EUR / USD
Source: Massive (polygon.io)
The EUR/USD pair remains under significant downward pressure, driven by an unfavourable confluence of geopolitical risk, deteriorating euro area fundamentals, and persistent dollar strength. The ongoing United States Iran conflict and the effective blockade of the Strait of Hormuz are keeping oil prices elevated above $100 per barrel, disproportionately weighing on the euro area’s energy import dependent economy while reinforcing safe haven demand for the United States dollar. Euro area flash PMI data showing the fastest private sector contraction since November 2024, combined with Germany’s downgraded 2026 growth forecast, underscores the deepening economic weakness undermining the single currency.
From a technical perspective, the pair’s drift lower to around 1.1681, settling just below the clustered 200 day and 20 day SMAs near 1.1700, confirms the bearish macro narrative, with the failed intraday move to 1.1716 suggesting sellers are firmly in control at that resistance zone. The neutral RSI reading of 50 reflects near term indecision, but a break below the 1.1670 session low could accelerate losses towards the 50 day SMA at 1.1640 and the 1.1600 VWAP support level.
The divergence in monetary policy outlook further compounds euro weakness, as the Federal Reserve is expected to hold rates steady to assess war driven inflation risks, maintaining an attractive yield differential that supports capital flows into dollar denominated assets. Until a credible diplomatic resolution emerges to ease the geopolitical risk premium, the macro and technical outlook for EUR/USD remains decisively skewed to the downside, with upcoming central bank meetings from the Fed and ECB serving as the next critical catalysts.
USD / JPY
The USD/JPY pair remains fundamentally supported by the 300 basis point interest rate differential between the Federal Reserve at 3.75% and the Bank of Japan at 0.75%, a spread that continues to fuel robust carry trade demand for the dollar. Elevated oil prices, with Brent above $105 and WTI near $96, are compounding pressure on the yen by worsening Japan’s trade balance given its near total dependence on imported energy, effectively neutralising the currency’s traditional safe haven appeal. While Japan’s core inflation accelerated to 1.8% in March, it remains below the BoJ’s 2% target, giving policymakers little urgency to tighten when they meet on 27 to 28 April, where rates are widely expected to be held steady.
From a technical perspective, the pair is trading near 159.75 and remains well supported above all key moving averages, with the 20 day SMA at approximately 159.25 acting as immediate support and the 200 day SMA around 155 marking longer term structural support. Daily RSI hovers around 57, reflecting modest upward momentum without overbought conditions, while resistance at 160.33 has consistently capped rallies over the past month. A decisive break above that level could target the all time high near 162, driven by persistent yield differentials, whereas failure at that resistance risks a pullback towards the 159 to 159.25 support zone.
Although Japanese Finance Minister Shunichi Katayama has intensified verbal intervention warnings ahead of the Golden Week holiday period, when thin liquidity could amplify any official action, markets have largely discounted the rhetoric, as unilateral intervention without an accompanying BoJ policy shift has historically provided only temporary relief against the powerful fundamental drivers currently favouring dollar strength.
GBP / USD
Source: Massive (polygon.io)
The GBP/USD pair is under significant pressure from a macro environment dominated by the United States Iran conflict and the closure of the Strait of Hormuz, which has driven Brent crude above $105 per barrel, creating stagflationary pressures for the energy import reliant United Kingdom economy while reinforcing the United States dollar’s safe haven status. Sterling’s fundamental outlook is further undermined by deteriorating domestic indicators, including a composite PMI that has slipped below the 50 contraction threshold and weakening retail sales, raising recession risks flagged by TD Securities. Monetary policy divergence compounds the bearish case, as the Bank of England faces a difficult balancing act between persistent energy driven inflation and weakening growth, while the Fed’s cautious hawkish stance continues to attract yield seeking capital towards the dollar.
From a technical perspective, the pair’s price action reflects this bearish tilt. After rising to 1.3517 during the European session, a sharp New York afternoon sell off drove GBP/USD back to the 1.3448 area, erasing intraday gains and leaving it consolidating near 1.3465. A dense zone of support sits around the 1.3400 to 1.3450 region, where the 200 day, 50 day, and 20 day SMAs along with the 30 day VWAP all converge, making this a critical area for buyers to defend.
A decisive break below this support cluster would open a path towards the 1.3320 to 1.3170 demand zone, a scenario that aligns with the macro environment strongly favouring continued dollar strength until a meaningful diplomatic breakthrough in the Middle East materialises. With upcoming policy decisions from the Bank of England, the Federal Reserve, and the ECB all on the near term horizon, the pair remains vulnerable to further downside, and any sustained sterling recovery appears limited without a fundamental shift in the geopolitical environment.
