EUR / USD
Source: Massive (polygon.io)
EUR/USD remains under pressure as dollar strength and wider interest rate differentials continue to weigh on the euro. The pair trades below its key moving averages, with the 20 DMA near 1.1200 providing immediate resistance, followed by the 50 DMA at 1.1300 and the 200 DMA around 1.1500. However, the daily RSI has recovered to approximately 43 from oversold territory, suggesting that selling pressure may be easing near the annual low of 1.1115. A sustained recovery above 1.1200 could open the way towards 1.1280, while renewed selling pressure risks a decline towards 1.1050.
Fundamentally, the dollar is likely to retain support from resilient US economic growth and the Fed's restrictive monetary policy, particularly as subdued eurozone growth and fiscal concerns in France weigh on sentiment. Nevertheless, elevated speculative euro shorts and substantial dollar long positioning increase the risk of a sharp reversal. With US employment figures and midterm elections approaching, we expect volatility to intensify, particularly if weaker US data or political uncertainty triggers short covering. Overall, the near term outlook remains cautiously bearish, although crowded positioning could amplify any recovery.
USD / JPY
Source: Massive (polygon.io)
USD/JPY remains supported by the substantial interest rate differential between the US and Japan, although expectations of further Bank of Japan tightening could gradually shift momentum in favour of the yen. The prospect of a December rate increase and additional tightening into early 2027 is likely to reduce the attractiveness of yen funded carry trades, limiting the pair's upside potential.
Technically, USD/JPY trades around 157.83, with the rising 50 DMA near 157 providing immediate support, while the 200 DMA around 159 and resistance at 160 present significant obstacles to further gains. The daily RSI near 52 suggests limited directional conviction, with a sustained break above 159 potentially extending gains towards 160. Conversely, rejection at current resistance could encourage a retreat towards 156.40. We expect the balance of risks to remain modestly skewed towards yen appreciation over the medium term, supported by tighter Japanese monetary policy and the possibility of currency intervention. However, upcoming US employment figures and election developments could generate considerable volatility in either direction.
GBP / USD
Source: Massive (polygon.io)
GBP/USD has regained upward momentum ahead of the Bank of England's policy decision, with the pair trading near 1.3402, above its 20 and 50 DMAs around 1.3300 and testing the 200 DMA near 1.3400. The daily RSI at 59 suggests improving buying momentum, although repeated resistance around 1.3427 to 1.3431 indicates that a sustained breakout has yet to materialise.
Attention now turns to the BoE's upcoming rate decision, with markets anticipating an increase to 4.00%. However, the accompanying guidance could prove more influential than the decision itself, particularly if policymakers challenge expectations for additional tightening. A hawkish message, combined with renewed dollar weakness, could support a move above 1.3431 towards 1.3664. Conversely, less hawkish guidance or stronger US employment figures could trigger a retreat towards 1.3300, followed by 1.3261. We maintain a modest upside bias while the pair holds above its shorter term moving averages, although monetary policy divergence and US political developments could constrain further gains.
