Better-than-expected numbers could support investor expectations the US economy will avoid a recession. However, the numbers are unlikely to influence the Fed’s interest rate trajectory. The US Personal Income and Outlays Report (Fri) will impact bets on a September Fed rate cut.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on inflation numbers from Japan and the US and the Bank of Japan. Softer-than-expected inflation numbers from Japan could allow the Bank of Japan to support a zero-interest rate environment over the near term.

Sticky US inflation numbers and upward trends in personal income and spending could tilt monetary policy divergence further toward the US dollar.

USD/JPY Price Action

Daily Chart

The USD/JPY remained comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY breakout from the April 23 high of 154.874 could give the bulls a run at the 155 handle.

Investors should consider the Bank of Japan, intervention chatter, and US core durable goods orders.

Conversely, a USD/JPY fall through the 154 handle could signal a drop toward the 151.685 support level.

The 14-day RSI at 75.43 shows the USD/JPY in overbought territory. Selling pressure will likely increase at the April 23 high of 154.874.

• EUR/USD regained the 1.0700 yardstick and beyond.
• The Dollar remained well on the defensive on Tuesday.
• Firm PMIs in Euroland underpinned the EUR.

Another retracement in the US Dollar (USD) prompted EUR/USD to resume its recovery and surpass the key barrier at 1.0700 the figure on turnaround Tuesday.

The data-driven sell-off in the Greenback followed discouraging advanced prints of US PMIs in March and came amidst further reassessment by investors of the potential timing of a Federal Reserve (Fed) rate cut, now expected to happen later than previously anticipated, potentially in September, though the possibility of a move in July has not been entirely dismissed.

The resurgence of bearish sentiment in the Greenback coincided with ongoing decline in US yields across various timeframes and a consistent narrative highlighting the divergence in monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

Against this backdrop, recent statements from Board members leaned towards the initiation of the bank’s easing cycle in June, with speculation circulating about three interest rate cuts (or 75 basis points) for the rest of the year. Conversely, the Fed is projected to make its first interest rate reduction in September, although the likelihood of a similar move in July cannot be ruled out entirely.

Looking forward, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, reinforce expectations for a stronger Dollar in the medium term, especially considering the possibility that the ECB may begin rate cuts before the Fed. In such a scenario, EUR/USD is expected to undergo a more pronounced decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, EUR/USD is expected to face initial resistance at the important 200-day SMA of 1.0811, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

The breach of the 2024 low of 1.0601 (April 16) could indicate a return to the November 2023 low of 1.0516 (November 1), which preceded the weekly low of 1.0495 (October 13, 2023). Once this region is passed, a visit to the 2023 bottom of 1.0448 (October 3) may begin to take shape before the round milestone of 1.0400.

The 4-hour chart shows that the bullish trend appears to have regained its momentum. The initial up-barrier is at 1.0711, prior to the 100-SMA of 1.0731 and then 1.0756. The initial support, in the meantime, is 1.0601, followed by 1.0516. The Relative Strength Index (RSI) rose above 65.

• EUR/USD regained the 1.0700 yardstick and beyond.
• The Dollar remained well on the defensive on Tuesday.
• Firm PMIs in Euroland underpinned the EUR.

Another retracement in the US Dollar (USD) prompted EUR/USD to resume its recovery and surpass the key barrier at 1.0700 the figure on turnaround Tuesday.

The data-driven sell-off in the Greenback followed discouraging advanced prints of US PMIs in March and came amidst further reassessment by investors of the potential timing of a Federal Reserve (Fed) rate cut, now expected to happen later than previously anticipated, potentially in September, though the possibility of a move in July has not been entirely dismissed.

The resurgence of bearish sentiment in the Greenback coincided with ongoing decline in US yields across various timeframes and a consistent narrative highlighting the divergence in monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

Against this backdrop, recent statements from Board members leaned towards the initiation of the bank’s easing cycle in June, with speculation circulating about three interest rate cuts (or 75 basis points) for the rest of the year. Conversely, the Fed is projected to make its first interest rate reduction in September, although the likelihood of a similar move in July cannot be ruled out entirely.

Looking forward, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, reinforce expectations for a stronger Dollar in the medium term, especially considering the possibility that the ECB may begin rate cuts before the Fed. In such a scenario, EUR/USD is expected to undergo a more pronounced decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, EUR/USD is expected to face initial resistance at the important 200-day SMA of 1.0811, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

The breach of the 2024 low of 1.0601 (April 16) could indicate a return to the November 2023 low of 1.0516 (November 1), which preceded the weekly low of 1.0495 (October 13, 2023). Once this region is passed, a visit to the 2023 bottom of 1.0448 (October 3) may begin to take shape before the round milestone of 1.0400.

The 4-hour chart shows that the bullish trend appears to have regained its momentum. The initial up-barrier is at 1.0711, prior to the 100-SMA of 1.0731 and then 1.0756. The initial support, in the meantime, is 1.0601, followed by 1.0516. The Relative Strength Index (RSI) rose above 65.

• The pound sterling fell towards $1.23, reaching its lowest level since mid-November, as investors recalibrated their expectations for the timing of the Bank of England’s first rate cut after cautious comments from Deputy Governor Dave Ramsden.
• Recently, Ramsden suggested that the risk of UK inflation remaining excessively high might have diminished and could fall below the BoE’s latest forecasts.
• GBP/USD is trading around 1.2345 as of writing.

This statement came shortly after BoE colleague Megan Greene warned against considering a rate cut, citing recent economic data showing rising wage growth and services price inflation in Britain. Markets now expect the first borrowing cost cut to occur at the August meeting, compared to September previously expected, with the possibility of an early adjustment as early as June. Meanwhile, the US dollar held its ground, supported by hawkish comments from Fed officials.

According to the platforms of Forex currency trading companies., It is expected that the exchange rate of the pound against the dollar will recover from its recent losses in this week’s trading, with focus on the Purchasing Managers’ Index data in Britain and the personal consumption expenditure inflation numbers in the United States. Recently, the price of the British pound fell by 2.30% against the US dollar in just eight trading days, a relatively rapid movement that brings the GBP/USD pair close to oversold levels. We expect these oversold conditions to fade in the short term.

• 

Technical forecasts for the GBP/USD pair today:

According to the performance on the daily chart below, the Relative Strength Index is approaching oversold conditions near 30, and we are looking forward to some moderate rebound in this indicator, which will lead to a rise in the exchange rate of the British pound. Strong support for GBP/USD around resistance 1.2410 this week and gains across 1.2472 should pave the way for more technical strength in the pound in the short term (towards 1.2540/50). Obviously, the British pound price is struggling to rise, supported by correction of short-term RSI signals from oversold levels.”

For now, rebounds are likely to be relatively short-lived, so the option is one that only covers a few days. The chances of further decline in the exchange rate remain high, as it remains below the 200-day moving average. Only when the pound breaks above the 200-day moving average again, currently at 1.2572, can we call it an uptrend.

Briefly, we are a long way from such a development, as it would require a string of weak US data to reverse the fortunes of the forex market.

In general, the pound sterling could rebound against the US dollar in this week’s trading if the US economic growth numbers, scheduled to be released on Thursday, are less than the agreed-upon expectations for an annual growth rate for the first quarter of 2.3%. A hot reading will only exacerbate the dollar’s rise, but given the size of the recent gains, we believe a larger move in the FX market will follow a disappointing number.

According to the results of the economic calendar data, The GDP reading is likely to have a short-term impact on the FX markets. Instead, the highlight of the week for the US dollar will be the PCE inflation reading on Friday. Moreover, Economists like to point out that this is the Fed’s preferred inflation, although evidence from 2024 suggests the Fed is firmly focused on the hot increases seen in the headline CPI inflation rate. However, the PCE numbers could have a market impact on any deviation from the 0.3% monthly growth that the market expects. Once again, we expect the biggest reaction in the Forex market to come after a drop in numbers as this will provide markets with a cover to book profits on the recent strength of the US dollar.

In the meantime, the pound could be volatile today, Tuesday, with the release of the April PMI survey, the latest release of key economic data that will give guidance on how the economy is starting the first quarter. The figure to watch is the services PMI, where the consensus is looking for a reading of 53. Anything less than this could extend the recent bearish tone in the pound.

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UBS adjusted its forecast for the currency pair, citing the strength of the US dollar as a key factor. The firm increased its quarter-end predictions for the pair to ¥155 for June 2024, followed by ¥152, ¥148, and ¥145 for the subsequent quarters through March 2025. The previous forecasts were set at ¥148, ¥145, ¥143, and ¥141, respectively.

The revision comes as the market adjusts its expectations for Federal Reserve rate cuts, which have been scaled back significantly. Additionally, UBS noted that short positions in the yen have reached extreme levels. These market dynamics have contributed to the perceived dislocation of the USD/JPY pair due to the robust performance of the US dollar.

UBS also provided guidance for investors who had previously sold USD/JPY, suggesting that those who took positions anticipating an upside risk for the pair at levels between ¥150–¥152 should consider converting back at these initial levels. After this conversion, investors could then look into engaging in additional positions.

The firm’s updated forecast reflects a belief that while ¥155 is not an absolute threshold, it is a level that is informed by current market trends, including the recalibration of interest rate expectations and the positioning in the yen. This guidance is aimed at helping investors navigate the currency markets amid these shifting conditions.

The new targets set by UBS for the USD/JPY currency pair are indicative of the firm’s analysis of the economic indicators and market sentiment at the time of the forecast. Investors and market watchers typically monitor such forecasts from major financial institutions to inform their trading strategies and expectations for currency movements.

InvestingPro Insights

UBS’s revised forecast for the USD/JPY currency pair is underscored by the robust performance of the US dollar. To provide a broader context on the dollar’s recent strength, InvestingPro data shows a consistent uptrend in the dollar’s value. Over the past year, the dollar has experienced a 4.16% price total return, with a notable year-to-date increase of 4.62%. These figures reflect the currency’s strong position in the market.

Additionally, the previous close price of the dollar was reported at 106.08 USD, reinforcing the currency’s solid performance. This data aligns with UBS’s assessment, which may influence currency traders to consider the firm’s advice on the USD/JPY positions.

InvestingPro Tips suggest that investors should keep an eye on the Federal Reserve’s interest rate decisions and market positioning, as these factors can significantly impact currency pair movements. For those seeking a more in-depth analysis, InvestingPro offers additional tips for currency traders. To enhance your trading strategy with these insights, consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access the full list of 15+ InvestingPro Tips that could further inform your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

EUR/USD Current price: 1.0664

• Upbeat European PMIs provided near-term support to the Euro.
• US S&P Global PMIs could set the tone during American trading hours.
• The EUR/USD has a limited bullish potential, can still pierce the 1.0600 threshold.

The EUR/USD pair gained some ground on Tuesday, peaking at 1.0694 during European trading hours. The pair eased from such a level, but retains modest gains and trade at around 1.0670. According to provisional survey data, the Euro benefited from upbeat local data, as the Hamburg Commercial Bank (HCOB) and S&P Global Purchasing Managers Indexes (PMIs) showed business activity in the euro area grew at the fastest rate for nearly a year in April.

Growth is modest but still brings hope as the seasonally adjusted EU Composite PMI Index rose from 50.3 in March to 51.4 in April. According to the official report, the German private sector also returned to growth at the start of the second quarter. The Composite PMI  Index moved back above 50.0 for the first time in ten months in April, printing at 50.5 following 47.7 in March. In both economies, manufacturing remains the weakest leg, as it held in contraction territory.  

S&P Global will release the preliminary estimates of the United States (US) PMIs after Wall Street’s opening, while the country will publish March New Home Sales and the April Richmond Fed Manufacturing Index.

Financial markets await first-tier US data, scheduled for later in the week. The country will release the preliminary estimate of the Q1 Gross Domestic Product on Thursday and the March Personal Consumption Expenditures (PCE) Price Index on Friday.

EUR/USD short-term technical outlook

The daily chart for EUR/USD  shows the pair surpassed last week’s high by a few pips and adds ground for a third consecutive day. Nevertheless, the bullish potential remains limited. The Relative Strength Index (RSI) indicator stands directionless around 39, while the Momentum indicator turned south after failing to reconquer positive ground. Finally, the pair keeps developing below all its moving averages, with the 20 Simple Moving Average (SMA) heading firmly south and providing dynamic resistance at around 1.0740.

The 4-hour chart offers a neutral stance. Technical indicators head nowhere just above their midlines, losing the modest momentum seen earlier in the day. A flat 20 SMA provides near-term support at around 1.0650, while the 100 and 200 SMAs head firmly south, well above the current level. The pair bottomed for the year at 1.0600, the level to watch for a steeper bearish run.

Support levels: 1.0645 1.0600 1.0570  

Resistance levels: 1.0700 1.0740 1.0745 

• The euro is shot straight up in the air during the trading session on Monday, breaking well above the 200-Day EMA against the British pound.
• The British pound seems to be on its back foot at the moment, and of course the euro, although week in general, is not under the same kind of pressure.
• With that being the case, it does make a certain amount of sense that we would see this behavior.

Technical Analysis

It looks as if the 0.8650 level is going to continue to be a major barrier to overcome, and if and when we can, then I think we could start to see more momentum enter this market. Having said that, I don’t necessarily think that this is going to be an easy rally, because we had been so bearish for so long. The market will continue to be very noisy, and therefore I think that even if we do rally from here, it’s very likely that traders will continue to see this through the prism of a market that has a lot of work to do to change the overall attitude.

• 

Short-term pullback should end up offering buying opportunities, because this type of explosive new action typically means that something is changing. Furthermore, it’s probably worth noting that the 0.85 level underneath is a major area of support on longer-term charts, and therefore I think it does make a lot of sense the people will be trying to buy here where euros are “cheap” in relation to the British pound historically speaking. In fact, if we were to break down below the 0.85 level, something that’s looking increasingly unlikely at the moment, that could be a bit of a disaster for the EUR/GBP market, opening up the possibility of a drop all the way down to the 0.8250 level over the longer term. That is unlikely but is also worth noting that we have seen a little bit of a pullback late in the day, so I also believe that the market might be just a bit stretched. It’ll be interesting to see on a pullback if the 200-Day EMA can hold as support. If we can, that would be a very bullish sign indeed.

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• GBP/USD stages a rebound after touching a multi-month low on Monday.
• Pound Sterling gathers strength against its rivals despite mixed PMI data.
• The pair could extend its recovery once it stabilizes above 1.2400.

GBP/USD gathered recovery momentum and climbed above 1.2350 in the European trading hours on Tuesday after touching a five-month low of 1.2300 on Monday. 1.2400 aligns as key short-term resistance for the pair.

The improving risk mood made it difficult for the US Dollar (USD) to outperform its rivals in the American session on Monday and helped GBP/USD pull away from multi-month lows.

Early Tuesday, the data from the UK showed that the S&P Global/CIPS Manufacturing PMI declined to 48.7 in early April, showing a contraction in the manufacturing sector’s business activity. On a positive note, the S&P Global/CIPS Services PMI rose to 54.9 from 53.1.

Assessing the UK PMI reports, “early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. 

“While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” Williamson added.

On the second half of the day, PMI data from the US will be watched closely by market participants. S&P Global Manufacturing PMI and Services PMI are both forecast to come in at 52 in April. A reading below 50 in either of those data could weigh on the USD. Investors will also pay close attention to changes in risk perception. In case risk flows dominate the action with a bullish opening in Wall Street, the USD could come under renewed bearish pressure.

GBP/USD Technical Analysis

GBP/USD faces immediate resistance at 1.2400, where the mid-point of the descending channel and the 20-period Simple Moving Average (SMA) on the 4-hour chart are located. Once the pair stabilizes above this level, it could target 1.2440 (50-period SMA) and 1.2500 (psychological level, static level) next.

On the downside, interim support aligns at 1.2350 (static level) before 1.2300 (static level, lower limit of the descending channel).

 

• GBP/USD stages a rebound after touching a multi-month low on Monday.
• Pound Sterling gathers strength against its rivals despite mixed PMI data.
• The pair could extend its recovery once it stabilizes above 1.2400.

GBP/USD gathered recovery momentum and climbed above 1.2350 in the European trading hours on Tuesday after touching a five-month low of 1.2300 on Monday. 1.2400 aligns as key short-term resistance for the pair.

The improving risk mood made it difficult for the US Dollar (USD) to outperform its rivals in the American session on Monday and helped GBP/USD pull away from multi-month lows.

Early Tuesday, the data from the UK showed that the S&P Global/CIPS Manufacturing PMI declined to 48.7 in early April, showing a contraction in the manufacturing sector’s business activity. On a positive note, the S&P Global/CIPS Services PMI rose to 54.9 from 53.1.

Assessing the UK PMI reports, “early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. 

“While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” Williamson added.

On the second half of the day, PMI data from the US will be watched closely by market participants. S&P Global Manufacturing PMI and Services PMI are both forecast to come in at 52 in April. A reading below 50 in either of those data could weigh on the USD. Investors will also pay close attention to changes in risk perception. In case risk flows dominate the action with a bullish opening in Wall Street, the USD could come under renewed bearish pressure.

GBP/USD Technical Analysis

GBP/USD faces immediate resistance at 1.2400, where the mid-point of the descending channel and the 20-period Simple Moving Average (SMA) on the 4-hour chart are located. Once the pair stabilizes above this level, it could target 1.2440 (50-period SMA) and 1.2500 (psychological level, static level) next.

On the downside, interim support aligns at 1.2350 (static level) before 1.2300 (static level, lower limit of the descending channel).

 

A pickup in service sector activity would likely raise investor expectations of a near-term interest rate hike. However, investors must consider the sub-components, including employment, prices, and new orders.

Following the March rate hikes, a translation into higher input prices, a more marked job creation rate, and rising new orders need consideration. Upward trends could incentivize the BoJ to begin rate hike discussions. The Bank of Japan will deliver its monetary policy decision on Friday, April 26.

Economists expect the Bank of Japan to leave interest rates at zero percent. Nevertheless, Bank of Japan Governor Kazuo Ueda may refer to the PMIs during the press conference.

US Economic Calendar: Services PMI and the Fed

On Tuesday, preliminary US private sector PMIs will garner investor interest amidst fading investor bets on multiple 2024 Fed rate cuts.

The Services PMI will likely affect the USD/JPY more, accounting for over 70% of the US economy. The services sector is a significant contributor to inflation. Chicago Fed President Austan Gooslbee recently highlighted the housing services sector as a stumbling block to returning inflation to target.

Economists forecast the S&P Global Services PMI to slip from 53.1 to 53.0 in April. An unexpected rise in the Services PMI could further impact investor expectations of a September Fed rate cut. However, investors must consider the sub-components, including prices and employment.

Bank of America has revised its forecast for the USD/JPY exchange rate upwards, predicting that it will reach higher levels by the end of 2024 and 2025. The adjustment is based on several factors including sustained capital outflows from Japan, an accommodative monetary policy stance by the Bank of Japan (BoJ), and the dynamics of U.S. interest rates.

Key Points:

• Revision of Rate Projections: BofA has increased its forecast for the USD/JPY from 142 to 155 by the end of 2024, with a peak expected in the 155-160 range during the year. For the end of 2025, the forecast has been adjusted from 136 to 147. These revised forecasts are notably higher than current Bloomberg consensus and forward rates.

• Capital Outflows from Japan: There is clear evidence of accelerated capital outflows from Japan, which is a significant driver of the yen’s depreciation. These outflows are primarily directed towards the U.S., fueled by differences in return expectations and economic prospects between the two countries.

• BoJ’s Accommodative Policy: The BoJ is likely to maintain an accommodative monetary policy with the policy rate remaining in negative territory. This stance contrasts with the U.S. Federal Reserve’s policy trajectory, further influencing the USD/JPY exchange rate.

• Impact of U.S. Rate Cuts on Repatriation Flows: BofA analysts argue that even if the Fed were to cut rates, which would generally support risk assets, it is unlikely to trigger significant repatriation flows back to Japan. This is due to the nature of equity investments driving the outflows, where Japanese investments in U.S. equities are likely to remain in place despite potential rate cuts.

Conclusion: The upward revision in BofA’s USD/JPY forecasts reflects a combination of structural and policy-related factors that are expected to weaken the Japanese yen against the U.S. dollar over the next few years.

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• EUR/USD’s upside appears capped by 1.0700 so far.
• The Dollar traded with a mild upside bias.
• The ECB is still expected to cut rates in June.

A humble rebound in the US Dollar (USD) prompted EUR/USD to resume its bearish tone and shift its focus to the downside at the beginning of the new trading week.

The tepid advance in the Greenback followed investors’ re-assessment of the timing of a potential rate cut by the Federal Reserve (Fed), now anticipated to occur later than previously thought, possibly in September, although a move in July has not been utterly ruled out so far.

The continuation of the bullish sentiment in the US Dollar coincided with further range-bound trading in US yields across different timeframes and a consistent narrative regarding the divergence in monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

In this context, recent comments from Board members favoured the start of the bank’s easing cycle in June, with speculation running around three interest rate cuts (or 75 bps) for the remainder of the year. In contrast, the Fed is expected to reduce its interest rates for the first time in September, although a similar move at the July event should not be discarded just yet.

Looking ahead, the relatively lacklustre economic fundamentals in Euroland, combined with the resilience of the US economy, bolster expectations for a stronger Dollar in the medium term, especially considering the view that the ECB could surely start cutting rates before the Fed. In such a scenario, EUR/USD is anticipated to experience a more significant decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

The breach of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to the weekly low of 1.0495 (October 13, 2023). Once this region is cleared, a potential visit to the 2023 bottom of 1.0448 (October 3) might start shaping up prior to the round milestone of 1.0400.

On the upside, EUR/USD is projected to find initial resistance at the crucial 200-day SMA of 1.0814, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before hitting the psychological barrier of 1.1000.

The 4-hour chart indicates that the bearish trend appears to have recovered some momentum. The initial support is at 1.0601, followed by 1.0516. In the other direction, the initial up-barrier is at 1.0690, ahead of 1.0756 and the 100-SMA at 1.0739. The Relative Strength Index (RSI) climbed past 46.

• EUR/USD’s upside appears capped by 1.0700 so far.
• The Dollar traded with a mild upside bias.
• The ECB is still expected to cut rates in June.

A humble rebound in the US Dollar (USD) prompted EUR/USD to resume its bearish tone and shift its focus to the downside at the beginning of the new trading week.

The tepid advance in the Greenback followed investors’ re-assessment of the timing of a potential rate cut by the Federal Reserve (Fed), now anticipated to occur later than previously thought, possibly in September, although a move in July has not been utterly ruled out so far.

The continuation of the bullish sentiment in the US Dollar coincided with further range-bound trading in US yields across different timeframes and a consistent narrative regarding the divergence in monetary policy between the Fed and other G10 central banks, particularly the European Central Bank (ECB).

In this context, recent comments from Board members favoured the start of the bank’s easing cycle in June, with speculation running around three interest rate cuts (or 75 bps) for the remainder of the year. In contrast, the Fed is expected to reduce its interest rates for the first time in September, although a similar move at the July event should not be discarded just yet.

Looking ahead, the relatively lacklustre economic fundamentals in Euroland, combined with the resilience of the US economy, bolster expectations for a stronger Dollar in the medium term, especially considering the view that the ECB could surely start cutting rates before the Fed. In such a scenario, EUR/USD is anticipated to experience a more significant decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

The breach of the 2024 low of 1.0601 (April 16) may signal a return to the November 2023 low of 1.0516 (November 1), prior to the weekly low of 1.0495 (October 13, 2023). Once this region is cleared, a potential visit to the 2023 bottom of 1.0448 (October 3) might start shaping up prior to the round milestone of 1.0400.

On the upside, EUR/USD is projected to find initial resistance at the crucial 200-day SMA of 1.0814, followed by the April high of 1.0885 (April 9), the March top of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), all before hitting the psychological barrier of 1.1000.

The 4-hour chart indicates that the bearish trend appears to have recovered some momentum. The initial support is at 1.0601, followed by 1.0516. In the other direction, the initial up-barrier is at 1.0690, ahead of 1.0756 and the 100-SMA at 1.0739. The Relative Strength Index (RSI) climbed past 46.