EUR / USD
Source: Massive (polygon.io)
EUR/USD continues to trade with a firm tone near 1.1782, and we see the recent nine session rally as a reflection of fading safe haven demand for the dollar as ceasefire optimism builds. The pair remains well supported above key moving averages, and we expect momentum to remain constructive in the near term provided the 1.1770 support level holds.
However, we see the broader backdrop as increasingly fragile. Elevated oil prices linked to the ongoing Strait of Hormuz disruption continue to weigh disproportionately on the eurozone, and we expect this stagflationary dynamic to constrain the European Central Bank’s policy flexibility. At the same time, we see the Federal Reserve maintaining a relatively firm stance, which limits the extent of any sustained narrowing in rate differentials.
From a technical perspective, we see resistance emerging in the 1.1810 to 1.1841 zone, and we expect that failure to break this area could trigger a corrective move back toward 1.17. Looking ahead, we expect the pair’s direction to remain highly dependent on geopolitical developments, with any breakdown in ceasefire negotiations likely to restore dollar strength and reverse recent gains.
USD / JPY
USD/JPY is holding near 159.48 and we see the pair continuing to be supported by strong carry dynamics and a wide interest rate differential. The move higher remains technically intact, with price holding above key short term averages, and we expect a continued grind toward the 160 level if current conditions persist.
We see the macro backdrop as clearly supportive of dollar strength against the yen, particularly given Japan’s sensitivity to higher energy prices and the Bank of Japan’s cautious stance. Governor Ueda’s emphasis on data dependence reinforces expectations that policy normalisation will be gradual, and we expect this to keep pressure on the yen.
However, we also see risks becoming increasingly asymmetric. The proximity to the 160 level raises the probability of intervention, and we expect Japanese authorities to act if moves become disorderly. A break above 160.40 could open the path toward cycle highs, while failure near this level could trigger a pullback toward 158. Overall, we expect elevated volatility as markets balance carry trade demand against policy risks.
GBP / USD
Source: Massive (polygon.io)
GBP/USD is trading near 1.3519, and we see the pair caught between supportive near term data and a more challenging forward outlook. While recent United Kingdom growth data has surprised to the upside, we expect the broader macro environment to remain difficult given the country’s exposure to higher energy costs.
We see the Bank of England facing a clear policy dilemma, with inflation pressures rising alongside weakening growth. While rate expectations provide some support for sterling, we expect this to be offset by concerns over the sustainability of growth and the impact of elevated energy prices.
From a technical perspective, we see the pair holding above the 1.35 level, which remains a key near term pivot. A sustained hold above this level would support a retest of 1.3587, while a break below could open the path toward the 1.34 support zone. Looking ahead, we expect geopolitical developments to remain the dominant driver, with sterling particularly vulnerable to any renewed escalation that pushes energy prices higher.
