USD/JPY Breakdown Imminent? Bearish Chart Pattern Aligns with BoJ Optimism

Traders' Opinions

Economic

Summary:

The Japanese Yen extends gains amid rising expectations of further Bank of Japan rate hikes in 2025 and optimism over a potential US-Japan trade pact.

SELL USDJPY

Close Time

CLOSED

144.500

Entry Price

141.000

147.000

155.093 -0.252 -0.16%

84.4

Pips

Profit

141.000

143.656

Exit Price

144.500

Entry Price

147.000

The Japanese Yen (JPY) continued its ascent on Tuesday, reaching near two-week highs against the US Dollar (USD) as investors increasingly price in the likelihood of further Bank of Japan (BoJ) rate hikes in 2025. This comes amid a backdrop of widening monetary policy divergence between Tokyo and Washington and a cautious reappraisal of global risk, with developments ranging from easing US-China tensions to renewed Middle East and Eastern European geopolitical instability.

The JPY’s upward momentum gained traction during the early European session, with USD/JPY retreating steadily as traders digested a confluence of supportive macro and geopolitical factors. Despite a broadly improved risk tone globally, the Yen remains well bid — a testament to growing expectations that Japan’s monetary policy is entering a normalization phase after years of ultra-accommodation.

The core catalyst fueling the Yen’s strength lies in increasingly hawkish rhetoric from the Bank of Japan. On Monday, BoJ Deputy Governor Shinichi Uchida indicated that inflation in Japan may re-accelerate following a temporary lull, reinforcing the case for further rate increases — a rare and significant pivot for a central bank long known for its dovish bias. Uchida emphasized that should price trends and economic activity unfold as expected, the BoJ "will act accordingly" to tighten policy.

This view was echoed in the BoJ’s latest Summary of Opinions, which highlighted a notable shift in internal policy discourse. Some board members reportedly see room to resume hikes, particularly if global uncertainty — including the disruptive influence of US tariffs — begins to recede.

Such forward-looking policy signals are pulling the Yen out of its traditional safe-haven silo and repositioning it as a yield-sensitive currency for the first time in over a decade.

Supporting the JPY further is renewed optimism surrounding US-Japan trade relations. Market chatter around a potential bilateral agreement has buoyed sentiment, even as concrete details remain scarce. Japan's Finance Minister Katsunobu Kato confirmed that FX coordination talks were scheduled on the sidelines of the G7 finance ministers' summit. However, with reports suggesting US Treasury Secretary Bessent may skip the meeting, expectations are tempered.

Nonetheless, the positive tone reinforces the market’s current inclination to favor the Yen over the Dollar — a sentiment rooted more deeply in monetary policy divergences than in day-to-day geopolitical developments.

While the BoJ appears increasingly inclined to tighten, the US Federal Reserve finds itself in a murky middle ground. US inflation readings last week — both the Consumer Price Index (CPI) and Producer Price Index (PPI) — indicated cooling price pressures. Coupled with lackluster retail sales data, these figures have strengthened the case for economic softness extending into the second half of 2025.

Despite this, Fed officials remain reluctant to endorse near-term rate cuts. New York Fed President John Williams and Atlanta Fed’s Raphael Bostic suggested on Monday that cuts may not arrive until after September, if at all. Fed Vice Chair Philip Jefferson added that a “wait-and-see” approach is prudent to avoid embedding transient price spikes into broader inflation expectations.

Yet, markets are not convinced. Futures pricing reflects expectations of two 25-basis-point cuts by year-end — a disconnect that leaves the Dollar vulnerable to downside pressure should incoming data continue to soften.

Risk sentiment also improved modestly after former US President Donald Trump claimed that Russia and Ukraine had agreed to enter ceasefire talks. While the announcement lacked official confirmation, the notion of a de-escalation in Europe added to the overall risk-on tone.

In the Middle East, however, risks remained elevated. Israel expanded ground operations in Gaza, issuing new evacuation orders in Khan Yunis. These developments serve as a reminder that geopolitical flare-ups remain a potential wild card — one that could intermittently favor haven assets like the Yen, even if current momentum is driven more by central bank policy.

Technical Analysis

From a technical standpoint, USD/JPY is flashing bearish signals that align with the broader fundamental story. On the 2-hour chart, the pair has completed a Head and Shoulders pattern — a classic bearish reversal formation. The neckline has been broken decisively, confirming the setup.

Price action now suggests a potential retest of the neckline near the 145.00 handle, which may serve as a springboard for further downside. The projected target derived from the pattern implies a move toward the 141.95–141.00 zone — a decline of roughly 300 pips from current levels. Momentum indicators, including RSI and MACD, have also flipped bearish, reinforcing the near-term downside bias.

TRADE RECOMMENDATION

SELL USDJPY

ENTRY PRICE: 144.50

STOP LOSS: 147.00

TAKE PROFIT: 141.00

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

Today, the Reserve Bank of Australia (RBA) cut interest rates by 25 basis points as expected, while signaling that the easing cycle may be prolonged. This suggests the Australian dollar (AUD) could face significant depreciation pressure.

SELL AUDUSD

Close Time

CLOSED

0.64173

Entry Price

0.60100

0.65200

0.66436 +0.00053 +0.08%

102.7

Pips

Loss

0.60100

0.65200

Exit Price

0.64173

Entry Price

0.65200

Fundamentals

The current depreciation pressure on AUD/USD stems from the combined effects of diverging monetary policies and structural economic contradictions.

Earlier today, the RBA lowered interest rates by 25 basis points to 3.85%, in line with market expectations. However, the dovish tone of its policy statement heightened expectations for further easing. The RBA specifically highlighted "weak domestic demand" and "external tariff shocks," implying that the rate-cutting cycle may extend amid downward revisions to economic growth. This stance contrasts sharply with the Federal Reserve's "higher for longer" interest rate policy, directly undermining the AUD's carry-trade appeal.

Meanwhile, internal contradictions in economic data further reinforce the bearish case. Although Q1 wage growth of 3.4% exceeded expectations, the increase was primarily driven by the public sector (3.6%), while private-sector wage growth stagnated at 3.3%. Additionally, productivity declined for two consecutive quarters (-1.2%), and rising unit labor costs may squeeze corporate profits, dampening investment momentum. The seemingly robust labor market also hides underlying weaknesses: April saw 89,000 new jobs, far exceeding expectations, but the unemployment rate remained at 4.1%. Moreover, rising labor participation suggests an oversupply of workers, casting doubt on the sustainability of wage growth. At the same time, retail sales grew just 0.1%, and consumer confidence remains weak, highlighting the disconnect between domestic demand and employment data.

Technical Analysis

AUDUSD exhibits a clear depreciating trend in the weekly chart. Besides, the moving average system maintains a bearish alignment, indicating strong continuation potential. Additionally, the currency pair broke below the low set in October 2022 this January, further opening the space for additional downside.

Currently, AUDUSD has closed with long upper-shadow bearish candles for two consecutive weeks below the 0.6500 resistance level, confirming strong selling pressure. This level also coincides with the MA60, creating a confluence of resistance from both the moving average and the key level, further increasing the likelihood of a decline.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6420

Target price: 0.6010

Stop loss: 0.6520

Valid Until: June 3, 2025, 23:00:00

Support: 0.6356/0.6000

Resistance: 0.6464/0.6514

Risk Warnings and Disclaimers

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Eva Chen

Forex

Economic

Summary:

During the European session on Monday, GBPUSD further rebounded and broke above 1.3400, primarily driven by renewed pressure on the US dollar following Moody's downgrade of the US credit rating.

BUY GBPUSD

Close Time

CLOSED

1.33400

Entry Price

1.36000

1.30900

1.33406 +0.00094 +0.07%

183.9

Pips

Profit

1.30900

1.35239

Exit Price

1.33400

Entry Price

1.36000

Fundamentals

During the European session on Monday, GBPUSD recovered from last week's decline, trading around 1.3400. The rebound was mainly triggered by Moody's Investors Service downgrading the US credit rating by one notch (from Aaa to Aa1), which led to renewed pressure on the US dollar. Moody's cited the continuous rise in US debt levels and the increasing burden of interest payments as the primary concerns.

This move by Moody's aligns with the downgrades by Fitch Ratings in 2023 and Standard & Poor's in 2011. Moody's currently forecasts that by 2035, US federal debt will account for approximately 134% of GDP, up from 98% in 2023. The federal deficit is expected to widen to nearly 9% of GDP, driven by rising debt repayment costs, increased welfare spending, and declining tax revenues.

In contrast, the UK economy saw an unexpected expansion in the first quarter of 2025. However, inflationary pressures and a weak labor market pose multiple challenges for the pound. The UK's real GDP grew by 0.7% QoQ in Q1 2025, exceeding market expectations. The CPI annual rate was 2.6% in March but is expected to surge to around 3.3% in April. The unemployment rate rose to 4.5%, the highest since 2021. Additionally, the Bank of England's cautious stance between rate cuts and maintaining interest rates has led to market divisions over the short-term trajectory of the pound.

Overall, if macroeconomic data continue to improve, the pound is likely to strengthen. However, investors should be vigilant about potential downside risks from global trade uncertainties and changes in domestic fiscal policies.

Technical Analysis

During the day, the trend of GBPUSD remains neutral with a slight upward bias. After breaking below the 1.3200 consolidation range previously, the pair is likely to continue a range-bound trading pattern. However, bulls have maintained control above the MA20, indicating a near-term bullish bias.

On the upside, a decisive break above the key resistance level of 1.3433 would confirm the resumption of a more significant upward trend. Conversely, a drop below 1.3138 would reinitiate the pullback from 1.3442. However, downside space should be limited by the 38.2% Fibonacci retracement level (1.2929) of the 1.2099 to 1.3442 range. Should this level be triggered, a rebound is likely.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.3340

Target Price: 1.3600

Stop Loss: 1.3090

Valid Until: June 3, 2025, 23:55:00

Support: 1.3315/1.3243/1.3142

Resistance: 1.3443/1.3549/1.3653

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

A decisive close above the 100-period moving average could act as a catalyst for a stronger bullish move toward the upper boundary of the wedge.

BUY USDCAD

Close Time

CLOSED

1.39570

Entry Price

1.41000

1.38900

1.38217 +0.00070 +0.05%

67.0

Pips

Loss

1.38900

Exit Price

1.39570

Entry Price

1.41000

Federal Reserve Vice Chair Philip Jefferson emphasized on Monday that the U.S. economy continues to face risks on both inflation and employment fronts, underscoring the need for a cautious and measured approach to interest rate decisions. He highlighted that many of these risks are tied to pending policy decisions by the U.S. administration, which remain uncertain for now. Jefferson also warned that recently imposed tariffs could trigger a one-off spike in prices and stressed the importance of preventing such shocks from developing into entrenched inflation.

Adding to the already complex macroeconomic backdrop, Moody’s downgraded the sovereign credit rating of the United States after markets closed on Friday. The rating agency cited a sustained and substantial increase in debt servicing costs, which now far exceed those of peer economies with similar credit profiles. Moody’s noted that the U.S. government's interest payment obligations are “significantly higher than those of sovereigns with comparable ratings.”

This downgrade reflects growing concerns about Washington’s ongoing inability to establish and execute long-term fiscal reforms. Moody’s emphasized that repeated failures by Congress and successive administrations to address the country’s ballooning budget deficits and rising debt costs have weakened the fiscal outlook.

Meanwhile, the latest data on U.S. consumer sentiment painted a concerning picture. Preliminary results from the University of Michigan’s survey showed a sharp decline in sentiment to 50.8—its second-lowest reading in history. Simultaneously, short-term inflation expectations unexpectedly surged, with consumers now projecting a 7.3% increase in prices over the next year. This is the highest figure since 1981, suggesting that Americans are bracing for prolonged inflationary pressure, which could compel the Federal Reserve to keep rates higher for longer despite weakening sentiment.

On the inflation front, the April Producer Price Index (PPI) came in well below expectations. Headline PPI dropped 0.5% month-over-month, while core PPI contracted by 0.4%. This softer-than-expected print raises fresh doubts about the pricing power of U.S. businesses and points to the possibility of slowing economic momentum ahead.

Despite these warning signals, Federal Reserve officials remain prudent. Atlanta Fed President Raphael Bostic indicated that while a slowdown in growth is possible, it does not necessarily mean the U.S. is heading toward a recession. His comments support the Fed’s current stance of monitoring incoming data before making further policy adjustments.

Turning to Canada, last Friday’s disappointing jobs report revealed slower employment growth and a rising unemployment rate, dampening expectations for additional rate hikes by the Bank of Canada. The central bank’s calendar remains quiet, and markets are still pricing in approximately two 25-basis-point rate cuts by December. In the near term, price action appears to be anchored by the recent lows established during last week’s Trump-Carney meeting.

On the political front, U.S. Vice President JD Vance met with Canadian Prime Minister Mark Carney on Sunday to discuss fair trade policies. This renewed dialogue has fueled optimism for a future U.S.-Canada trade deal, offering some support to the Canadian dollar (CAD). However, the renegotiation of the USMCA is expected to move more slowly than previous transcontinental trade agreements, presenting challenges for both nations. Consolidation Within Wedge Could Set the Stage for a Bullish Extension_1

Consolidation Within Wedge Could Set the Stage for a Bullish Extension_1

Technical Analysis

USD/CAD is currently trading within a rising wedge pattern, finding support at the 200-period moving average on the one-hour chart. A decisive close above the 100-period moving average could act as a catalyst for a stronger bullish move toward the upper boundary of the wedge. If that resistance is breached, momentum could accelerate further, potentially driving the pair toward the 1.4100 level.

The Relative Strength Index (RSI) is hovering around 47, indicating a neutral stance and leaving room for further upside. On the flip side, a break below the lower trendline of the wedge would invalidate the current bullish setup and could open the door to renewed bearish momentum.

Trading Recommendations

Trading direction: Buy

Entry price: 1.3954

Target price: 1.4100

Stop loss: 1.3890

Validity: May 30, 2025 15:00:00

Risk Warnings and Disclaimers

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Eva Chen

Cryptocurrency

Summary:

The price of Ethereum (ETH) fell by 4.8% on Monday, reaching $2,327, continuing the recent trend of price correction. The decline was primarily driven by the negative sentiment from Bitcoin and the broader market. Despite the single-day drop of approximately 4%, multiple technical indicators suggest that Ethereum may be approaching a short-term bottom.

BUY ETH-USDT

EXP

EXPIRED

2400.00

Entry Price

3240.00

2000.00

3134.53 +107.57 +3.55%

Pips

EXPIRED

2000.00

2624.15

Exit Price

2400.00

Entry Price

3240.00

Fundamentals

Ethereum's price saw a significant decline on Monday, falling nearly 5% to the $2,327 level. This was largely due to concerns over the potential downgrade of the US credit rating, which has exacerbated the sell-off pressure in the cryptocurrency market.

In terms of market sentiment, the recent "Sunday Scam Pump" phenomenon serves as a warning that irrational price fluctuations driven by retail investors could occur in the short term. Additionally, the ETH/BTC ratio is currently at a historical low, indicating that Ethereum may be undervalued relative to Bitcoin. However, the lack of robust growth in network activity suggests that the bearish trend could persist.

On a positive note, the Pectra upgrade has brought several improvements. This upgrade has optimized transaction speeds, reduced costs, and expanded the staking limits for validators, all of which are expected to enhance network vitality in the long run.

Institutional developments are also supportive. Major financial institutions such as Mastercard are actively exploring stablecoin payment and transfer solutions, indirectly boosting the development of the Ethereum ecosystem. Meanwhile, cryptocurrency exchanges like Coinbase are lobbying for regulatory clarity, which is expected to benefit the industry's normalization process.

From a medium- to long-term perspective, the Pectra upgrade has significantly improved network performance and usability. Combined with the inflow of institutional capital and the expansion of the stablecoin ecosystem, it provides a solid fundamental support for Ethereum. However, global macroeconomic uncertainties and the volatility of Bitcoin continue to pose risks to the market.

Therefore, investors are advised to adopt a flexible trading strategy between key support and resistance levels, while strictly managing positions and stop-loss levels to mitigate potential risks.

Technical and Fundamental Factors Signal Potential Rebound_1

Technical Analysis

Ethereum prices experienced a significant decline on Monday, falling nearly 5% to a low of $2,327, indicating a short-term oversold condition. However, both technical and fundamental factors suggest potential for a rebound.

From a technical perspective, the key short-term support level is around $2,365. If this level holds, it could serve as an accumulation point for bulls. The primary resistance lies at $2,650. Should prices manage to break back above the trend channel, a rebound target of approximately $3,000 could be in sight.

On the daily chart, Ethereum is forming a flag pattern, with an upside resistance at $3,700. However, the key will be whether it can break above the upper rail of the flag.

Additionally, several technical indicators (such as RSI and MACD) are currently in oversold territory or on the verge of turning. If these indicators stabilize effectively, they could trigger a short-term rebound.

Overall, despite the sharp correction on Monday, Ethereum's short-term support levels are well-defined, and both technical and fundamental signals point to opportunities for a short-term rebound. Investors are advised to formulate flexible trading strategies based on support and resistance levels, in line with their risk tolerance. Meanwhile, it is crucial to closely monitor macroeconomic data and on-chain metrics, while maintaining proper stop-loss and position management.

Trading Recommendations

Trading Direction: Long

Entry Price: 2400

Target Price: 3240

Stop Loss: 2000

Valid Until: June 3, 2025, 23:55:00

Support: 2327/2273/2222

Resistance: 2489/2588/2740

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

This area could serve as a springboard for the next leg higher, potentially retesting the recent high and even pushing beyond it if bullish momentum gathers strength.

BUY NZDUSD

Close Time

CLOSED

0.59268

Entry Price

0.60300

0.58200

0.57842 +0.00088 +0.15%

25.9

Pips

Profit

0.58200

0.59527

Exit Price

0.59268

Entry Price

0.60300

Federal Reserve Vice Chair Philip Jefferson stated on Monday that there are ongoing risks to both employment and inflation, emphasizing the importance of a patient and cautious approach to interest rate decisions amid current economic uncertainty. He noted that policy outcomes remain closely tied to future decisions by the U.S. administration, which have yet to be determined. Jefferson also warned that recent tariff measures could result in a one-time spike in price levels and stressed the importance of ensuring that such shocks do not evolve into sustained inflationary pressures.

Adding further strain to the macroeconomic landscape, Moody’s downgraded the U.S. sovereign credit rating after markets closed on Friday. The agency pointed to an ongoing and significant increase in debt servicing costs, which now greatly exceed those seen in similarly rated economies. Moody’s highlighted that the U.S.’s interest obligations are "significantly higher than those of sovereigns with comparable ratings."

The downgrade reflects a deeper concern over Washington’s inability to implement long-term fiscal strategies. The agency noted that “successive administrations and Congress have repeatedly failed to agree on measures to curb large and persistent budget deficits and rising interest expenses.”

Consumer sentiment data released last week further contributed to the uncertain outlook. According to preliminary figures from the University of Michigan, sentiment dropped sharply to 50.8—its second-lowest level ever recorded. At the same time, short-term inflation expectations rose unexpectedly, with consumers now anticipating a 7.3% increase in prices over the next year. This marks the highest reading since 1981, suggesting that American households are preparing for prolonged inflation pressures, which may force the Fed to keep interest rates elevated even amid waning consumer confidence.

Meanwhile, April’s Producer Price Index (PPI) came in weaker than anticipated. Headline PPI fell by 0.5% on a monthly basis, and the core reading also showed a 0.4% decline. These figures have sparked new concerns over diminishing pricing power among U.S. firms and hint at a possible deceleration in economic activity.

Despite these warning signs, Fed policymakers remain guarded. Atlanta Fed President Raphael Bostic remarked that the U.S. economy could face a period of slower growth without necessarily tipping into a recession, reinforcing the central bank’s current strategy of monitoring data before taking action.

Turning to New Zealand, the latest Business NZ Performance of Services Index (PSI) fell to 48.5 in April, down from 49.1 in March. This marked the lowest level since November and underscored ongoing contraction in the services sector.

BNZ Senior Economist Doug Steel commented, “Despite discussions around economic recovery, the latest PSI is a stark reminder that conditions remain extremely challenging. New Zealand’s PSI continues to lag behind all of our major trading partners. At 48.5, it points to a services sector still moving in reverse.” Consolidation at Major Support Hints at Renewed Upside in NZDUSD_1

Consolidation at Major Support Hints at Renewed Upside in NZDUSD_1

Technical Analysis

NZD/USD is currently consolidating after a strong bullish run that started from the 0.5490 level on April 8 and peaked at a local high of 0.6032 on April 22. The ongoing correction appears to have found solid support at the 200-period moving average, now positioned around 0.5785. This area could serve as a springboard for the next leg higher, potentially retesting the recent high and even pushing beyond it if bullish momentum gathers strength.

The Relative Strength Index (RSI) is currently sitting at 56, placing it in neutral territory. Importantly, the 0.5850 zone—once a significant resistance—has now flipped into support. Such a shift often indicates that the market is building a solid foundation, and the ongoing consolidation could be a healthy pause before the trend resumes.

If NZD/USD manages to close decisively above the 100-period moving average, it could accelerate the upward momentum. Conversely, a strong break below the 0.5850 support zone would suggest a deeper corrective move may be underway.

Trading Recommendations

Trading direction: Buy

Entry price: 0.5925

Target price: 0.6030

Stop loss: 0.5820

Validity: May 30, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Pound Sterling rallied sharply on Monday, buoyed by optimism over a potential UK-EU trade deal, while the US Dollar weakened following a Moody’s credit downgrade and diverging Fed rate expectations.

BUY GBPUSD

Close Time

CLOSED

1.33599

Entry Price

1.35000

1.32600

1.33406 +0.00094 +0.07%

50.8

Pips

Profit

1.32600

1.34107

Exit Price

1.33599

Entry Price

1.35000

The British Pound kicked off the week with renewed vigor, climbing sharply against major currencies, including the US Dollar, amid mounting speculation of a breakthrough trade deal between the United Kingdom and the European Union. Sterling's ascent comes just ahead of a high-stakes trade summit in London that investors hope will mark a milestone in repairing post-Brexit economic relations.

At the same time, the US Dollar fell under pressure after ratings agency Moody’s downgraded the United States’ sovereign credit rating from Aaa to Aa1 late Friday, citing persistent fiscal deterioration. The downgrade, while expected by some market participants, nonetheless rattled sentiment and contributed to sharp Greenback losses across the board.

The GBP/USD pair surged near the 1.3400 handle during Monday’s North American session, as traders recalibrated their exposure amid diverging macroeconomic and geopolitical themes on both sides of the Atlantic. The Pound’s momentum was underpinned by growing optimism that a wide-ranging trade framework could be announced between London and Brussels, potentially opening up significant new business opportunities across key UK industries.

Speaking at a Jefferies-hosted forum over the weekend, William Bain, Head of Trade Policy at the British Chamber of Commerce, noted that the prospective trade agreement includes provisions that could unlock as much as €150 billion in defense contracts for British firms. In addition to defense, the agreement reportedly targets the reduction of non-tariff barriers in agricultural sectors and outlines energy cooperation mechanisms designed to stabilize cross-border flows.

Markets also drew confidence from recent economic data showing the UK economy expanded at a solid clip of 0.7% in Q1 – a figure that outpaced analyst expectations and reaffirmed the resilience of British output amid elevated global headwinds.

Looking ahead, traders are now keenly awaiting April's Consumer Price Index (CPI) data, scheduled for release on Wednesday. Core inflation – which strips out volatile components such as food and energy – is expected to accelerate to 3.6% from 3.4%, a development that could challenge the Bank of England’s (BoE) current rate path and reignite expectations of tighter monetary policy.

Should the data come in hotter than expected, it may reintroduce the possibility of further rate hikes later in the year – or at the very least delay any potential dovish pivots from the BoE. This is particularly relevant in contrast to the Fed, where markets remain divided over the future direction of US interest rates.

In stark contrast to the upbeat UK narrative, the US Dollar has been grappling with fresh headwinds. The downgrade by Moody’s marked the first such move since the Obama-era debt ceiling standoff, underscoring a deteriorating fiscal picture exacerbated by rising borrowing costs and persistent political gridlock. Though Moody’s emphasized that its faith in the institutional strength of the Federal Reserve and US policymaking remains intact, the symbolic hit to US creditworthiness spooked markets and saw the Dollar Index (DXY) slide to around 100.40.

Adding to the Dollar’s woes was the Federal Reserve’s ambiguous forward guidance. Despite persistent inflationary pressures and higher consumer expectations – as evidenced by the University of Michigan’s one-year inflation forecast rising sharply to 7.3% – the Fed remains cautious. Analysts at Morgan Stanley now anticipate the Fed will not cut rates before March 2026, citing resilient price growth and high tariff-related costs as key deterrents.

Meanwhile, the CME FedWatch Tool still shows two rate cuts priced in for 2025, beginning in September, illustrating the disconnect between market optimism and institutional projections.

There was, however, a glimmer of optimism for the Greenback after former President Donald Trump – currently running for reelection – signaled a willingness to engage directly with Chinese President Xi Jinping in future trade talks. In a Fox News interview on Friday, Trump stated he would consider visiting China to discuss a de-escalation in tariffs. The news injected a brief risk-on tone into markets, although many analysts remain skeptical about any near-term breakthroughs in US-China relations.

Technical Analysis

From a technical standpoint, the GBP/USD pair appears to have resumed its bullish trajectory. The pair found strong support above the 50-period Exponential Moving Average (EMA50), reinforcing upward momentum. RSI indicators have emerged from oversold territory, signaling potential for additional gains. Price action continues to align along a rising trendline, with the recent test of last month’s highs offering another potential breakout opportunity.

Should bulls manage a sustained close above the 1.3400 resistance, the next target could be 1.3475, followed by the psychological barrier at 1.3500. Support rests at 1.3320, with the 200EMA offering additional downside protection.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3360

STOP LOSS: 1.3260

TAKE PROFIT: 1.3500

Risk Warnings and Disclaimers

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