EUR / USD
Source: Massive (polygon.io)
EUR/USD is trading in a decisively bullish posture, and we see the recent break above the 1.17 zone as technically significant following a prolonged period of consolidation. The move higher toward 1.1765, supported by a rising RSI near 62, confirms strengthening momentum, and we expect that a sustained hold above the 1.1700 to 1.1710 breakout zone could open the path toward 1.1856 and potentially the January high near 1.2040.
We see the macro backdrop shifting in favour of the euro in the near term, primarily driven by broad dollar weakness as markets reassess the Federal Reserve’s rate path. Softer United States data and positioning dynamics have encouraged short covering in the euro, while we expect the perception that the Fed is nearing the end of its tightening cycle to continue weighing on the dollar.
However, we expect upside to remain vulnerable to the evolving energy shock. The eurozone’s structural dependence on imported energy and emerging stagflation risks continue to pose a meaningful constraint, particularly as inflation rises alongside weakening growth indicators. While the European Central Bank’s relatively firm stance provides some support, we see the balance of risks becoming more two sided at higher levels. A failure to hold above 1.17 would likely trigger a pullback toward 1.16.
USD / JPY
USD/JPY is navigating a more balanced environment, and we see early signs that bullish momentum is beginning to fade after the recent rejection near the 160 level. The move lower toward 159.10 and the break below the 20 day moving average suggest that near term upside momentum is moderating, with RSI cooling toward neutral levels.
We see the macro picture becoming increasingly complex. On one hand, we expect the yen to remain structurally pressured by Japan’s energy import exposure and the persistence of wide yield differentials. On the other, we see growing sensitivity to intervention risk as the pair trades close to 160, which is likely to cap further upside in the short term.
We expect the near term direction to hinge on whether the pair can reclaim the 159.15 to 159.30 zone. A failure to do so would likely expose support near 158 and potentially the 50 day moving average, while a recovery above this area could bring a renewed test of 160. We also expect geopolitical developments and United States inflation data to remain key catalysts for directional moves.
GBP / USD
Source: Massive (polygon.io)
GBP/USD has staged a strong rally, and we see the move toward 1.3516 as a clear shift in short term momentum following a prolonged period of weakness. The break above key moving averages and the rise in RSI toward 60 confirm that buyers have regained control in the near term, and we expect that a sustained move above 1.3542 could open the path toward the January highs near 1.3848.
We see the fundamental backdrop as supportive in the short term, largely driven by broad dollar weakness and expectations that the Bank of England may need to maintain a relatively firm stance in response to persistent inflation pressures. Elevated energy costs continue to feed into the United Kingdom inflation outlook, and we expect this to underpin rate expectations relative to a more cautious Federal Reserve.
However, we expect the rally to remain vulnerable to reversal given the headline driven environment. Geopolitical uncertainty and energy market volatility continue to dominate, and any renewed escalation could quickly restore the dollar’s safe haven appeal. From a technical perspective, the pair appears extended above key support levels, and we see scope for a pullback toward 1.34 should profit taking emerge or sentiment shift.
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