The euro and pound gained strength as optimism over European economic resilience and skepticism about U.S. tariff policies drove investors away from the dollar. While the euro benefited from upbeat services data and easing policy concerns, the pound climbed despite soft UK figures, supported by hopes that U.S. tariffs would backfire. Meanwhile, the yen surged as traders sought refuge from global uncertainty, and gold remained elevated near record highs amid safe-haven demand, although signs of exhaustion and profit-taking suggested a potential pause in its upward momentum.
EUR/USD Outlook
Current Sentiment:
The euro has shown renewed strength against the dollar, driven by stronger-than-expected Eurozone services data and fresh geopolitical uncertainties triggered by sweeping U.S. tariffs. Market participants have turned more bullish on the euro as confidence in the Eurozone’s economic resilience grows. The bounce from 1.0928 toward the 1.1019 mark and further to the 1.0950 zone shows a continuation of this short-term bullish momentum.
Key Drivers:
- Eurozone Services PMI: The robust reading exceeded forecasts, signaling economic momentum despite global headwinds.
- ECB Policy Outlook: Improved economic figures reduce the urgency for additional monetary easing. While rate cuts are still on the table (possibly up to 65 bps this year), the pace could slow if data continues to impress.
- U.S. Dollar Weakness: The dollar has weakened due to protectionist trade policies and investor fears over U.S. economic deceleration. Fresh tariffs, especially those targeting EU imports, have soured sentiment.
Forecast Outlook:
The euro is likely to remain supported as long as U.S. data underperforms and geopolitical risks escalate. However, after its recent gains, consolidation is probable unless another bullish catalyst emerges.
- Upside Scenario: Sustained movement above 1.1019 opens the path to retest 1.1116 and potentially 1.1233. A soft U.S. ISM print or dovish Fed commentary could fuel this breakout.
- Downside Risk: A decisive break below 1.0879 and then 1.0805 could revive bearish pressure, especially if U.S. jobs or trade data surprise to the upside.
Key Levels:
- Resistance: 1.0952, 1.1019, 1.1116, 1.1233
- Support: 1.0879, 1.0805, 1.0785
GBP/USD Outlook
Current Sentiment:
Despite lackluster UK Services PMI data, the pound surged, fueled by broad-based dollar weakness and anticipation that the U.S. economy may take a harder hit from trade tensions. Traders have largely shrugged off domestic economic concerns and are instead focusing on global themes.
Key Drivers:
- Trade War Impact: The UK, affected by a 10% tariff, is still viewed as less exposed compared to others. The relative positioning could help the pound in the short run.
- Dollar Weakness: Protectionist U.S. policies have created tailwinds for the pound, especially as traders expect the Fed to pivot dovishly.
- FOMC Speakers: Remarks from policymakers like Jefferson and Cook could further influence short-term dollar flows depending on their tone regarding inflation and employment.
Forecast Outlook:
The pound appears to have broken higher out of a multi-week range. However, the rally has outpaced fundamentals in the short term, increasing the risk of a pullback or at least some consolidation.
- Upside Scenario: A push above 1.3189 with strong follow-through could bring 1.3268 into play. Beyond that, technical extensions toward 1.3300 may occur if sentiment remains risk-on.
- Downside Risk: A break below 1.3135, especially if backed by strong U.S. data, could open the path to 1.3064 and possibly 1.2953.
Key Levels:
- Resistance: 1.3189, 1.3268, 1.3300
- Support: 1.3135, 1.3064, 1.2953, 1.2884
USD/JPY Outlook
Current Sentiment:
The Japanese yen has strengthened amid escalating geopolitical tensions and a broad move into safe-haven assets. The recent drop from 147.16 to 146.33 underscores the risk-averse mood in the market, driven primarily by the fallout from the U.S. tariff wave.
Key Drivers:
- Safe-Haven Flows: The yen is benefiting from heightened demand due to fears of a global trade war. With Japan itself being hit with 24% tariffs, market sentiment is cautious, but the yen still holds favor as a traditional haven.
- Bank of Japan Commentary: Governor Ueda’s warning about the impact of tariffs adds to market concerns about global growth, further strengthening the yen.
- U.S. Economic Data: Weakness in ISM or jobless claims will accelerate yen buying, while any strong beat could cause brief corrections.
Forecast Outlook:
The current sentiment supports a downside bias in USD/JPY, though the pair may attempt intraday corrections due to the sharp deviation from recent averages. A retest of support levels is more likely in the near term.
- Upside Scenario: If price rebounds off 145.95 or 146.00 and stabilizes above 147.91, a move toward 148.41 or even 149.16 is possible—particularly if risk appetite returns.
- Downside Risk: A break below 145.95 confirms bearish continuation toward 144.72 and potentially deeper retracement toward 143.50 in the coming sessions.
Key Levels:
- Support: 147.41, 146.65, 146.00, 145.95, 144.72
- Resistance: 148.41, 149.16, 150.27
XAU/USD (Gold) Outlook
Current Sentiment:
Gold remains in high demand amid global trade concerns, but technical overextension has triggered profit-taking. After hitting a new record high of $3,167, prices corrected down toward $3,065, where support is holding for now.
Key Drivers:
- Global Trade Conflict: The announcement of widespread tariffs has reignited risk aversion, pushing gold to all-time highs as investors flee into hard assets.
- U.S. Dollar Weakness: Declines in the greenback, tied to trade policy uncertainty and expectations of rate cuts, are bolstering gold’s relative appeal.
- Fed Rate Outlook: The possibility of earlier-than-expected rate cuts is bullish for gold, as lower rates reduce opportunity costs for holding non-yielding assets.
Forecast Outlook:
Despite the pullback, the overall trend remains bullish. However, short-term corrections could deepen if investors rotate into cash or equities during consolidation phases. The double-top pattern and break of the uptrend channel are warning signs that suggest caution in the near term.
- Upside Scenario: If gold holds above $3,055 and rebounds strongly toward $3,125, a retest of the $3,150 resistance is likely. Breakout above $3,150 may send prices to $3,200 and beyond.
- Downside Risk: If gold fails to hold $3,055 or $3,000, deeper retracements to $2,976 or even $2,900 could follow. A daily close below $3,000 would be a bearish signal.
Key Levels:
- Resistance: 3150, 3167, 3200
- Support: 3100, 3057, 3037, 3000, 2976, 2954, 2930, 2906, 2859
General Conclusion
- EUR and GBP are benefiting from relative resilience in their domestic data and a weakening dollar narrative. If global growth slows unevenly, the ECB and BoE may have more flexibility than the Fed.
- JPY is gaining ground as a risk-averse asset amid trade disruptions. If equity markets sell off, the yen is likely to strengthen further.
- Gold remains the prime safe-haven play, but traders should be cautious of near-term corrections. A break below $3,000 would signal a longer-term top.
- The U.S. Dollar is vulnerable to downside risk amid dovish Fed expectations and deteriorating macro indicators.
Summary
| Asset | Trend | Buy Zones | Sell Zones | Target Levels |
|---|---|---|---|---|
| EUR/USD | Bullish | 1.0879 / 1.0950 | 1.1233 | 1.1116 → 1.1233 |
| GBP/USD | Bullish | 1.3135 / 1.3064 | 1.3268 | 1.3189 → 1.3268 |
| USD/JPY | Bearish | 145.95 (short-term only) | 146.84 → 147.91 | 145.95 → 144.72 |
| XAU/USD | Bullish | 3,055 / 3,100 | Avoid selling | 3,125 → 3,150 |
