GBP/JPY Drops Below 192: Reversal Signal Or Short-Term Correction?

Forex

Summary:

On May 5, 2025, the GBP/JPY pair fell below the 192 mark, reflecting cautious market sentiment on factors such as the Bank of Japan's (BoJ) interest rate policy and weak economic data from the UK.

SELL GBPJPY

Close Time

CLOSED

191.600

Entry Price

190.700

192.300

206.883 -0.217 -0.10%

47.1

Pips

Profit

190.700

191.129

Exit Price

191.600

Entry Price

192.300

Market Overview

As of 18:47 GMT+7 on 05/05/2025, GBP/JPY is trading around 191.59, down 0.19% from the previous day. This weakness comes after the pair failed to overcome the strong resistance at 193.75, indicating increased selling pressure from the high price zone.

The Bank of Japan (BoJ) kept interest rates on hold at 0.5%, but trade risks clouded the outlook. USD/JPY and GBP/JPY rose, with speculators eyeing the 145 and 193 levels, respectively.

Market psychology

The current market sentiment shows concern about the global economic outlook and interest rate policy. The RSI(14) is at 41.613, indicating a sell bias. The Stochastic(9.6) is at 41.701, also showing a sell signal.

Trading data shows large investors are adjusting positions and moving away from risky assets like cryptocurrencies and stocks, seeking safety in defensive assets like gold and bonds.

Technical analysis

GBP/JPY Drops Below 192: Reversal Signal Or Short-Term Correction?_1

Bollinger Bands (20,0,2) : Price is hovering near support at 191.24 and resistance at 192.32. Bollinger Bands are narrowing, indicating reduced volatility and a possible price breakout.

Ichimoku Kinko Hyo (9,26,52) : Price is below the Ichimoku cloud, indicating a downtrend. Tenkan-sen line crosses below Kijun-sen, confirming a sell signal.

Stochastic Oscillator (5,3,3) : The Stochastic indicator is in the oversold zone, indicating a possible short-term recovery before continuing the downtrend.

Trading Recommendations

Entry: 191.60

Take Profit: 190.70

Stop Loss: 192.30

Risk Warnings and Disclaimers

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Manuel

Forex

Economic

Summary:

The U.S. dollar has experienced a sharp drop, retreating to the 1.3770 area, a level that previously acted as resistance and could now serve as a key support.

BUY USDCAD

Close Time

CLOSED

1.37900

Entry Price

1.41000

1.36500

1.38217 +0.00070 +0.05%

1.1

Pips

Profit

1.36500

1.37911

Exit Price

1.37900

Entry Price

1.41000

Progress toward a trade agreement between the United States and Canada appears to be slowly taking shape. President Donald Trump revealed that newly elected Canadian Prime Minister Mark Carney reached out to him personally, stating, “Let’s make a deal.” According to Trump, Carney is expected to visit the White House sometime within the next week, raising hopes for a breakthrough in bilateral negotiations that have been stalled by tariff uncertainties and political friction.

Meanwhile, the Bank of Canada’s Summary of Deliberations from its April 16 meeting confirmed that Governing Council members weighed the option of either holding the policy rate steady or cutting it by 25 basis points. In the end, consensus was reached to maintain the benchmark rate at 2.75% while policymakers await further clarity on the economic impact of tariffs and broader external developments. This cautious stance highlights the central bank’s balancing act between addressing downside risks and avoiding premature policy shifts.

In the United States, labor market data offered a mixed picture. The April Nonfarm Payrolls (NFP) report showed that the U.S. economy added 177,000 jobs, outperforming expectations of 130,000 and providing some temporary reassurance about the health of the labor market. However, downward revisions totaling 58,000 jobs across February and March tempered the optimism. The unemployment rate held steady at 4.2%, and wage growth came in at 3.8% year-over-year—slightly softer than projected. Initial jobless claims rose to 241,000, the highest since mid-February, while continuing claims reached levels not seen since November 2021. These data points collectively suggest that cracks are emerging in the labor market, potentially supporting the case for a rate cut by the Federal Reserve as early as July.

Further signs of a cooling economy came from the ISM Manufacturing PMI, which slipped to 48.7 in April from 49.0 in March—remaining below the 50 threshold that signals expansion. The production component dropped significantly to 44.0, indicating weakening output. While new orders and employment components showed marginal improvement, inflationary pressures persisted. The prices paid index climbed to 69.8, its highest since mid-2022, keeping inflation concerns alive despite signs of slowing growth.

Earlier in the week, the U.S. Department of Commerce reported that the American economy contracted at an annualized rate of 0.3% in the first quarter of 2025. This outcome sharply missed the 0.4% growth expected by economists and marked a notable deceleration from the 2.4% expansion seen in Q4 2024. The contraction arrives amid rising uncertainty surrounding the direction of U.S. trade policy under the Trump administration.

President Trump, speaking on Wednesday, admitted that the impact of current policies may take longer to become evident in the broader economy. He also sought to shift blame for the recent volatility in equity markets, pointing fingers at former President Joe Biden. These remarks came just ahead of several key data releases, including jobless claims and PMI readings, injecting additional tension into an already nervous market environment. Buyers Eye Rebound as Oversold Signals Emerge_1

Buyers Eye Rebound as Oversold Signals Emerge_1

Technical Analysis

The U.S. dollar has experienced a sharp drop, retreating to the 1.3770 area, a level that previously acted as resistance and could now serve as a key support. This zone may offer a foundation for a potential bullish reversal. On the daily chart, the RSI recently touched the 30 level, signaling oversold conditions. Historically, such levels have attracted buyers—particularly considering that similar price points were last seen in October of the previous year.

The 100-period and 200-period moving averages are positioned at 1.3654 and 1.4000, respectively, and have yet to form a bearish crossover. This technical setup increases the probability of a rebound in price. A bullish move from current levels could see USD climbing back toward the 1.4174 area, where the ascending trendline also intersects—a key technical zone that could act as a magnet in an upward move. However, a decisive breakdown below 1.3770 would invalidate this scenario and open the door for further losses, potentially accelerating the current downtrend.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3790

Target price: 1.4100

Stop loss: 1.3650

Validity: May 12, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

For now, the technical setup suggests that the bulls may still have room to push higher—at least until the price tests major resistance.

BUY USDCHF

Close Time

CLOSED

0.82500

Entry Price

0.83300

0.82000

0.80329 -0.00126 -0.16%

50.0

Pips

Loss

0.82000

0.81999

Exit Price

0.82500

Entry Price

0.83300

The April Nonfarm Payrolls (NFP) report showed that the U.S. economy added 177,000 jobs, beating expectations of 130,000 and offering some relief to concerns about a sharp labor market slowdown. However, the headline beat was partially offset by downward revisions to February and March, which collectively removed 58,000 jobs from previous estimates. The unemployment rate held steady at 4.2%, while wage growth rose 3.8% year-over-year—slightly below forecasts. Meanwhile, initial jobless claims climbed to 241,000, the highest level since mid-February, and continuing claims reached their highest point since November 2021. These figures hint at underlying softness in the labor market and have bolstered market expectations for a potential rate cut by the Federal Reserve as early as July.

Adding to the economic narrative, the ISM Manufacturing PMI for April dipped further to 48.7 from March’s 49.0, remaining below the 50-mark that separates expansion from contraction. The production sub-index saw a notable drop to 44.0, signaling weakening output, though marginal improvements were seen in new orders and employment. On the inflation front, the prices paid index rose modestly to 69.8, its highest reading since mid-2022, keeping inflationary concerns alive despite cooling economic indicators.

Earlier in the week, data from the U.S. Department of Commerce confirmed that the economy contracted at an annualized rate of 0.3% in Q1 2025—well below the expected 0.4% growth and a steep decline from the 2.4% expansion in the previous quarter. This marks the first quarterly contraction in over a year and comes amid growing uncertainty over the trajectory of U.S. trade policy under President Donald Trump.

President Trump, speaking on Wednesday, acknowledged that the effects of current policies may take time to filter through the economy. He redirected blame for the recent weakness in equity markets toward former President Joe Biden. These comments arrived ahead of several key economic releases, including jobless claims and PMI reports, adding more tension to already jittery markets.

Meanwhile, concerns are also surfacing in Switzerland. On Friday, Swiss National Bank (SNB) President Martin Schlegel cautioned that an economic slowdown in Switzerland “cannot be ruled out.” Trade policy uncertainty is proving disruptive not only for large economies but also for traditionally stable nations like Switzerland. Schlegel emphasized that while price stability remains crucial, it cannot eliminate the uncertainty brought about by fragmented global trade relationships. He noted that in addition to interest rates, foreign exchange interventions remain a viable tool for shaping monetary conditions.

The Swiss franc’s sharp appreciation has created renewed deflationary pressures, prompting speculation that the SNB might consider reintroducing negative interest rates. However, the central bank appears more restrained this time, mindful of potential political pushback—especially from Washington. Upside Continuation in Focus as USDCHF Finds Fresh Support_1

Upside Continuation in Focus as USDCHF Finds Fresh Support_1

Technical Analysis

The USD/CHF pair remains in a bullish phase, having recently found support at the 200-period moving average on the 1-hour chart. The pair also rebounded from an ascending trendline, reinforcing the strength of the current uptrend. With bullish momentum picking up again, the dollar may continue climbing toward the next resistance area near 0.8330. RSI recently dipped to 31, approaching oversold territory—often a magnet for buyers looking to join the prevailing trend.

However, should the price break decisively below the ascending trendline and sustain that move, a deeper correction may be in play. In such a scenario, the next key support to watch would be around the 0.8200 level. This area could provide a short-term floor unless broader dollar weakness emerges. For now, the technical setup suggests that the bulls may still have room to push higher—at least until the price tests major resistance.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8250

Target price: 0.8330

Stop loss: 0.8200

Validity: May 09, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

During the Asian and European trading sessions on Friday, gold prices continued to rebound, reaching levels near $3,265. The initial short-sellers' profit-taking, following the sustained selling pressure observed at the beginning of the week, has provided upward impetus to the market. Concurrently, the anticipated release of the U.S. April Non-Farm Payrolls (NFP) report has heightened risk-aversion sentiment, thereby offering additional support to gold prices.

SELL XAUUSD

Close Time

CLOSED

3310.00

Entry Price

3162.00

3359.00

4216.84 +18.93 +0.45%

490.0

Pips

Loss

3162.00

3359.00

Exit Price

3310.00

Entry Price

3359.00

Fundamentals

During the Asian and European trading sessions on Friday, gold prices rallied consecutively, supported by the $3,227 level. The intraday market attention is sharply focused on the upcoming U.S. April Non-Farm Payrolls (NFP) report. The downside risks to the NFP data have been exacerbated by the weaker-than-expected ADP employment data released on Wednesday, coupled with the increase in unemployment benefit claims. These factors have collectively intensified the market's risk-aversion sentiment.

This week, the U.S. labor market data have exhibited a pronounced tilt towards downside risks. Initial jobless claims surged to 241,000 last week, driving the four-week moving average to 226,000. Meanwhile, the ADP employment report revealed a significant deceleration in private-sector job growth, with only 62,000 new jobs added, compared to the revised figure of 147,000 in March. Additionally, although the employment sub-index of the ISM Manufacturing PMI edged up slightly from 44.7 to 46.2, it remains firmly within contractionary territory.

Amid rising macroeconomic uncertainty in the United States, the U.S. April NFP report, scheduled for release tonight, will serve as a pivotal indicator of labor market resilience. The market currently anticipates a gain of 130,000 jobs in April, a notable deceleration from the far-better-than-expected increase of 228,000 jobs in March. Moreover, average hourly earnings are projected to rise by 0.3% MoM, while the unemployment rate is expected to hold steady at 4.2%.

While the recent volatility in reciprocal tariff policies has yet to be fully reflected in the data, other indicators have already signaled an increasing fragility in the labor market. Should today's report significantly underperform expectations, it could reignite market concerns about a potential economic downturn, especially following the unexpected contraction in the Q1 GDP data released earlier this week. For the Federal Reserve, a disappointing employment report would further amplify the pressure to resume accommodative policies as early as June.

Focus Shifts to U.S. April Non-Farm Payrolls Report _1

Technical Analysis

On Thursday, gold prices declined by 1.6%, reaching a two-week low, driven by rising risk appetite amid easing trade tensions and consecutive profit-taking by long positions. This development further eroded gold's appeal as a safe-haven asset. However, with the market momentum becoming oversold due to sustained selling pressure and the emergence of new uncertainties, gold prices are now showing signs of a bottoming-out recovery.

From a broader cyclical perspective, the Relative Strength Index (RSI) is approaching the neutral level of 50, which could represent a critical inflection point. Should momentum rebound at this level, it may signal that the bullish momentum remains intact, potentially fueling a short-term rebound. In the shorter term, price fluctuations remain within the normal range of range-bound trading.

In light of the current market dynamics, traders are advised to adopt a swing trading approach, capitalizing on short-term price movements while remaining vigilant to broader macroeconomic developments.

Trading Recommendations

Trading Direction: Sell

Entry Price: 3310

Target Price: 3162

Stop Loss: 3359

Valid Until: May 17, 2025, 23:55:00

Support: 3243/3227/3201

Resistance: 3268/3283/3307

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Summary:

The Australian Dollar clings to gains despite underwhelming retail sales and renewed global slowdown concerns.

BUY AUDUSD

Close Time

CLOSED

0.64501

Entry Price

0.65400

0.63800

0.66431 +0.00048 +0.07%

21.1

Pips

Profit

0.63800

0.64712

Exit Price

0.64501

Entry Price

0.65400

The Australian Dollar (AUD) managed to maintain a modest rebound against the US Dollar (USD) on Friday, even as a weaker-than-expected retail sales figure for March, softening commodity prices, and lingering political uncertainties at home cloud the outlook for the currency. Traders are grappling with a mix of fragile global sentiment, renewed trade optimism, and a murky domestic political picture ahead of the national elections this weekend.

According to the Australian Bureau of Statistics (ABS), retail sales rose just 0.3% month-over-month in March, falling short of the 0.4% forecast and down sharply from the revised 0.8% jump in February. While the data underscores ongoing consumer caution amid cost-of-living pressures, it has done little to immediately derail the Aussie, which has been buoyed by technical factors and a mild pullback in the US Dollar ahead of key labor market data.

Despite holding ground in Friday trading, the AUD remains fundamentally vulnerable to fluctuations in commodity prices and those are under pressure. Key Australian exports such as iron ore, copper, and gold have seen declines in recent sessions, as global risk sentiment deteriorates. Concerns over faltering growth in China and soft US manufacturing data have reignited fears of a broader global economic slowdown, which could curtail demand for Australia’s commodity-heavy export basket.

The National Bureau of Statistics (NBS) in China reported that its Manufacturing Purchasing Managers' Index (PMI) slipped to 49.0 in April from 50.5 in March, falling back into contraction territory and missing market expectations. The Non-Manufacturing PMI also eased to 50.4, further dampening hopes for a robust recovery in the world’s second-largest economy.

Given Australia’s heavy trade reliance on China, the disappointing data adds another layer of pressure on the Aussie, which already faces headwinds from a cooling domestic economy and political instability.

Australia’s federal election this weekend adds yet another source of potential volatility. While polling suggests a narrow edge for incumbent Prime Minister Anthony Albanese, the possibility of a hung parliament looms large. Should Albanese secure only a minority, the need to form a coalition with the Greens or independents could complicate fiscal planning and raise the risk of policy gridlock or excessive public spending. Markets are particularly wary of fiscal slippage at a time when the Reserve Bank of Australia (RBA) remains cautious about the inflation outlook.

A delayed or contested result could also weigh on investor sentiment, especially given Australia’s recent history of political turnover and fragile parliamentary majorities.

Recent inflation data from the ABS showed that the Consumer Price Index (CPI) climbed 0.9% quarter-over-quarter in Q1 2025, significantly above the 0.2% gain in Q4 2024 and slightly ahead of consensus. On an annualized basis, CPI rose 2.4%, exceeding expectations of 2.2%. While these numbers are unlikely to fundamentally shift the RBA’s dovish stance, they complicate the central bank’s narrative as it balances between supporting growth and anchoring inflation expectations.

Despite these inflation surprises, market participants still anticipate a 25-basis-point rate cut in May, amid fears that new US tariffs and slowing global trade could dent Australian export demand.

On the other side of the AUD/USD pair, the US Dollar has been losing momentum after several sessions of gains, weighed down by a softer tone in recent US economic data and growing political uncertainty around trade.

President Donald Trump has been signaling renewed optimism about potential trade deals with key partners, including China, India, Japan, and South Korea. Trump stated during a recent NewsNation Town Hall that a deal with China has a "very good probability" of materializing, provided US conditions are met. He also confirmed progress in trade talks with Ukraine.

Yet, the positive tone has been tempered by structural concerns in the US economy. The ISM Manufacturing PMI fell to 48.7 in April still in contraction and Initial Jobless Claims rose unexpectedly to 241,000, raising fresh doubts about the resilience of the labor market. The Employment Index within the ISM report, while improved at 46.5, remains firmly in contraction territory.

US Treasury Secretary Janet Yellen and Treasury Secretary Scott Bessent both issued warnings about the risks of Trump's tariff policies, with Bessent emphasizing that the inverted yield curve strengthens the case for Fed rate cuts in the coming months.

In more supportive news for the Australian Dollar, the ABS reported a March trade surplus of AUD 6.9 billion more than double market expectations of AUD 3.13 billion driven by a sharp 7.6% surge in exports and a 2.2% drop in imports. The strong data provides a tailwind for the AUD, reinforcing Australia's favorable trade balance even as commodity prices wobble.

However, the question remains whether this will be enough to shield the currency from mounting global and domestic risks.

Technical Analysis

From a technical perspective, AUD/USD is trading around 0.6440 and shows signs of modest bullish momentum. The pair remains above its 9-day Exponential Moving Average (EMA), and the 14-day Relative Strength Index (RSI) holds above 50 typically a positive signal for short-term strength.

Immediate resistance lies at 0.6450, the recent four-month high. A break above that level could open the door to 0.6540, the five-month peak. Support is seen at 0.6340, with a break below likely signaling the start of a bearish leg.

The currency remains range-bound in the near term, with direction likely hinging on upcoming US Nonfarm Payrolls data and the outcome of Australia's election. A move outside the 0.6340–0.6440 band could set the tone for the weeks ahead.

TRADE RECOMMENDATION

BUY AUDUSD

ENTRY PRICE: 0.6450

STOP LOSS: 0.6380

TAKE PROFIT: 0.6540

Risk Warnings and Disclaimers

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Alan

Commodity

Summary:

Gold prices have been experiencing a sustained correction in recent sessions, primarily driven by the Trump administration's signals of a more accommodative stance on tariffs.

SELL XAUUSD

Close Time

CLOSED

3264.06

Entry Price

3180.00

3295.00

4216.84 +18.93 +0.45%

309.4

Pips

Loss

3180.00

3295.13

Exit Price

3264.06

Entry Price

3295.00

Fundamentals

Gold has undergone a significant correction, with a decline of nearly $300. The current pressure on gold prices is primarily attributable to a confluence of factors, including policy expectations, market sentiment, and technical breakdowns. The Trump administration's recent signals of a more lenient approach to tariffs have significantly alleviated market concerns over escalating trade frictions, thereby diminishing the safe-haven appeal of gold.

Moreover, the marginal impact of geopolitical risks that previously underpinned gold prices, such as the India-Pakistan tensions and the Middle East situation, has waned. This has led to a rapid outflow of funds from gold ETFs. Notably, the world's largest gold ETF, SPDR, recorded a weekly reduction in holdings of 6.02 tons last week, marking the largest single-week drawdown within the month.

Concurrently, the recalibration of Federal Reserve policy expectations has exerted additional downward pressure on gold prices. While the market still anticipates two interest rate cuts within the year, recent U.S. economic data have demonstrated underlying resilience. Market participants are currently pricing in a 93.3% probability that the Fed will maintain interest rates unchanged in next week's monetary policy decision. This expectation is expected to further amplify the short-term upward pressure on the U.S. dollar, thereby exerting additional downward pressure on gold prices.

It is noteworthy that market focus has now pivoted to tonight's Non-Farm Payrolls (NFP) report. A strong NFP outcome (with non-farm employment growth ≥180,000 and wage growth ≥4.3%) could reinforce the Fed's hawkish stance and potentially push gold prices below the $3,200 mark. Conversely, a weak NFP report (with non-farm employment growth ≤120,000) may trigger short-covering activities. However, given the short-term constraints imposed by policy rate differentials and the easing of tariff negotiations, the upside potential for gold prices is likely to remain capped.

Technical Analysis

From a broader trend perspective, despite the recent correction of nearly $300, the underlying bullish trend in gold remains intact, with the overall trajectory still favoring higher prices.

On the 4-hour chart, gold has recently breached the key support level at $3,260, thereby opening up further downside potential. The subsequent target may be to test the support level at $3,170.

Currently, the level of $3,260 has transitioned from support to resistance. XAUUSD has rebounded to the vicinity of this resistance level. Should gold prices exhibit signs of weakness at this resistance level, a further decline in gold prices is likely in the short term.

Trading Recommendations

Trading Direction: Sell

Entry Price: 3260.00

Target Price: 3180.00

Stop Loss: 3295.00

Valid Until: May 16, 2025, 23:00:00

Support: 3201.87/3170.00

Resistance: 3260.00/3280.00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The EUR/USD pair has come under renewed selling pressure, sliding toward 1.1285 as the US Dollar strengthens following upbeat ISM manufacturing data and persistent inflation fears.

SELL EURUSD

Close Time

CLOSED

1.12800

Entry Price

1.10000

1.14300

1.16597 +0.00171 +0.15%

27.3

Pips

Profit

1.10000

1.12527

Exit Price

1.12800

Entry Price

1.14300

The euro came under heavy selling pressure on Thursday, sliding decisively below the 1.1330 level and hitting session lows around 1.1285 during North American trade. The sharp drop in the EUR/USD exchange rate marks a critical technical and psychological shift, coming as the US dollar flexes its muscle once again supported by a surprisingly firm manufacturing sector and stubbornly persistent inflation in the United States. In contrast, the euro is facing growing headwinds amid dovish European Central Bank rhetoric and renewed fears of slowing inflation across the bloc.

The dollar’s rebound has been swift and forceful. The US Dollar Index (DXY), which tracks the greenback’s performance against a basket of major currencies, extended its recovery for the second consecutive session, punching through the crucial 100.00 mark a level often seen as a sentiment bellwether in currency markets. This resurgence followed the release of the April ISM Manufacturing PMI, which printed at 48.7, beating analysts' expectations of 48.0. Although the reading remained below the 50.0 threshold that demarcates contraction from expansion, the data was nonetheless taken as a signal of relative resilience, especially considering broader fears of economic softness.

More importantly for markets, inflationary pressure within the manufacturing sector remains elevated. The Prices Paid sub-index climbed to 69.8 from the previous 69.4, indicating that cost pressures on inputs are not easing, but rather intensifying. This uptick complicates the Federal Reserve’s path forward, as it suggests price growth is more entrenched than previously anticipated — a scenario that would likely delay any potential interest rate cuts and strengthen the dollar further in the process.

This follows Wednesday’s release of US GDP data, which revealed that the economy contracted by 0.3% on an annualized basis in the first quarter. It was the first time in three years that the US economy has posted a negative quarter. However, analysts from Morgan Stanley were quick to highlight that the contraction might not tell the full story. They argued that the dip in output was partially masked by inventory distortions, as American firms scrambled to frontload imports ahead of looming tariff hikes imposed by President Donald Trump. The full brunt of those protectionist measures, they warned, would likely manifest more clearly in the coming quarters, with possible ripple effects in hiring, inflation, and consumer spending.

Meanwhile, the geopolitical backdrop continues to offer little reassurance. Trade tensions between Washington and Beijing remain unresolved. In an interview with Fox News, US Trade Representative Jamieson Greer made it clear that no formal negotiations have resumed with China since the latest round of reciprocal tariffs. According to reporting by the South China Morning Post, Greer acknowledged that the current environment is one of “stalemate,” with no near-term dialogue planned an admission that immediately rekindled concerns over the global trade outlook and reinforced safe-haven demand for the dollar.

On the other side of the Atlantic, the euro has been weighed down by rising expectations that the European Central Bank will be the first major monetary authority to cut rates this year. A growing chorus of ECB officials has voiced concern about the downside risks to inflation, particularly as the continent struggles to digest the economic fallout from US trade policy. The ECB’s Deposit Facility rate, currently at 2.25%, is widely expected to be cut by 25 basis points at the central bank’s June meeting. Such a move would not only widen the policy divergence with the Federal Reserve but could also undermine the euro further, particularly if inflation data continues to trend lower.

Indeed, preliminary inflation figures for the Eurozone, set for release on Friday, are expected to confirm the ECB’s concerns. The Harmonized Index of Consumer Prices (HICP) for April is forecast to rise just 2.1% year-on-year, a modest slowdown from the 2.2% pace in March. At the core level — which strips out volatile items like energy, food, alcohol, and tobacco — price growth is seen ticking up slightly to 2.5% from 2.4%. However, national-level data suggests that the disinflationary trend is uneven. While Germany and France reported cooling inflation, Spain and Italy showed more stable price trends, highlighting the fragmented nature of price dynamics within the bloc.

To complicate matters further, recent GDP figures for the Eurozone offered a mixed picture. Eurostat reported that the region’s economy grew 0.4% in the first quarter — a stronger-than-expected print that doubled the growth rate recorded in the final quarter of 2024. Yet analysts caution that these numbers likely do not reflect the full impact of recently imposed US tariffs on European automobile exports, a key sector for the region. As these trade barriers filter through supply chains and corporate profit margins, the case for looser monetary policy in Europe may become more compelling.

From a market psychology standpoint, the current move in EUR/USD is not merely technical — it reflects an increasingly clear macro divergence between the US and Europe. The Federal Reserve, despite a brief pause in tightening, remains in a holding pattern due to sticky inflation, while the ECB appears poised to ease amid softer price pressures and external trade shocks. This policy bifurcation has reasserted itself in currency markets, and barring a dramatic shift in incoming data, it is likely to persist.

Technical Analysis

Technically, the EUR/USD pair has breached key support levels, and the recent drop has been exacerbated by a classic head-and-shoulders pattern breakdown on the short-term charts. The neckline breach reinforced bearish sentiment, and while intraday price action attempted a modest rebound, these efforts have so far failed to reclaim meaningful ground. Momentum indicators such as the Relative Strength Index (RSI) have begun to emerge from oversold territory, suggesting the potential for minor recoveries, but the broader trend remains firmly tilted to the downside.

Unless buyers manage to decisively retake the 1.1360–1.1390 resistance zone, the euro remains vulnerable to further losses. A drop toward the next support level at 1.1260 appears likely, and if that fails to hold, markets may begin to price in a test of the psychologically important 1.1000 level.

TRADE RECOMMENDATION

SELL EURUSD

ENTRY PRICE: 1.1280

STOP LOSS: 1.1430

TAKE PROFIT: 1.1000

Risk Warnings and Disclaimers

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