EUR / USD
Source: Massive (polygon.io)
EUR/USD is benefiting from a supportive macro backdrop, and we see the recent move toward 1.1805 as a continuation of improving sentiment toward the euro. The easing of geopolitical tensions has reduced safe haven demand for the dollar, and we expect this shift to continue supporting risk sensitive currencies in the near term.
We see the narrowing of rate differentials as a key driver, with softer United States data increasing expectations for Federal Reserve easing, while the European Central Bank remains relatively steady. This dynamic is removing a long standing headwind for the euro, and we expect it to remain a supportive factor if incoming United States data continues to soften.
At the same time, we see improving eurozone fundamentals adding to the constructive outlook, particularly as lower energy prices ease inflation pressures and support growth. From a technical perspective, we see strong momentum with price holding above key moving averages, though the RSI near 65 suggests the move is becoming stretched. We expect that a break above 1.1845 would open the path toward 1.2040, while failure to do so could lead to a pullback toward the 1.17 area.
USD / JPY
USD/JPY remains under downward pressure, and we see a clear shift in the macro narrative as the dollar weakens and expectations for Bank of Japan tightening increase. Softer United States data is reducing the yield advantage that has supported the pair, and we expect this trend to continue as markets price in a more dovish Federal Reserve.
We see the yen gaining support from both domestic policy expectations and improving external conditions, particularly as easing geopolitical tensions help stabilise energy markets. This combination is likely to support the yen over the medium term, especially if the Bank of Japan continues along a gradual normalisation path.
From a technical perspective, we see the pair trading below key resistance levels near 159, with momentum indicators confirming a loss of upside strength. The 50 day moving average near 158 remains an important support, and we expect that a break below this level would open the path toward 157.30. Overall, we see risks skewed to further downside unless the pair can reclaim the 159 to 159.30 zone.
GBP / USD
Source: Massive (polygon.io)
GBP/USD continues to trade with a firm tone, and we see the move toward 1.3568 as part of a broader shift driven by dollar weakness rather than purely domestic strength. Improving global risk sentiment and easing geopolitical concerns have reduced demand for the dollar, supporting sterling in the near term.
We expect the Bank of England’s stance on inflation to provide a degree of support, particularly as elevated energy costs delay rate cuts and maintain a relatively favourable yield environment compared to a more cautious Federal Reserve. This narrowing policy divergence is likely to remain a key driver for the pair.
From a technical perspective, we see strong momentum with RSI elevated but not yet overextended. A break above the 1.3590 to 1.3600 resistance zone would likely open the path toward 1.3848. However, we expect the rally to remain vulnerable to reversal, particularly if geopolitical tensions re escalate or if weaker United Kingdom growth begins to weigh more heavily on sentiment.
