The markets are entering the week with cautious optimism fueled by improving geopolitical dynamics. Potential breakthroughs in the Ukraine conflict and progress on U.S.-China trade relations are reducing demand for traditional safe-haven assets like gold and the yen, while encouraging moderate risk-on sentiment across commodities and risk-sensitive currencies. However, rate differentials, persistent uncertainty over U.S. policy direction, and mixed economic indicators continue to anchor volatility across major FX pairs.
🇪🇺/🇺🇸 EUR/USD: Outlook – Euro vs U.S. Dollar
Geopolitical Shifts & Interest Rate Divergence
The EUR/USD pair continues to fluctuate within a broad consolidation phase, largely influenced by both monetary policy divergence and geopolitical developments. Despite a brief rally last week that pushed the pair toward the resistance zone of 1.1265–1.1282, the euro reversed and now trades with a bearish tilt after failing to maintain upward momentum.
Key Drivers:
- Ukraine-Russia Peace Talks: News of direct negotiations between Ukraine and Russia—possibly leading to a ceasefire—has weakened the dollar’s “safe-haven” appeal. However, the euro has not significantly capitalized on this due to structural concerns within the Eurozone economy.
- Rate Differentials: While the ECB is expected to begin cutting rates ahead of the Fed, the U.S. continues to maintain a relatively higher interest rate posture. This supports the dollar structurally, even if geopolitical tensions ease.
- Trump Policies: Donald Trump’s aggressive stance on tariffs and trade is contributing to economic policy uncertainty, but also giving rise to potential recession risks in the U.S., which could undermine the dollar in the long term.
Forecast:
In the short term, a continuation of the bearish move is likely, with 1.1181 as the immediate target. A bounce from this level could produce another test of the 1.1265–1.1282 resistance zone. However, a sustained break below 1.1213 would expose the pair to 1.1074 and even 1.0960 in the medium term.
Key Levels:
- Support: 1.1246, 1.1181, 1.1088, 1.0960
- Resistance: 1.1297, 1.1380, 1.1440, 1.1492, 1.1572
🇬🇧/🇺🇸 GBP/USD Outlook – British Pound vs U.S. Dollar
Trade Deals & Rate Cuts Shape Sterling Outlook
The British pound remains under moderate selling pressure against the U.S. dollar, despite minor gains after the announcement of trade deals with India and the U.S. The pair rebounded from 1.3205 and tested the 1.3344–1.3357 resistance band, but failed to break through, indicating ongoing bearish bias.
Key Drivers:
- BoE Rate Cut: The Bank of England’s decision to lower interest rates continues to weigh on the pound, especially in contrast to the Fed’s more cautious stance.
- Trade Agreements: While the UK has announced agreements with India and the U.S., these are largely symbolic at this stage, with most U.S. tariffs remaining in place.
- Political Uncertainty: Brexit aftershocks and fragile UK leadership still pose downside risks to sterling.
Forecast:
As long as the pair stays below 1.3344, the path of least resistance is downward, with 1.3205 and 1.3121 as near-term targets. A break above 1.3357 would invalidate this bearish outlook and open up 1.3402 and 1.3434.
Key Levels:
- Support: 1.3234, 1.3205, 1.3121
- Resistance: 1.3352, 1.3402, 1.3434
🇺🇸/🇯🇵 USD/JPY Outlook – U.S. Dollar vs Japanese Yen
Yen Under Pressure Amid Weak Japanese Data
The Japanese yen continues to depreciate, trading near 146 per dollar, as poor domestic data and improved global trade sentiment reduce demand for the yen’s traditional safe-haven status. Japan’s services PMI and forward-looking indicators highlight a weakening economy, while the U.S. continues to attract capital flows.
Key Drivers:
- Weak Japanese Data: Service sector contraction and falling business sentiment indicate deep-rooted economic fragility.
- Yield Differentials: The Bank of Japan remains far from policy normalization, while U.S. yields are still relatively attractive, supporting dollar strength.
- Trade Optimism: Hopes of a thaw in U.S.-China relations are prompting investors to reduce exposure to defensive currencies like the yen.
Forecast:
The medium-term trend remains bullish. If the dollar breaks above 147.08, the pair could aim for 148.50 and higher. However, a surprise break below 142.90 would signal a bearish reversal.
Key Levels:
- Support: 145.08, 144.42, 144.05, 142.90
- Resistance: 147.08
🪙 XAU/USD Outlook – Gold vs U.S. Dollar
Safe-Haven Demand Fades
Gold fell sharply to $3260 before rebounding to $3326, as the market shifted away from defensive assets. Positive trade developments between the U.S. and China, coupled with geopolitical calm in South Asia, have diminished the metal’s appeal.
Key Drivers:
- Risk-On Sentiment: With equities rising and tariff tensions cooling, gold faces selling pressure.
- Geopolitical De-escalation: Reports of a stable ceasefire between India and Pakistan reduce regional conflict risk.
- Yield Competition: Gold remains vulnerable in environments where real yields are attractive, especially if the Fed delays rate cuts.
Forecast:
As long as $3269 holds as support, buyers may continue pushing toward $3361 and $3405. However, a sustained break below $3223 would expose gold to deeper losses toward $3194 and even $3150.
Key Levels:
- Support: 3269, 3222, 3194
- Resistance: 3361, 3405, 3444, 3500
⚫ Oil (Crude Oil) Outlook
Tariff Relief Spurs Optimism
Crude oil prices surged on news that the U.S. and China agreed to ease tariffs for 90 days. This development sparked optimism in the energy markets, as both nations are the world’s largest oil consumers. Brent Crude climbed 4%, testing key resistance levels.
Key Drivers:
- Trade Truce: The rollback of tariffs has buoyed market sentiment and suggests a recovery in global trade, which supports oil demand.
- Producer Confidence: Both Saudi Aramco and the Russian Central Bank have expressed confidence in oil market stability, further fueling investor optimism.
- Client Positioning: A majority of retail traders are long WTI crude, which from a contrarian perspective suggests potential for a short-term pullback.
Forecast:
With resistance at 66.44 and 68.71, Brent has room to extend higher if optimism persists. However, failure to clear those levels could lead to a retracement toward 64.00 and 62.81.
Key Levels:
- Support: 64.00, 62.81
- Resistance: 66.44, 68.71
\
📊 Summary Table: As of May 13, 2025
| Asset | Support Levels | Resistance Levels | Bias | Key Focus |
|---|---|---|---|---|
| EUR/USD | 1.1246, 1.1181, 1.1088, 1.0960 | 1.1297, 1.1380, 1.1440, 1.1492, 1.1572 | Bearish (Short Term) | Geopolitics, ECB vs. Fed rates |
| GBP/USD | 1.3234, 1.3205, 1.3121 | 1.3352, 1.3402, 1.3434 | Bearish (Cautious) | UK trade deals, BoE policy |
| USD/JPY | 145.08, 144.42, 144.05, 142.90 | 147.08 | Bullish | Japan’s economic slowdown |
| Brent Oil | 64.00, 62.81 | 66.44, 68.71 | Bullish | U.S.-China trade truce |
| Gold | 3269, 3222, 3194 | 3361, 3405, 3444, 3500 | Neutral-Bullish | Decreasing safe-haven demand |
