EUR/USD Breaks Out as ECB Hawks Clash with Dovish Fed Expectations

Economic

Summary:

The euro climbs beyond 1.1600 against the dollar for the first time since November 2021, buoyed by dovish Fed expectations, hawkish ECB rhetoric, and rising trade war fears.

BUY EURUSD

Close Time

CLOSED

1.15693

Entry Price

1.19500

1.14000

1.16651 +0.00225 +0.19%

23.3

Pips

Profit

1.14000

1.15926

Exit Price

1.15693

Entry Price

1.19500

The euro extended its bullish streak on Thursday, breaking above the 1.1600 handle against the U.S. dollar for the first time in nearly three and a half years. This sharp move higher in EUR/USD comes on the heels of mounting market expectations for Federal Reserve rate cuts and a fresh flare-up in global trade tensions ignited by U.S. President Donald Trump.

By midday in Europe, the common currency was trading around 1.1615, its highest level since November 2021, marking a critical technical and psychological milestone for euro bulls. This rally is being driven by a confluence of bearish forces weighing heavily on the greenback, while the euro benefits from renewed monetary policy divergence and investor confidence in the European Central Bank’s (ECB) relatively hawkish tone.

The latest leg lower for the U.S. dollar followed Wednesday’s release of the U.S. Consumer Price Index (CPI), which showed headline inflation rising at a slower-than-expected pace in May. The softer data—particularly in core components—has rekindled bets that the Federal Reserve could pivot to easing as soon as September.

According to CME Group’s FedWatch Tool, futures traders are now pricing in a nearly 60% probability of a 25-basis-point rate cut at the Fed’s September meeting, up from around 50% just a week ago. The shift reflects a broader market reassessment of U.S. monetary policy amid signs that disinflation is gaining traction.

Adding fuel to the dollar’s decline was a fresh wave of trade-related uncertainty. Bloomberg reported that former President Donald Trump, who is running for re-election, has vowed to reintroduce broad tariffs on U.S. trading partners unless new deals are signed by a self-imposed deadline of July 9. His comments have reignited fears of a repeat of the 2018–2019 trade war era, when global growth slowed under the weight of retaliatory tariffs and supply chain disruptions.

Although recent talks between the U.S. and China produced a temporary truce, markets appear skeptical that any lasting resolution is in sight. Instead, traders are increasingly bracing for a return to protectionist policies that could complicate the Fed’s outlook and further weaken the dollar.

While the dollar struggles, the euro is finding solid support from a more assertive stance by ECB policymakers. President Christine Lagarde last week signaled that while a rate cut was delivered in June, the central bank remains data-dependent and will proceed with caution. Since then, several ECB officials have echoed a similar message, warning that inflation risks remain tilted to the upside and further easing should not be assumed.

This contrasts sharply with the dovish shift unfolding in U.S. rate markets. The policy divergence has re-opened yield differentials that favor the euro, particularly against the backdrop of a fragile U.S. macro environment.

“The ECB’s cautious tone and the market’s aggressive pricing of Fed cuts have created the perfect storm for EUR/USD to break out,” said Clara Becker, a senior FX strategist at Saxo Bank. “Unless we see a sharp reversal in U.S. data or a coordinated effort to stabilize trade relations, the path of least resistance remains higher.”

Technical Analysis

From a technical perspective, EUR/USD remains firmly in bullish territory. Thursday’s breakout above the 1.1550 resistance zone reinforces the prevailing uptrend, with momentum indicators such as the Relative Strength Index (RSI) suggesting continued buying interest despite creeping into overbought territory.

The pair is also trading comfortably above the 50-period Exponential Moving Average (EMA50), while maintaining alignment with an ascending support trendline. The bullish bias remains intact as long as prices stay above the former resistance zone at 1.1550, which now acts as support.

A sustained move above 1.1600 could pave the way toward the next key resistance at 1.1650—levels last tested during the pre-2022 tightening cycle. However, traders should be alert to the risk of short-term pullbacks, particularly if the pair struggles to consolidate above the breakout level.

TRADE RECOMMENDATION

BUY EURUSD

ENTRY PRICE: 1.1570

STOP LOSS: 1.1400

TAKE PROFIT: 1.1950

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Warren Takunda

Economic

Summary:

EUR/JPY surged near 166.60 on Thursday, reclaiming early-session losses as the Euro gained broad strength.

BUY EURJPY

Close Time

CLOSED

166.297

Entry Price

168.500

164.000

181.014 +0.141 +0.08%

51.0

Pips

Profit

164.000

166.807

Exit Price

166.297

Entry Price

168.500

The Euro staged a decisive comeback against the Japanese Yen during European trading hours on Thursday, pushing the EUR/JPY pair to its highest level since November 2023. After dipping earlier in the session, the pair reversed course and advanced toward 166.60, fueled by both supportive central bank commentary and growing risk aversion in global markets.

At the heart of the Euro’s rally was a clear message from European Central Bank officials: the prolonged cycle of monetary easing appears to be drawing to a close. Isabel Schnabel, a prominent ECB board member, signaled that the current policy path is reaching its endpoint, citing evidence that eurozone inflation is stabilizing near the central bank’s target. Speaking in Brussels, Schnabel noted, “This monetary-policy cycle is coming to an end as medium-term inflation is stabilizing around target,” as reported by Bloomberg. She projected inflation to hover around 1.9% through 2026 and 2027—just shy of the ECB’s 2% objective—while also noting that the eurozone’s growth outlook remains stable despite rising global trade tensions.

Her remarks reinforced similar sentiments expressed last week by Madis Müller, Governor of the Bank of Estonia and an ECB policymaker, who said he was comfortable with ECB President Christine Lagarde’s assertion that the easing cycle is “almost finished.” That statement followed the ECB’s move to cut rates by 25 basis points for the seventh consecutive time, bringing the deposit rate to 2%. Collectively, the commentary is feeding speculation that the central bank will shift to a longer-term pause, marking a subtle but important pivot in eurozone monetary policy.

Beyond rate speculation, the Euro’s gains are being amplified by its role as a safer alternative to the U.S. Dollar. Traditionally seen as a risk-off hedge, the Euro is increasingly benefitting from capital flows seeking refuge from the uncertainty swirling around Washington’s trade policy direction. With new tariff threats hanging over both China and the European Union, investors are finding fewer reasons to hold the Dollar, especially as political and fiscal risks in the U.S. grow more pronounced ahead of the November election. In this context, the Euro’s liquidity and relative stability make it a compelling hedge.

Meanwhile, the Japanese Yen, although weaker in this particular cross, continues to demonstrate resilience across other major pairs. Expectations remain firm that the Bank of Japan is gradually preparing to tighten policy further. BoJ Governor Kazuo Ueda reaffirmed this week that another interest rate hike could be on the table if the central bank gains confidence that underlying inflation will sustainably hover around 2%. That said, most analysts expect the BoJ to hold interest rates steady at 0.5% in its upcoming policy meeting on Tuesday. Investors will be watching closely for any shift in forward guidance that might point to rate normalization later in the year.

Technical Analysis

From a technical standpoint, EUR/JPY’s rally is being supported by a strong bullish structure. The pair recently confirmed its upward momentum after reaching the overbought zone on the stochastic oscillator, breaking above the 166.45 resistance level before briefly retreating to 165.75. The correction was short-lived, as the pair found firm support within its ascending channel, anchored by the 164.80 level. With this structure intact, traders are keeping their eyes on the next upside targets.

If EUR/JPY manages to decisively break and hold above the 166.45 mark, it could initiate a fresh leg higher toward 167.25. A continued bullish push might ultimately take the pair to the upper boundary of its channel near 168.50. Despite temporary fluctuations, the technical setup remains favorable for the bulls, so long as price action remains above the key support zones.

TRADE RECOMMENDATION

BUY EURJPY

ENTRY PRICE: 166.30

STOP LOSS: 164.00

TAKE PROFIT: 168.50

Risk Warnings and Disclaimers

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Eva Chen

Economic

Forex

Summary:

The US dollar has been negatively impacted by soft US inflation data and rising expectations for a Federal Reserve rate cut in September. As USDCAD continues to decline within a descending channel, persistent bearish sentiment has taken the lead.

SELL USDCAD

Close Time

CLOSED

1.36226

Entry Price

1.34700

1.36950

1.38174 +0.00027 +0.02%

72.4

Pips

Loss

1.34700

1.36953

Exit Price

1.36226

Entry Price

1.36950

Fundamentals

During the European session on Thursday, USDCAD resumed its downward trajectory within the descending channel. Soft US inflation data and increasing expectations for a Federal Reserve rate cut in September have weakened USDCAD.

The US Consumer Price Index rose by 0.1% in May, falling short of the expected 0.2% and marking the fourth consecutive month below the market's average forecast. The overall index grew by 2.4% YoY, while the core index (excluding food and energy) increased by 2.8%. The current price growth rate of the core index remained unchanged for the third consecutive month, at the lowest level in nearly four years.

Tariff disputes have not yet led to a significant spike in inflation, as new-priced goods have not yet reached consumers. However, it is also worth noting that sellers are not as eager to pass on costs in advance as in many other countries. During the first trade war in 2018, we also observed a slowdown in price increases with a minimal impact on overall inflation.

In response to this news, the US Dollar Index initially fell by 0.5% in the first few minutes but subsequently rebounded by more than half. After overnight digestion, the market returned to a downward trend. Overall, this is negative news for the US dollar, reinforcing the Federal Reserve's dovish stance.

Additionally, a trade agreement between the US and Canada is likely to be finalized during the G7 summit on June 15, which appears to be strengthening the Canadian dollar.

Persistent Bearish Sentiment Dominates_1

Technical Analysis

During the European session on Thursday, USDCAD completely relinquished the previous trading day's gains, trading around 1.3630. Technical analysis on the daily chart shows that as the asset continues to decline within the descending channel, persistent bearish sentiment has taken the lead.

A decisive break below 1.3603 would pave the way for a 100% Fibonacci retracement to 1.3349. Moreover, the current decline remains part of the head-and-shoulders top pattern that began in February. According to this pattern, a drop to 1.3470 by the bears would provide a decent adjustment.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3676

Target Price: 1.3470

Stop Loss: 1.3695

Deadline: June 27, 2025, 23:55:00

Support: 1.3593/1.3540/1.3495

Resistance: 1.3675/1.3691/1.3702

Risk Warnings and Disclaimers

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Eva Chen

Commodity

Economic

Summary:

After closing in the positive territory on Wednesday, gold prices continued to rise on Thursday, currently trading around $3,380. Following the release of the US May inflation data, US Treasury yields plummeted significantly, and the ongoing weakness of the US dollar has helped to maintain the upward momentum of gold prices.

BUY XAUUSD

Close Time

CLOSED

3364.98

Entry Price

3450.00

3329.00

4216.43 +18.52 +0.44%

10.5

Pips

Profit

3329.00

3366.03

Exit Price

3364.98

Entry Price

3450.00

Fundamentals

On Thursday, gold prices once again reversed the early morning decline in the European session and carried the bulls to challenge the previous week's high. After breaking through the minimum starting level of $3,360, gold is now in a neutral upward range, slightly below last week's high of $3,403.

US President Trump issued another tariff threat on Wednesday, indicating that the initial market reaction to the positive Sino-US trade situation was fleeting. Additionally, the so-called escalation of geopolitical tensions in the Middle East has dampened investors' interest in high-risk assets, which is a boon for safe-haven gold.

Meanwhile, after data released on Wednesday showed that the US consumer price index in May rose less than expected, investors increased their bets that the Federal Reserve would restart the interest rate cut cycle in September. This is seen as another factor supporting the price of non-yielding gold and helping to prevent further pullbacks yesterday.

Geopolitical Tensions as Catalysts, Algorithmic Trading as Key Drivers for Price Reversal_1

Technical Analysis

Gold prices touched a one-week high in the Asian session on Thursday, extending Wednesday's nearly 1% gain. Weaker-than-expected US inflation data boosted bets on a Federal Reserve rate cut and a weaker US dollar, driving gold prices higher.

However, with the significant pullback in the New York session yesterday, it seemed that gold prices were "once again" on track to decline when. In the final 4-hour close before yesterday's close, prices surged by $26 in just 20 minutes. This move was algorithmically driven, not from geopolitical tensions (which had been reported two hours before the price rise). After breaking through the minimum requirement of $3,360 for the bulls to turn, the technical dynamics have turned bullish. This means that the head-and-shoulders top pattern will continue to play out. Therefore, investors are preparing for a new round of gains.

The bulls' immediate target is now $3,391, with the next target at $3,403, and the final target at $3,415.

Trading Recommendations

Trading Direction: Long

Entry Price: 3365

Target Price: 3450

Stop Loss: 3329

Deadline: June 27, 2025, 23:55:00

Support: 3371/3360/3339

Resistance: 3391/3403/3415

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

Released today, the UK April GDP data shows an unexpected decline, far below market expectations, which has caused the British pound to come under pressure and weaken. Technical analysis suggests a potential head and shoulders top formation.

SELL GBPUSD

Close Time

CLOSED

1.35692

Entry Price

1.32400

1.36200

1.33426 +0.00114 +0.09%

50.8

Pips

Loss

1.32400

1.36201

Exit Price

1.35692

Entry Price

1.36200

Fundamentals

During today's Asian trading session, the UK's latest April GDP data plunged 0.3%, marking the largest monthly decline since October 2023 and falling well short of the market's expectation of a small 0.1% decline. Although the UK economy grew 0.7% year-on-year in Q1, the weakness in April signals a weak start to Q2, with both the service sector and manufacturing sector slowing. Meanwhile, retail sales and PMI both dropped below the boom-bust line, indicating persistent weakness in domestic demand.

Meanwhile, UK exports to the US have been significantly impacted by the Trump administration's new tariff policies. In April, UK goods exports to the US fell by £2 billion (US$2.71 billion), the largest monthly decline since records began in 1997, exacerbating pressure on export-oriented industries.

Following the GDP data, the market increased bets on the Bank of England (BoE) cutting interest rates, with expectations of a total 52 basis point reduction this year. According to a recent Reuters survey, economists expect the BoE to cut rates by 25 basis points in August and again in the fourth quarter of 2025, bringing the interest rate down to 3.75%.

Technical Analysis

0.3% GDP Plunge Triggers Head and Shoulders Top, Sterling's 1.3420 Defense Line Under Pressure_1

As of the European trading session today, the GBP/USD has dropped sharply due to the impact of the April GDP decline, currently trading at 1.3570.

Based on the 4-hour chart, the candlestick structure of GBP/USD shows signs of forming the right shoulder of a head and shoulders top pattern. If the right shoulder is confirmed, the likelihood of a decline in GBP/USD in the near term will increase significantly. If the price subsequently breaks below the neckline at 1.3420, further downside potential will open up.

Trading Recommendations

Trading direction: Sell

Entry price: 1.3570

Target price: 1.3240

Stop loss: 1.3620

Valid Until: June 26, 2025, 23:00:00

Support: 1.3456/1.3415

Resistance: 1.3593/1.3616

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Australian Dollar has extended its rally, pushing AUD/USD to new 2025 highs near 0.6550, as dovish U.S. inflation data sparks Fed rate cut bets and optimism around U.S.-China trade talks bolsters risk sentiment.

BUY AUDUSD

Close Time

CLOSED

0.65300

Entry Price

0.66500

0.64800

0.66462 +0.00079 +0.12%

50.0

Pips

Loss

0.64800

0.64795

Exit Price

0.65300

Entry Price

0.66500

The Australian Dollar (AUD) continued its impressive climb this week, with AUD/USD extending gains for a third consecutive session on Wednesday to breach new yearly highs near the 0.6550 level. The rally has been underpinned by renewed U.S. Dollar weakness following softer-than-expected inflation data and cautious optimism surrounding trade negotiations between the United States and China.

This surge marks a notable shift in sentiment toward the Aussie, which has benefited from both domestic resilience and shifting expectations on U.S. monetary policy. As market participants reassess the Federal Reserve’s path, the AUD has emerged as a relative outperformer among G10 currencies.

The immediate catalyst for the AUD/USD advance came from the latest U.S. Consumer Price Index (CPI) figures, which showed inflation slowing more than anticipated. Headline inflation rose by 2.4% in the year to May, below both the market consensus and prior readings. The core CPI, which excludes volatile food and energy prices, also decelerated to 2.8% annually — a full tenth below estimates.

This undershoot in inflation data amplified market expectations for a Federal Reserve rate cut in September, with traders now seeing over a 65% probability of easing, according to interest rate futures. The result was a sharp drop in U.S. Treasury yields and broad-based selling pressure on the Greenback.

The U.S. Dollar Index (DXY), which tracks the currency against a basket of peers, fell to its lowest levels in nearly two months. The move highlights growing investor conviction that the Fed may finally pivot toward policy accommodation, after more than a year of hawkish rhetoric.

In a separate but complementary development, reports emerged suggesting that U.S. and Chinese officials had made progress in negotiations related to rare earth minerals during meetings in London. While details remain scarce and any agreement is yet to be formally confirmed by Presidents Trump and Xi Jinping, markets viewed the talks as a de-escalation signal — one that helped lift risk sentiment and supported currencies like the Aussie that are sensitive to global trade flows.

Rare earths, critical in the production of advanced electronics and military equipment, have long been a sticking point in the U.S.-China trade standoff. An easing in tensions surrounding this key sector could pave the way for broader cooperation or at the very least, a pause in tariff escalations.

Domestically, the economic calendar was light, with no tier-one data releases out of Australia on Wednesday. This left traders looking ahead to Thursday’s release of the Melbourne Institute’s Inflation Expectations — a monthly survey that could offer clues on domestic price pressures and influence Reserve Bank of Australia (RBA) expectations.

Although the RBA remains firmly in a holding pattern for now, sticky inflation could limit its ability to follow other central banks into dovish territory. For now, however, global macro factors — not local data — are steering the AUD/USD trajectory.

Technical Analysis

From a technical standpoint, AUD/USD continues to show strength, trading firmly within a bullish channel on the short-term chart. Price action has managed to hold above the 50-period Exponential Moving Average (EMA50), reinforcing the pair’s bullish structure.

Despite some intraday pullback, the currency pair is now testing the critical resistance zone around 0.6535–0.6550 — an area that has previously capped gains. A sustained break above this barrier could open the door to a further leg higher, with targets near 0.6650 and beyond.

Supporting the bullish case is the Relative Strength Index (RSI), which remains in positive territory despite recent consolidation. Bullish overlapping signals have begun to reemerge after the indicator

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6530

STOP LOSS: 0.6480

TAKE PROFIT: 0.6650

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

USD/JPY trades steadily near 145.30 ahead of crucial U.S. CPI data, with traders eyeing its implications for Fed policy.

BUY USDJPY

Close Time

CLOSED

145.804

Entry Price

150.000

143.500

155.172 -0.173 -0.11%

103.4

Pips

Loss

143.500

144.770

Exit Price

145.804

Entry Price

150.000

The USD/JPY pair held steady around the 145.00 mark during the European session on Wednesday, as global markets turned their attention to a critical U.S. inflation report that could significantly shape the Federal Reserve's monetary policy outlook heading into the second half of the year.

The currency pair has oscillated within a narrow intraday range—hovering around 145.30 at the time of writing—demonstrating traders' caution ahead of the release of May’s U.S. Consumer Price Index (CPI) data, due at 12:30 GMT. The greenback itself has remained muted, with the U.S. Dollar Index (DXY) fluctuating near the psychologically significant 99.00 level.

Market participants are anticipating the inflation print not only for clues on future Fed policy moves but also to assess whether the broader effects of the Trump administration’s newly enacted economic measures—particularly tariff hikes—are beginning to filter into consumer prices. The headline CPI is projected to rise 2.5% year-on-year in May, modestly higher than the 2.3% recorded in April. Core CPI, which strips out food and energy prices, is forecast to tick up to 2.9% from April’s 2.8%.

This uptick, if confirmed, could reinforce concerns that domestic price pressures are firming as a result of tariffs imposed by Washington, with importers likely to pass on the costs to end consumers. In that scenario, the Federal Reserve may have to delay rate cuts or even adopt a more hawkish stance should inflation show signs of persistently overshooting the central bank’s 2% target.

"The Fed has made it clear that it needs more confidence in disinflation before loosening policy," said Emily Wang, FX strategist at Deutsche Bank. "If today’s CPI comes in hotter than expected, we could see USD/JPY extend its rally beyond 146."

On the Japanese front, expectations remain anchored to a cautious Bank of Japan. Despite the BoJ's historic pivot away from negative interest rates earlier this year, a June 2–10 Reuters survey showed that a slim majority of economists still expect the central bank to maintain its policy rate at 0.5% through year-end. Most now anticipate the next rate hike to occur in early 2026, not this year.

This divergence in policy trajectories between the Fed and the BoJ continues to favor a stronger dollar against the yen, especially as Tokyo remains deeply concerned about domestic growth fragility and the potential deflationary impact of a premature tightening cycle.

Elsewhere, geopolitical risks have marginally eased after a two-day summit in London between U.S. and Chinese trade officials, which produced a tentative framework for continued dialogue. U.S. Commerce Secretary Howard Lutnick said he was optimistic that Beijing would soon reverse its export curbs on rare earth materials—a positive sign that both economies are attempting to stabilize relations after months of heightened tensions.

This slight reduction in geopolitical tension, coupled with subdued yen demand as a traditional safe haven, has also helped underpin the USD/JPY’s upward bias.

Technical Analysis

From a technical standpoint, USD/JPY appears poised for further upside in the near term. The pair has broken decisively above a short-term descending trendline and continues to trade above the 50-day Exponential Moving Average (EMA50), maintaining a constructive technical posture. Relative Strength Index (RSI) readings have exited oversold territory and now flash fresh bullish signals.

Currently trading around 145.33, USD/JPY has established a solid foothold above the key pivot level at 144.93. If the pair sustains this level, bulls could set their sights on the next resistance target at 146.33. A break beyond that could expose the 150.00 region—a level not seen since late 2022.

Still, a short-term pullback toward the pivot zone is plausible, especially if CPI figures offer an underwhelming surprise. However, unless the price drops back below 144.50, the broader bullish structure remains intact.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE: 145.80

STOP LOSS: 143.50

TAKE PROFIT: 150.00

Risk Warnings and Disclaimers

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