• The USD/JPY forecast shows further dollar weakness.

• US consumer sentiment came in at 50.8 compared to expectations of 53.1.

• Trump’s tariff threats caused some uncertainty in the market.

The USD/JPY forecast shows further dollar weakness after a downgrade to the US government’s credit rating. At the same time, market participants were worried about progress on trade negotiations between the US and its trading partners. 

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The dollar fell on Friday after data revealed weak consumer sentiment. According to the report, consumer sentiment came in at 50.8 compared to expectations of 53.1. The unexpected drop revealed that consumers were still not confident in the economy. 

Moreover, the greenback started the week down against most of its peers, including the yen. This happened after Moody’s downgraded the US government’s credit rating, citing its growing debt size. This was another reason for traders to dump the dollar and buy the yen.

Furthermore, demand for the safe-haven yen increased after reports that Trump was threatening tariffs on countries that are not negotiating in good faith. The US has announced trade deals with the UK and China, which boosted sentiment. However, talks with India, Japan, and South Korea seem to have stalled. As a result, Trump’s tariff threats caused some uncertainty in the market. 

Meanwhile, BoJ policymakers are ready to keep hiking interest rates as long as the economy pushes past Trump’s tariff impacts. 

USD/JPY key events today

Market participants do not expect any key economic releases from the US and Japan.

USD/JPY technical forecast: Bears reach a pivotal support zone

On the technical side, the USD/JPY price has pulled back and is approaching its support trendline. The price trades below the 30-SMA, with the RSI under 50, indicating a bearish bias. At the same time, the price has reached the 0.618 Fib retracement level that might act as a support. 

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Therefore, USD/JPY might soon bounce higher. The price has maintained a shallow uptrend that chops through the SMA but respects the trendline. Consequently, the uptrend will continue if bulls return near the trendline support. Such an outcome would allow the price to break above the 146.02 resistance level and the 30-SMA. Bulls would likely break above the 148.51 resistance level to make a new high. 

On the other hand, a break below the trendline would signal a shift in sentiment. It would allow bears to retest the 142.55 support level.

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• EUR/USD trades in positive territory above 1.1200 on Monday.
• Fed policymakers will be delivering speeches later in the day.
• The pair could face strong resistance at 1.1270.

EUR/USD gains traction and trades in positive territory above 1.1200 to begin the new week. The pair could face a strong resistance level at 1.1270.

The selling pressure surrounding the US Dollar (USD) following Moody’s downgrade of the United States’ credit rating helps EUR/USD push higher in the European morning on Monday. The USD Index, which tracks the USD’s performance against a basket of six major currencies, was last seen losing 0.6% on the day below 100.50, pointing to a broad-based USD weakness.

Moody’s announced late Friday that it downgraded the US’ credit rating to ‘AA1’ from ‘AAA’, citing concerns about the growing $36 trillion debt pile. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s explained, per Reuters.

In the second half of the day, several Federal Reserve (Fed) policymakers will be delivering speeches.

Late last week, Atlanta Fed President Raphael Bostic said that he expects just one rate cuts this year amid uncertainty. In case Fed officials adopt a similar tone, the USD could stage a rebound and limit EUR/USD’s upside. According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability of the Fed cutting the policy rate at least twice this year.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60, reflecting a buildup of bullish momentum.

On the upside, 1.1270 (Fibonacci 38.2% retracement of the latest uptrend, 100-period Simple Moving Average (SMA), 200-period SMA) aligns as a key resistance level before 1.1300 (static level) and 1.1380 (Fibonacci 23.6% retracement).

Looking south, the first support level could be spotted at 1.1200 (static level, round level) ahead of 1.1170 (Fibonacci 50% retracement) and 1.1080 (Fibonacci 61.8% retracement).

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

The GBPJPY pair remains affected by the negative pressures, which forces it to fluctuate below the extra support at 193.15 level, which forces it to delay the bullish rally on the current trading, while the stability of the moving average 55 above the support at 191.50, stochastic approach from 20 level, these factors make us wait for gathering the positive momentum, then begin targeting some of the positive stations, by its rally to 194.50 and 195.30.

While the decline below 191.50 and providing a negative close will confirm its move to the bearish track, to expect suffering big losses by reaching 190.40.

The expected trading range for today is between 192.20 and 194.10

Trend forecast: Bullish

May 18, 2025 – Written by Frank Davies

STORY LINK Euro to Dollar Forecast for Next Week: EUR to Extend 1.12 Consolidation

Nordea forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.20 by the end of 2026 and would not be surprised if this level was reached much earlier than this.

ING is far from bullish on the dollar, but expects EURUSD will be held to 1.13 at the end of this year.

The EUR/USD recovered strongly from initial lows near 1.1050 during the week, but there was a fresh retreat to 1.1150 as the dollar found fresh energy.

The dollar bounced strongly following the US-China deal to lower tariffs by 115% points for the next 90 days.

Fears over dollar selling abated and defensive Euro demand also faded.

There are still important underlying concerns surrounding the dollar outlook and whether there has been long-term damage to the outlook.

According to Deutsche Bank; “The fact that China retaliated strongly to US tariffs and made no publicly known concessions to effect the reduction, highlights that we are in very different times.”

It added; “A backtracking on tariffs does not mean the importance of underlying issues has changed, merely that the approach or timing of dealing with them may have. The fundamental overproduction-overconsumption imbalance between China and the US remains large, striking and unsustainable.”

The bank considers that this has important implications; “The significance of this conclusion cannot be over-estimated. We have been arguing over the last few months that the market is reducing its willingness to fund US twin deficits,” Saravelos writes. “We worry this is brewing a major problem for the dollar and potentially the US bond market too.”

Nordea maintains a bearish dollar stance; “We think the USD will weaken even more. It is facing a trifecta of headwinds: domestic economic slowdown, political uncertainty undermining global trust and upside growth potential in Europe beyond the short term uncertainties.”

It added; “Trump’s public challenges to the Fed’s independence could undermine trust and confidence that the Fed will do its job. If investors begin to doubt the Fed’s commitment or ability to control inflation, they are likely to demand a higher risk premium to hold US assets – adding further pressure on the dollar.”

According to Berenberg; “The extremely uncertain macroeconomic environment is causing companies to postpone recruitment and investment plans. This could drive the economy into stagnation.”

The bank, however, sees little scope for rate cuts; “we believe that the interest rate cuts currently being priced in are somewhat exaggerated.”

At this stage it has a longer-term target of 1.13 for EUR/USD.

It did, however, add; “should the Fed fail to with-stand the attacks from Trump and his supporters, this would further call into question the safe-haven status of the US dollar. In combination with the risk of high US government debt and potential refinancing problems, the US dollar could continue to fall significantly in value in this scenario and reach price levels above 1.20.”

According to SocGen, there has been long-term damage to confidence; “In this instance, we know the U.S. Administration wants a weaker dollar in order to make U.S. manufacturing more competitive. We also know, and will not be able to forget, that foreign ownership of U.S. assets is excessive.

It added; “The world’s investors have too many under-hedged U.S. dollar assets in their portfolios for safety, especially given an Administration that would like to see the dollar weaker.”

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