Technical Analysis

Sterling remains confined within a 1.3143–1.3787 range established since late April, with recent price action tilting bearish as technical momentum fades. GBP/USD trades below its 21-DMA near 1.3498, signaling a loss of upward traction and vulnerability to a deeper correction. Macro and Sentiment Overview UK Context: Gilt yields continue to correlate tightly with GBP/USD, but fiscal concerns and rising equity volatility (VIX up three consecutive weeks) could limit sterling’s haven appeal. Cross-Asset Link: Cable’s resilience has been partially supported by a positive correlation between EUR/GBP and U.S. equity volatility—a dynamic that may unwind as risk sentiment weakens. BoE Outlook: While inflation concerns linger, a dovish tone from key MPC members could undermine the currency further. Technical Outlook Chart Pattern: A bearish crossover between the 21-DMA and 100-DMA near 1.3500 is forming, signaling potential medium-term weakness. Support Zones: 1.3394 – intraday double-bottom support. 1.3333/34 – dual September lows; break would confirm trend reversal. 1.3250 – 50% retracement of 1.2712–1.3787. Resistance Zones: 1.3498–1.3505 – converging MAs; key resistance to recapture. 1.3527 – Oct 1 swing high. 1.36 – breakout trigger if reclaimed. Indicators: RSI remains subdued, trending lower, and Bollinger Bands are narrowing, suggesting impending volatility expansion. MACD is flat but below zero, reinforcing downside bias. Strategic View Technically, GBP/USD faces mounting downside risk as long as it stays below 1.35. A decisive break beneath 1.3333 would accelerate selling toward 1.3250–1.3150. However, a surprise rally above 1.3527–1.36 would invalidate the bearish setup and shift focus to 1.3660.

Sterling rallied modestly on Friday as softer U.S. data and a dovish Fed outlook contrasted with a comparatively firmer BoE stance. GBP/USD’s rebound from its late-September lows reflects ongoing interest-rate divergence, yet lingering UK fiscal risks temper enthusiasm for an extended breakout. Macro Context Fed vs BoE: U.S. policy is priced for deeper easing into 2025–26, reinforcing downside pressure on the dollar. UK Backdrop: Persistent inflation keeps the BoE cautious, even as growth lags. Any hint of dovish pivot—particularly from MPC doves—could weigh on GBP via gilt yield volatility. Market Sentiment: The U.S. government shutdown has curbed data flow, reducing volatility across FX. Commentary from Fed speakers will be closely parsed for clarity on rate trajectory. Technical Framework Support Levels: 1.3430 – short-term pivot. 1.3418 – cloud base offering structural support. 1.3362 – lower Bollinger Band and key downside guardrail. Resistance Levels: 1.3485–1.3505 – initial resistance zone. 1.3526 – October 1 swing high; breakout target. 1.3660–1.3787 – major resistance cluster (September and July highs). Trend Indicators: Price is consolidating just beneath the 21-DMA, signaling latent bullish energy. RSI is rising, confirming improving momentum. Bollinger Bands are contracting, implying an impending volatility expansion. Strategic View Bullish Scenario: Sustained closes above 1.3525 would validate breakout strength and re-target 1.3660–1.3787, aligning with the upper edge of the summer range. Bearish Scenario: Failure to defend 1.3430–1.3418 would shift momentum lower, exposing 1.3360, then 1.3324 (September trend low). Conclusion Sterling’s technical tone is cautiously bullish, supported by policy divergence and soft U.S. data. However, traders should remain mindful of fiscal headwinds that could limit upside beyond 1.35–1.36 until clarity emerges from the Autumn Budget. Summary:GBP/USD has regained near-term traction on softer U.S. data and Fed-BoE divergence. Immediate focus lies on 1.3505–1.3526 resistance; a decisive breakout above this zone would extend the recovery toward 1.3660/1.3787, while support at 1.3430–1.3418 remains critical to preserve the bullish structure.

USD/JPY is carving a bullish hammer pattern above its 100-DMA (146.51) and cloud base (146.80), with support reinforced by a double-bottom at 146.60. The pair’s resilience reflects rising U.S. yields, though yen buyers remain positioned for hawkish BOJ risks later this month. Macro & Sentiment Fed Support: Decline in layoffs and hawkish Fed commentary underpinned USD demand, adding to Treasury yield strength. Equity Flows: Renewed demand for U.S. tech stocks further weighed on the yen. BOJ Dynamics: Market-implied probability of an October BOJ hike (~40%) is supporting yen calls. Deputy Governor Uchida’s upbeat tone reinforces speculation of a policy shift if leadership transitions align with Shinjiro Koizumi’s rise. Technical Levels Supports: 146.50 (100-DMA). 146.21 (lower Bollinger). 145.50 (Sept 17 low). Resistances: 147.84 (21-DMA). 148.03 (daily cloud top). 148.29 (200-DMA). Indicators: Daily RSI is recovering from neutral levels; Bollinger Bands remain tight, indicating suppressed volatility before a likely expansion. Strategic View Bulls need a close above 147.84–148.03 to confirm upside extension. That would pave the way for a test of the 200-DMA at 148.29 and ultimately the weekly cloud at 149.45. Failure to hold above the 100-DMA risks a slide toward 146.20–145.50. BOJ communication is the near-term wildcard, with potential to trigger either a renewed push toward 149 or a sharp yen rebound.

Sterling’s decline reflects profit-taking and renewed fiscal concerns rather than a structural change in policy divergence. The Fed is still seen easing more aggressively than the BoE into 2026, suggesting sterling retains medium-term support provided the UK can contain fiscal instability. Market Drivers Fiscal Pressures: UK gilts yields are at multi-decade highs, raising questions about sustainability ahead of the November 26 Autumn Budget. Monetary Divergence: Despite the BoE’s steady hand, Fed rate paths remain more dovish over the medium term, implying yield spreads may yet turn sterling-positive. Market Tone: Risk appetite remains cautious, with investors hedging against UK-specific risks despite broader dollar softness. Technical Landscape Immediate Structure: GBP/USD has broken below the rising short-term channel established since early September, tilting momentum bearish. Support/Resistance: Key downside levels: 1.3534 (Thursday low), 1.3479 (100-DMA), and 1.3465/1.3400 (cloud support). Upside hurdles: 1.3591 (10-HMA), 1.3661 (Sept 18 high), and 1.3726 (post-Fed spike). Indicators: Daily RSI has cooled to neutral, showing room for further downside before oversold. Bollinger Bands have widened, suggesting higher volatility ahead. Strategic View Short-term risks skew lower, but unless UK fiscal worries deepen significantly, the broader divergence in Fed–BoE expectations suggests dips could be bought. A rebound toward 1.3787 (July high) and even 1.4000 remains possible over the medium term, while failure at 1.3479 would threaten a deeper correction toward 1.3334 (Sept 3 low). ➡️ In short, GBP/USD is tactically bearish but strategically supported by relative policy divergence. Near-term focus is on 1.3534 support and whether fiscal angst drives a break lower, or whether buyers re-emerge on the divergence theme.

The euro’s advance has lost steam after stalling just below 1.1780, with dollar recovery leaving bulls defending key near-term support. While weak U.S. data bolstered easing bets, the dollar clawed back ground late in the session as cross-market flows (CNH rebound, softer gold) turned in its favor. Macro Backdrop Fed Expectations: The ADP miss aligns with dovish Fed guidance, but traders remain cautious, watching Challenger layoffs Thursday as one of the few scheduled releases not blocked by the shutdown. Labor Market Narrative: Revisions to August’s ADP also highlighted fragility, supporting long-term EUR/USD upside bias. Risk Sentiment: Broader FX vols remain subdued, but skews favor USD demand in the short term, limiting euro traction. Technical Picture Trend Context: EUR/USD is consolidating within the 1.1606–1.1919 range, with recent lower highs indicating cooling momentum. Support Structure: 1.1715–1.1716 (NY lows). 1.1670–1.1660 (medium-term base). 1.1606 (major pivot from September low). Resistance Structure: 1.1780 (initial cap). 1.1836 (Bollinger resistance). 1.1919 (Sept peak). Momentum Signals: RSI divergence and MACD flattening highlight fading bullish pressure, even as longer-term structure remains intact. Strategic View EUR/USD faces a tactical tug-of-war: longer-term fundamentals argue for higher levels if U.S. labor softening persists, but short-term technicals caution against aggressive bullish positioning. A sustained close above 1.1780 is needed to reassert control. Failure to defend 1.1715 risks a slide toward 1.1670 and potentially 1.1606.

EUR/USD’s broader outlook is clouded by a shift in rate differentials and market repricing. Stronger U.S. data (durable goods, GDP revision, labor market resilience) has widened the terminal-rate spread in favor of the dollar, now hovering near -116 to -118 bps. Macro Backdrop Fed vs ECB: Investors are paring back expectations for rapid Fed easing, while the ECB faces fiscal and political headwinds in France and Germany. Spreads: Widening rate spreads remain a decisive bearish driver for EUR/USD. Risk Events: U.S. September PMIs, August JOLTS, September ADP and NFP will provide decisive direction. Strong results could embolden dollar bulls. Technical Picture Trendline Test: The euro hovers near support drawn from the May 12 low; a breach would confirm downside continuation. Support Zones: 1.1660 (near-term pivot). 1.1606 (Sept 22 low). 1.1400, then 1.1200/25 (major downside objectives). Resistance Zones: 1.1725–1.1730 (breakdown point). 1.1789 (July high). 1.1836/1.1919 (upper Bollinger / September peak). Momentum Indicators: Daily RSI is falling, confirming bearish control; MACD histogram is negative, showing downside momentum is intact. Strategic Implications A decisive break of trendline support near 1.1660 risks an acceleration lower, targeting 1.1400–1.1200 if U.S. yields rise further. Conversely, should U.S. data underperform, EUR/USD may stabilize and retest 1.1780–1.1830. For now, the risk-reward skews bearish, and bulls are forced into defense. ➡️ Summary: EUR/USD is in a corrective pullback that risks turning into a broader downtrend. Short-term supports at 1.1660–1.1606 are critical; losing them exposes 1.1400–1.1200. Upside recovery only resumes above 1.1780–1.1830. 

USD/JPY’s four-day bull run has paused, with muted volatility and tight ranges highlighting the market’s reluctance to challenge the 150 barrier. The pair remains firmly anchored within the 146–149 band, established since July’s U.S.–Japan trade agreement. Macro Backdrop Fed Policy: Last week’s hawkish cut squeezed out some shorts, producing a bullish candle around 147. Fed officials Bostic and Musalem confirmed a gradual easing path, lending dollar support. Positioning: CFTC data shows yen longs have fallen to their lowest since February, underscoring waning bullish yen sentiment. Event Risks: Flash PMIs, Tokyo CPI, and jobless claims later this week will provide directional cues. Technical Landscape Support: 147.91 – cloud top pivot, acting as near-term anchor. 147.52–147.63 – 21- and 55-DMA cluster. 146.80 – cloud base, defining the lower band. Resistance: 148.50 – upper Bollinger Band. 148.62 – 200-DMA (major pivot). 149.13 – Sept 3 high; above here reopens 150 test. Indicators: Bollinger Bands remain compressed, signaling impending volatility expansion. RSI holds mid-range, confirming neutral momentum. Strategy View Until Powell’s commentary or new data surprises, USD/JPY is likely to hover near 147.90–148.00. Upside requires a daily close above the 200-DMA at 148.62 to attract fresh buying interest. Downside is contained by the Ichimoku cloud and clustered moving average support. ➡️ In summary: USD/JPY momentum has cooled, with 148.62 as the decisive breakout trigger. Supports at 147.50 and 146.80 define the downside. The pair remains range-bound, but a vol expansion is likely once U.S. data and Tokyo CPI hit later in the week.

GBP/USD remains on a firm upward path, buoyed by diverging policy expectations between the Fed and BoE. The pair has now tested two-month highs, but the next moves will depend heavily on how this week’s central bank meetings play out. Market Context The dollar is pressured by falling U.S. yields, reflecting anticipation of Fed easing. Sterling benefits from relatively tighter BoE policy expectations, though domestic fundamentals remain fragile with high inflation and weak growth. UK fiscal risks loom larger as the Autumn Budget approaches, with potential tax hikes adding to uncertainty. Technical Landscape Immediate Resistance: 1.3621 is the short-term ceiling. If cleared, bulls will eye 1.3681 (July 4 peak) as the next significant resistance, followed by the 1.3787 multi-month high from July 1. Immediate Support: 1.3552 serves as first-line support. Below that, the rising 10-DMA at 1.3510 and the Ichimoku cloud top at 1.3464 provide strong secondary support. Momentum Signals: Daily RSI and stochastic oscillators show bullish momentum but with scope for consolidation. Bollinger Bands are widening, confirming volatility expansion. Strategic Implications Traders should watch Wednesday’s Fed outcome closely. A standard 25 bp cut may already be priced in, but a 50 bp cut or very dovish forward guidance could drive GBP/USD decisively above 1.3621 toward 1.3681. Conversely, if the Fed surprises with cautious language, GBP/USD may consolidate or retest 1.3510–1.3550. The BoE’s decision is unlikely to deliver fireworks but could reinforce sterling’s relative advantage if policy divergence with the Fed widens.

Overview EUR/USD demonstrated resilience on Friday, rebounding from recent lows to hold gains around 1.1627 amid declining U.S. Treasury yields and ongoing tensions between President Trump and the Federal Reserve. This recovery suggests a potential turning point, with recent dovish remarks from Fed officials and mixed U.S. economic data softening the dollar's outlook. Traders now focus on technical levels and forthcoming economic data to determine whether EUR/USD can sustain its bullish momentum. Technical Outlook EUR/USD found significant buying interest around the psychological support at 1.1600, rebounding strongly from Friday’s session low and subsequently consolidating gains in the afternoon session. Trading remained confined between an intraday high of 1.1672 and a low of 1.1627, reflecting cautious yet constructive market sentiment. Key resistance is clearly marked by Friday's high at 1.1672, a level that traders will closely watch for potential breakout confirmation. Should the pair surpass this resistance decisively, it would set the stage for a retest of the recent high of 1.1830 from July 1, and subsequently challenge the upper Bollinger Band near 1.1853. Critical support lies initially at 1.1600, followed by Thursday’s low at 1.1556. These levels represent essential technical barriers to further downside. A breach below 1.1556 would open potential declines toward the robust support provided by the rising 55-day moving average at 1.1481. Technical momentum indicators have turned cautiously bullish, reflecting the recent rebound. Stabilizing RSI readings and supportive technical formations indicate a potential shift from bearish sentiment to neutral or bullish bias. Economic Indicators and Market Drivers The recent bounce in EUR/USD is primarily driven by the shifting market perception of U.S. monetary policy. Dovish statements from prominent Fed policymakers—particularly Mary Daly and Christopher Waller—have suggested potential near-term rate cuts, thus reducing the dollar's yield advantage. June’s revised U.S. retail sales data, revealing modest real-term growth, have also supported this narrative. These indicators suggest the Fed may refrain from aggressive monetary tightening, contributing to downward pressure on U.S. Treasury yields and consequently aiding EUR/USD. Additionally, ongoing public criticism from President Trump toward the Federal Reserve has introduced significant uncertainty, further depressing the dollar and benefiting the euro. Market expectations for future Fed policy have shifted slightly lower, as seen in LSEG’s IRPR data, which points to a less aggressive rate hike path through year-end 2025. Risks and Potential Consequences EUR/USD remains subject to several risks, notably geopolitical tensions and economic uncertainty. Continued trade frictions between the U.S. and Europe present a meaningful risk to the Eurozone’s economic stability. Any negative developments in this area could swiftly reverse recent bullish gains. Moreover, upcoming U.S. economic data, particularly employment and inflation reports, could alter market expectations around Fed policy. Stronger-than-expected figures might revive the dollar’s strength, undermining recent EUR/USD gains. Technically, maintaining support at 1.1600 and 1.1556 is crucial. Failure to sustain these levels would indicate renewed bearish momentum, targeting deeper technical supports near 1.1481. Strategic Recommendations Bullish traders should closely monitor resistance at 1.1672 for breakout opportunities. Stops should be placed cautiously below recent supports to manage downside risk effectively. Bearish traders must watch for potential reversals near current resistance or confirmatory breaks below key supports to justify positioning. Conclusion EUR/USD's recent recovery highlights shifting market sentiment driven by dovish Fed signals and supportive technical indicators. Traders must remain attentive to evolving economic data and geopolitical factors to navigate effectively.

Overview EUR/USD continues to drift lower, burdened by escalating U.S. tariff threats and robust technical signals that underscore significant bearish momentum. The euro's recent losses highlight growing market unease regarding Europe's economic outlook, particularly in the context of potentially severe trade disruptions. Traders are actively evaluating technical levels and upcoming economic indicators to assess further downside potential. Technical Outlook EUR/USD has exhibited pronounced bearish tendencies, commencing the New York session near the upper end of its overnight trading range between 1.1650 and 1.1697, but subsequently succumbing to considerable selling pressure. After a fleeting attempt to regain 1.1695, the pair encountered renewed downward pressure, sliding decisively below its crucial 21-day moving average toward the 1.1660 support zone. Critical support levels now lie at the immediate low near 1.1660, with further psychological support at the pivotal 1.1600 level. Additional downside technical targets include the lower Bollinger Band at approximately 1.1550, and the essential support region near 1.1500, marking June lows. Technical indicators remain strongly bearish, notably the formation of daily and monthly inverted hammer patterns coupled with falling RSI readings. These signals collectively highlight pronounced downward momentum, reinforcing the likelihood of continued bearish trends. Resistance remains formidable, initially near recent highs at 1.1697, followed closely by the 21-day moving average around 1.1700. Further overhead barriers include the declining 10-day moving average at approximately 1.1725, effectively limiting upside recovery attempts. Market Drivers and Economic Indicators Fundamentally, EUR/USD weakness stems from heightened tariff concerns following President Trump’s threat of a 30% tariff on EU imports, potentially effective August 1. This development has significantly amplified bearish sentiment, as markets fear negative impacts on Eurozone trade flows, economic growth, and corporate earnings. Concurrently, rising U.S. inflation expectations have strengthened the dollar, dampening prospects for immediate Federal Reserve easing. Persistent increases in U.S. 2-year and 5-year breakeven inflation rates underline market perceptions of elevated inflation, reinforcing a more hawkish Fed outlook and supporting ongoing dollar strength. Critical upcoming U.S. data releases, including June’s CPI and PPI, remain pivotal for shaping market expectations regarding future Fed policy. Higher-than-anticipated inflation data would bolster dollar strength, exacerbating EUR/USD bearish pressures. Additionally, potential ECB policy shifts in response to trade-related economic vulnerabilities could further pressure the euro. Increased likelihood of ECB easing measures to offset trade impacts and recent euro strength could accelerate downward momentum. Risks and Consequences Several key risks threaten EUR/USD, including potential tariff implementation and ongoing trade tensions, which pose substantial economic risks to the EU. Persistent U.S. inflationary pressures further complicate the outlook, potentially reinforcing dollar strength. Technically, EUR/USD faces significant downside risks if it fails to sustain key supports around 1.1660 and 1.1600, opening deeper bearish potential towards 1.1500 and possibly the significant technical zone at 1.1350-1.1400. Strategic Considerations Bearish traders currently maintain strong market control, supported by robust technical indicators and negative fundamental drivers. Positioning stop-loss orders above the 21-day (1.1700) and 10-day (1.1725) moving averages can manage risk effectively. Conversely, bullish traders should remain cautious, requiring clear bullish reversals above key resistances before initiating long positions. Positive EU data or easing trade tensions would be essential prerequisites. Conclusion EUR/USD’s bearish sentiment intensifies amid escalating tariff threats and robust technical signals. Traders should closely monitor forthcoming economic data, geopolitical developments, and key technical levels to strategically navigate this challenging market environment.