15% global tariff under Section 122, as creating a policy vacuum that undermines conviction in both currencies. The European Commission’s decision to freeze ratification of the EU-US trade agreement reinforces this paralysis. Meanwhile, US macro data have taken on a stagflationary tone, with GDP growth undershooting expectations at 1.4% versus 2.5% and core PCE inflation holding firm at 2.9%. We expect this combination to compress Fed easing expectations and limit the dollar’s upside despite elevated real yields.
The euro has nevertheless struggled to capitalise on dollar fragility. We see President Lagarde’s warnings about trade instability weighing on business confidence as a key constraint, particularly given Europe’s reliance on external demand in a higher-tariff global environment. Technically, the pair is consolidating just above a cluster of converging averages near 1.18, with the 200-day SMA around 1.17 providing deeper structural support. Momentum indicators remain subdued, with RSI below 47, signalling muted conviction despite the recent gap-up recovery.
Looking ahead, we expect direction to hinge on whether the US administration can legislate permanent tariff measures before the 150-day Section 122 window expires and whether the Federal Reserve shifts toward faster easing despite sticky inflation. A sustained hold above 1.18 would open scope for a move towards resistance near 1.1837, while failure to maintain this level risks a retracement towards the 1.1722 support zone.
USD / JPY
USD/JPY is showing increasingly bearish tendencies as a combination of fundamental and technical forces weighs on the pair. We see the Bank of Japan’s more hawkish tone, including discussion of potential rate increases as early as spring if yen weakness feeds import inflation, as gradually narrowing the US–Japan yield differential that has historically supported dollar strength. At the same time, renewed uncertainty around US trade policy and tariff implementation is dampening dollar demand, as investors reassess global growth prospects and rotate toward traditional safe-haven assets, including the yen.
From a technical perspective, the pair remains below key trend gauges, including the 20-day SMA at 154.88, the 50-day SMA near 156, and the 30-day VWAP around 155.07, reinforcing a short-term bearish bias. The 200-day SMA at 152.06 now represents the next major support zone. While the daily RSI near 49 reflects neutral momentum rather than outright oversold conditions, we expect that failure to reclaim the 155 area would increase downside pressure and could expose the January swing low near 152.20.
Looking ahead, we see the medium-term balance of risks tilted against dollar bulls. A cautious Federal Reserve constrained by mixed US data, a gradually normalising Bank of Japan, and persistent demand for safe-haven currencies together suggest that rallies may prove corrective rather than trend-reversing, with the broader trajectory biased lower unless rate differentials widen again decisively.
GBP / USD
GBP/USD is approaching a critical technical inflection point while fundamentals increasingly tilt in sterling’s favour. We see recent US economic softness, especially fourth-quarter GDP growth of 1.4% versus expectations of 2.5%, together with tariff-driven policy uncertainty following the Supreme Court ruling as materially undermining dollar sentiment. This has shifted the balance of risks marginally towards sterling appreciation.
Technically, the pair is trading near 1.3529 after a constructive weekend gap higher and is testing resistance at the 50-day SMA around 1.3500, with the 200-day SMA near 1.3400 providing a strong underlying support base. However, we note that momentum remains cautious: RSI near 41 and price still below the 20-day SMA and 30-day VWAP around 1.3600 suggest the downtrend from January’s 1.3848 peak has not yet fully reversed.
We see the current setup as pivotal. A sustained break above the 1.3500–1.3530 resistance band could confirm that improving fundamentals, including repriced Bank of England rate expectations and softer dollar dynamics, are beginning to translate into stronger price action, potentially opening a move towards 1.3580. Conversely, failure to clear resistance would likely trigger renewed selling pressure towards 1.3440 and the 200-day support near 1.3400.
