The global financial markets are entering a phase of heightened anticipation as the Federal Reserve prepares to announce its latest policy decision. Expectations are overwhelmingly in favor of no rate change, but investors are more interested in the tone and forward guidance from Chair Jerome Powell. Meanwhile, geopolitical developments, especially US-China trade negotiations, are tempering safe-haven flows and adding volatility to risk-sensitive currencies.
🇪🇺/🇺🇸 EUR/USD Outlook
Euro Consolidates as Markets Await Fed Clarity
Overview:
EUR/USD is navigating a narrow range amid a tug-of-war between resilient Eurozone sentiment and a broadly cautious risk tone surrounding the Fed’s upcoming decision. While the euro saw gains after Friedrich Merz was confirmed as German Chancellor—bringing hopes of fiscal stimulus—momentum has been capped by the U.S. dollar’s defensive appeal.
Key Drivers:
- Eurozone resilience: Political stability and proposed German spending are positives for the euro.
- Fed policy outlook: A dovish Fed would generally support EUR/USD upside, but strong U.S. data or hawkish hints could reassert dollar strength.
- Sideways range: The pair has lacked strong directional bias as investors await clearer macro cues.
Forecast:
EUR/USD could remain range-bound in the short term. If Powell leans dovish and US data weakens, a break above 1.1400 could trigger a broader rally toward 1.1440 and 1.1492. However, any hawkish surprise or strong U.S. labor/wage data could push the euro lower, especially if it breaks support at 1.1297, opening a path toward 1.1246 or even 1.1157.
Support levels: 1.1297, 1.1246, 1.1157, 1.1088
Resistance levels: 1.1380, 1.1400, 1.1440, 1.1492
🇬🇧/🇺🇸 GBP/USD Outlook
Pound Volatility Persists as Domestic Weakness and Fed Caution Collide
Overview:
The British pound edged higher but remains fragile amid disappointing economic data. The UK construction sector contracted again, and April’s Services PMI dropped below 50, highlighting growing recession risks. The pair is tracking sentiment-driven moves while waiting for clearer policy signals from both the BoE and Fed.
Key Drivers:
- UK economic slowdown: Weak PMIs and construction sector declines reflect deteriorating conditions.
- Fed uncertainty: U.S. interest rate decisions and Powell’s language remain pivotal.
- BoE hesitation: With inflation lingering but growth fading, the BoE is expected to stay cautious.
Forecast:
GBP/USD is trading within a volatile sideways channel. A break above 1.3402 could open up a climb toward 1.3434, but only if U.S. dollar weakness persists. Conversely, a drop below 1.3333 could trigger selling down to 1.3286 and possibly 1.3246 if sentiment worsens.
Support levels: 1.3333, 1.3286, 1.3246
Resistance levels: 1.3402, 1.3434
🇺🇸/🇯🇵 USD/JPY Outlook
Yen Retreats Amid Lower Safe-Haven Demand
Overview:
After strengthening for three straight days, the Japanese yen weakened as optimism surrounding US-China trade talks in Switzerland reduced demand for safe-haven assets. While Japan’s services PMI came in strong, the Bank of Japan’s dovish stance, along with persistent global inflation concerns, continues to weigh on the yen.
Key Drivers:
- BoJ policy divergence: With rates near zero, Japan remains out of sync with Western tightening cycles.
- U.S. yield advantage: Even with rate cuts possible in the U.S. later this year, current spreads favor the dollar.
- Trade-related sentiment shifts: Easing geopolitical risks reduce demand for the yen.
Forecast:
USD/JPY remains bullish in the medium term. A move above 143.63 could pave the way to 144.23 and 145.08. However, if the pair fails to clear resistance and breaks below 142.50, the next targets will be 141.96 and 140.18.
Support levels: 142.50, 141.96, 140.18
Resistance levels: 143.63, 144.23, 145.08
🇳🇿/🇺🇸 NZD/USD Outlook
Kiwi Pauses as RBNZ Dovish Outlook Limits Gains
Overview:
The New Zealand dollar is retracing from recent highs after a soft labor market report and dovish tone from the RBNZ. Although the unemployment rate held steady at 5.1% (better than expected), the underlying softness in job growth and falling wage inflation add to pressure on the RBNZ to cut rates further, possibly to 2.75% by year-end.
Key Drivers:
- Soft domestic data: Weak wage growth and low job creation increase chances of a rate cut.
- Global risk sentiment: U.S.-China trade optimism is positive for the Kiwi but could be short-lived.
- Fed watch: The dollar’s strength/weakness post-FOMC will directly impact NZD/USD.
Forecast:
NZD/USD is vulnerable in the near term. A failure to hold above 0.6000 keeps pressure intact, and a move toward 0.5940 and 0.5885 is possible. On the upside, if Fed dovishness emerges, recovery back toward 0.6025 and 0.6060 may unfold.
Support levels: 0.5940, 0.5885
Resistance levels: 0.6000, 0.6025, 0.6060
🌕 Gold (XAU/USD) Outlook
Range-Bound Ahead of FOMC Decision
Overview:
Gold prices are consolidating within a broad range as traders await the Fed’s interest rate decision. Recent declines in U.S. Treasury yields have offered some support, while continued uncertainty about the global economy and monetary policy trajectory maintains underlying demand for the metal.
Key Drivers:
- Fed expectations: A dovish pivot could trigger strong upside in gold prices.
- Dollar strength: A stronger USD caps gold gains due to the inverse relationship.
- Geopolitical and economic uncertainty: Ongoing global risks continue to support long-term bullish sentiment.
Forecast:
Gold remains in a wait-and-see mode. A break above $2,320 could clear the way to $2,345, while a drop below $2,280 could expose support at $2,250. The metal remains supported on dips but needs confirmation from Fed signals to resume a firm uptrend.
Support levels: $2,280, $2,250
Resistance levels: $2,320, $2,345
📊 Summary Table: Support and Resistance Levels Forecast
| Asset | Bias | Support Levels | Resistance Levels | Key Drivers |
|---|---|---|---|---|
| EUR/USD | Neutral to Bullish | 1.1297, 1.1246, 1.1157 | 1.1380, 1.1400, 1.1440 | Fed tone, German politics, EU data |
| GBP/USD | Sideways to Bearish | 1.3333, 1.3286, 1.3246 | 1.3402, 1.3434 | UK growth risks, Fed outlook |
| USD/JPY | Bullish | 142.50, 141.96, 140.18 | 143.63, 144.23, 145.08 | Yield spreads, BoJ policy, risk flows |
| NZD/USD | Bearish | 0.5940, 0.5885 | 0.6000, 0.6025, 0.6060 | RBNZ dovish bias, global risk tone |
| Gold (XAU/USD) | Neutral | $2,280, $2,250 | $2,320, $2,345 | Fed signals, yields, USD trends |
