EUR / USD
Source: Massive (polygon.io)
EUR/USD is navigating a more constructive backdrop, and we see the recent push toward 1.1810 as a reflection of both fading dollar strength and improving sentiment around geopolitical risks. The unwind of the safe haven bid in the dollar, as diplomatic channels reopen, has provided a clear tailwind for the pair, and we expect that any sustained easing in energy market stress would disproportionately benefit the eurozone.
We see a gradual shift in the macro narrative, with softer United States data allowing markets to reassess the Federal Reserve’s path, while eurozone sentiment has proven more resilient than expected. This is beginning to compress the transatlantic rate differential, which we expect to act as a structural support for the euro if the trend continues.
From a technical perspective, we see strong upside momentum, with price holding well above key moving averages clustered near 1.16. However, the rejection near 1.1810 highlights a clear resistance zone into 1.1860. We expect that a decisive break of this area would open the path toward 1.2040, while failure to do so could trigger a corrective move back toward the 1.17 region. Overall, we see the outlook turning more balanced, with upside potential contingent on continued geopolitical de escalation and softer United States data.
USD / JPY
Source: Massive (polygon.io)
USD/JPY is showing signs of losing upward momentum, and we see the recent move below the 159 area as indicative of a shift in the underlying drivers. Softer United States inflation data has reduced upward pressure on yields, and we expect this to gradually erode the dollar’s carry advantage over the yen.
At the same time, we see improving sentiment around global risk and easing oil prices as supportive for Japan, given its heavy reliance on energy imports. This dynamic could provide the Bank of Japan with greater flexibility to normalise policy over time, which we expect to be supportive for the yen in the medium term.
From a technical perspective, we see the pair trading below the 20 day moving average and the 30 day VWAP, with momentum indicators flattening. The key near term level is the 158 zone, and we expect that a break below this area would confirm a deeper correction toward 157. Conversely, a recovery back above 159 would be needed to stabilise the outlook. Overall, we expect the balance of risks to tilt modestly toward further downside as yield differentials narrow.
GBP / USD
Source: Massive (polygon.io)
GBP/USD has extended its rally, and we see the move toward 1.3589 as primarily driven by broad based dollar weakness rather than a fundamental improvement in the United Kingdom outlook. The easing of geopolitical tensions and softer United States inflation data have reduced the dollar’s support, allowing sterling to outperform in the near term.
We expect this dynamic to remain in place in the short term, particularly if markets continue to price a more dovish Federal Reserve stance. However, we see the underlying domestic backdrop in the United Kingdom as fragile, with weak growth prospects and ongoing sensitivity to energy prices limiting the sustainability of the rally.
From a technical perspective, we see strong momentum with RSI elevated, though approaching levels that suggest the move may be stretched. Resistance near 1.3589 to 1.3600 is now a key area, and we expect that a break higher could extend gains toward 1.3848. However, we also see increasing risk of a pullback toward 1.34 if profit taking emerges or if geopolitical tensions re escalate. Overall, we expect sterling to remain highly sensitive to external drivers, with the outlook dependent on the persistence of dollar weakness.
