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EUR/USD Approaches Four-Month Highs: Market Forces, Fed Rate Bets, and ECB Policy Changes

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  • March 7, 2025
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EUR/USD is robust above 1.0800, approaching a four-month high as the US Dollar dips with declining Treasury yields and increased hopes of aggressive Fed rate cuts. The European Central Bank (ECB) lowered interest rates for the fifth time in a row, with President Christine Lagarde cautioning against downside risks to economic growth. In the meantime, US employment data indicated a drop in Initial Jobless Claims, while Non-Farm Payrolls (NFP) are likely to indicate a modest recovery in job additions. Global trade tensions continue, with Canada postponing tariffs on US imports and President Trump exempting Mexico and Canada from his planned duties. In spite of market expectations for additional rate cuts, sustained US and EU inflation continues to hamper central banks’ flexibility to ease monetary policy aggressively. KEY LOOKOUTS                                                                   • The market is poised for aggressive Fed rate cuts, but sustained US inflation may reduce the Fed’s flexibility to loosen monetary policy. • The fifth straight rate cut by the ECB indicates worries over economic stability, with President Lagarde warning of risks to growth on the downside. • Beating jobless claims numbers and a projected NFP bounce back may impact the strength of USD and affect EUR/USD prices. • Uncertainty created by Canada’s retaliatory tariffs and President Trump’s trade policy can impact market mood and risk appetite. EUR/USD remains trading at four-month highs as US Dollar weakness gains momentum following hopes of drastic Fed rate reductions. Still, the fact that both US and EU experience stubborn inflation might keep central banks from further relaxing monetary policy. The fifth successive ECB rate reduction confirms economic stability fears, as President Christine Lagarde has already signaled concerns over risks to growth. Meanwhile, US job data, including lower-than-expected jobless claims and a projected NFP rebound, adds to market uncertainty. Additionally, global trade tensions remain a key factor, with Canada postponing tariffs and President Trump’s exemption of Mexican and Canadian goods under the USMCA shaping investor sentiment. EUR/USD stays close to four-month highs as the US Dollar loses strength in anticipation of higher Fed rate cuts. The ECB’s fifth straight rate cut reflects economic worries, while sustained inflation caps further policy relaxation. International trade tensions and US employment data continue to dominate markets. • The pair remains firm above 1.0800 as supported by a softer US Dollar. • Markets are expecting aggressive Fed rate cuts, but sustained inflation could cap policy relaxation. • The ECB reduced rates for the fifth straight time, pointing to economic worries. • ECB Chief Christine Lagarde warned that threats to economic growth are still biased to the downside. • Initial Unemployment Claims fell, with NFP set to report a small rebound in job growth. • Canada delayed imposing tariffs on US imports, while Trump excluded Mexico and Canada from his suggested tariffs. • Traders balance international trade policies, economic statistics, and inflation trends to determine the next EUR/USD direction. The EUR/USD currency pair is still the point of focus for international markets with economic policies and trade news dictating investor opinions. The latest move by the European Central Bank to lower interest rates was driven by fear over economic stability, with President Christine Lagarde pointing out the threats of diminished growth. At the same time, in the US, monetary policy debate continues to be focused on the Federal Reserve’s strategy in addressing inflation and economic growth. The policymakers continue to weigh the extent to which global uncertainties, such as trade tensions and employment trends, could shape future actions. EUR/USD Daily Price Chart Chart Source: TradingView Apart from monetary policy, geopolitical developments and international trade agreements have an important influence on market confidence. Canada’s postponement of tariffs on US products and President Trump’s exclusion of Mexican and Canadian products from planned duties reflect the intricacies of international trade relations. While countries grapple with these issues, companies and investors continue to look at long-term plans for stability and expansion. Economic changes, regulatory reforms, and global cooperation will be the determining factors in the financial environment over the next few months. TECHNICAL ANALYSIS EUR/USD remains trading above the 1.0800 level, with bullish pressure close to its four-month highs. The pair’s action indicates solid support at 1.0780, while resistance is still at 1.0850, the March 7 high. Technical indicators like the Relative Strength Index (RSI) indicate that the pair is trading in a neutral-to-overbought range, which can signal consolidation or a breakout attempt. Moving averages indicate ongoing upward momentum, with the 50-day and 200-day EMAs concurring in a bullish crossover. But a resolute break above 1.0850 may set the stage for additional advances, while a fall below 1.0780 may portend a near-term pullback. FORECAST As long as market sentiment remains positive towards risk assets and the US Dollar continues to decline on expectations of aggressive Fed rate cuts, EUR/USD may continue its rally. A sustained break above the 1.0850 resistance level may set the stage for additional gains, potentially towards the 1.0900-1.0950 area. Moreover, if the European Central Bank indicates a solid economic outlook in spite of recent rate cuts, optimism about the Euro may increase, which will help sustain bullish momentum. Conversely, if inflationary pressures in the US continue to push the Federal Reserve to be more conservative in rate cuts, the US Dollar may strengthen, putting pressure on EUR/USD lower. A fall below the critical support level of 1.0780 may lead to a pullback to 1.0720 or even 1.0680. Furthermore, geopolitical tensions, trade wars, or poorer-than-anticipated economic reports from the Eurozone may put downward pressure on the Euro and make it more probable for a downward revision in the pair.

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AUD/USD Currencies

Australian Dollar Consolidates Strength on Economic Data and US Dollar Weakness as Major Events Loom

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  • March 5, 2025
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The Australian Dollar (AUD) continues to consolidate its strength as the US Dollar (USD) stays weak in the face of economic uncertainty and the pending major data releases. Australia’s GDP growth beat forecasts in Q4 2024, bolstering confidence in the economy, while China’s better-than-expected Services PMI further underpinned the AUD. On the other hand, the US is grappling with rising trade policy concerns as Commerce Secretary Howard Lutnick signaled potential reappraisal of Trump’s tariffs that have already influenced market mood. The AUD/USD pair is quoted around 0.6260, with technicals indicating support at the nine-day EMA and potential downward risks if major support levels are breached. While the market waits for the US ISM Services PMI and ADP Employment Change, AUD’s strength is once again the currency market focus. KEY LOOKOUTS • Australia’s Q4 GDP grew 0.6%, beating forecast, affirming economic strength and backing the Australian Dollar during global uncertainty. • Commerce Secretary Lutnick suggested President Trump is considering reversing recently raised tariffs, injecting uncertainty into the US Dollar and affecting market sentiment. • China’s Services PMI rose unexpectedly to 51.4, signaling steady economic growth and offering indirect support to the AUD through trade relations. • The upcoming ISM Services PMI and ADP Employment Change could influence the USD’s trajectory, shaping short-term movements in the AUD/USD pair. Traders are closely watching key economic and policy developments impacting the Australian Dollar and US Dollar. Australia’s better-than-anticipated Q4 GDP growth of 0.6% has strengthened optimism in the economy, while China’s better Services PMI indicates stable growth, indirectly benefiting the AUD. In contrast, uncertainty surrounds US trade policy, with Commerce Secretary Howard Lutnick hinting that President Trump might roll back recently imposed tariffs, creating market volatility. With the US ISM Services PMI and ADP Employment Change due for release, investors are weighing the possible influence on the USD, which is still under pressure. These factors combined determine the short-term direction of AUD/USD, with traders keeping an eye on technical support and resistance levels. Australia’s robust Q4 GDP expansion and China’s better Services PMI underpin the Australian Dollar, while uncertainty surrounding US tariff policy continues to keep the USD under pressure. Market participants are looking for pivotal US economic data releases, including ISM Services PMI and ADP Employment Change, to gauge the influence on AUD/USD momentum. • Q4 2024 GDP expanded 0.6% QoQ, above market expectations and further underpinning economic resilience. • The USD is under pressure with market sentiment weighed down by economic uncertainties and trade policy issues. • Commerce Secretary Lutnick hinted Trump might revisit recently imposed tariffs, injecting volatility in the forex market. • The sudden spike to 51.4 indicates consistent economic growth, implicitly backing the Australian Dollar. • Speculators look out for confirmation of releases of major US economic data to determine the short-term direction of the USD. • The two trade close to 0.6260, with support at 0.6271 (nine-day EMA) and possible downside towards 0.6187. • Global trade uncertainty and economic data continue to play a crucial role in driving movements of the forex market, determining AUD/USD trends. The Australian Dollar continues to be strong amidst major economic events and international trade uncertainties. Australia’s GDP growth of 0.6% in Q4 was above market forecasts, indicating the strength of the economy despite global difficulties. Also, China’s better-than-anticipated Services PMI at 51.4 indicates consistent growth, indirectly favoring the AUD because of robust trade relations between the two countries. In the meantime, the Reserve Bank of Australia (RBA) is still evaluating economic risks, with policymakers keeping a close eye on inflation and labor market performance to inform future monetary policy. AUD/USD Daily Price Chart Chart Source: TradingView On the international side, US trade policy continues to be a pressing issue, as Commerce Secretary Howard Lutnick suggested that President Trump might revisit the recently levied tariffs. The uncertainty surrounding the trade actions has caused apprehension regarding their long-term effects on economic growth and global trade patterns. Additionally, the US suspended all military assistance to Ukraine, creating yet another layer of geopolitical stress for the market. While investors wait for major US economic releases, such as ISM Services PMI and ADP Employment Change, sentiment in the market is subdued, with attention to economic stability and policy guidance. TECHNICAL ANALYSIS AUD/USD currency pair is trading around 0.6260, with sideways action as the market conditions are evaluated by traders. The pair has immediate resistance at the nine-day Exponential Moving Average (EMA) of 0.6271, and a stronger resistance at the 50-day EMA of about 0.6303. The Relative Strength Index (RSI) is still below 50, which reflects a risk-averse market sentiment with weak bullish pressure. On the negative side, the major support is at 0.6187, the four-week low seen on March 5. A fall below this level might trigger further drops to 0.6087. With future US economic data releases, AUD/USD price movements might experience greater volatility, impacting short-term technical trends. FORECAST The Australian Dollar (AUD) can witness further gains if economic data keeps supporting positive sentiment in the market. With Australia’s Q4 GDP beating forecasts and China’s economic data indicating resilience, the AUD has fundamentals to support gains. If risk sentiment remains steady globally and US economic worries continue, the AUD/USD currency pair can challenge resistance around 0.6300 in the near future. Also, any signals from the Reserve Bank of Australia (RBA) regarding holding or changing monetary policy could affect investor sentiment and add more support for the currency pair. Downside-wise, the AUD/USD pair remains susceptible to external threats from US trade policy and economic uncertainty in the world. If the US Dollar strengthens on more robust-than-anticipated economic news or a change in Federal Reserve policy expectations, the pair might experience fresh selling pressure. A breakdown below the key support of 0.6187 would initiate a more severe pullback to 0.6087, the lowest since April 2020. Also, geopolitical tensions, including the US suspension of military assistance to Ukraine, may enhance market volatility, which would trigger risk-off sentiment to weigh on the Australian Dollar.

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Currencies USD/JPY

Japanese Yen Gains on Strong GDP Data, Puts Pressure on USD/JPY Near One-Week Low

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  • February 17, 2025
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The Japanese Yen (JPY) continues to hold strong gains after a strong Q4 GDP report supported expectations of more interest rate increases by the Bank of Japan (BoJ). Narrowing US-Japan rate difference, combined with persistent weakness of the US Dollar (USD) amid disappointing US retail sales and market skepticism around Trump’s offered reciprocal tariffs, holds the USD/JPY pair close to a one-week low. Owing to hawkishness offered by the Federal Reserve, offering some support for the USD notwithstanding, the functional bias remains skewed towards JPY bulls, making a further lower direction for the currency pair quite likely. Support levels are key around 151.40 and 150.00, with any bounce being met with resistance at 152.70 and higher.  KEY LOOKOUTS • Solid Q4 GDP growth of 2.8% supports the view that the Bank of Japan will keep tightening monetary policy. • A soft US Retail Sales report and worries over Trump’s retaliatory tariffs keep the USD at a two-month low, bearing down on the USD/JPY pair. • The diminishing gap between US and Japanese interest rates strengthens the Yen, increasing investor confidence in Japan’s currency amid BoJ’s hawkish stance. • USD/JPY faces immediate support near 151.40, with further downside potential toward 150.00, while resistance lies at 152.70 and 154.00. The Japanese Yen continues to strengthen as robust Q4 GDP data reinforces expectations of further interest rate hikes by the Bank of Japan (BoJ). The decline in the US-Japan rate differential and continued US Dollar softness, fueled by soft US Retail Sales data and reservations regarding Trump’s proposed tit-for-tat tariffs, maintain the USD/JPY cross close to a one-week low. Although the Federal Reserve’s hard-dollar bias lends some support to the USD, overall sentiment remains in favor of JPY bulls. Critical support for the duo comes around the 151.40 and 150.00 points, whereas any bounce could see stiff resistance near 152.70 and 154.00. The Japanese Yen is still strong following positive Q4 GDP numbers, further solidifying BoJ rate hike expectations and putting pressure on USD/JPY around a one-week low. Poor US Retail Sales and Trump’s reciprocal tariffs worries also bear down further on the USD, as key support and resistance levels at 151.40 and 152.70, respectively. • Japan’s Q4 GDP increased by 2.8%, further solidifying hopes for additional Bank of Japan (BoJ) rate hikes. • The Japanese Yen holds its ground, driving the USD/JPY pair down as the US Dollar weakens. • A steep 0.9% decline in US retail sales puts further pressure on the USD, dampening investor sentiment. • Uncertainty in the markets regarding Trump’s tariffs plans on US imports is adding to USD weakness and JPY strength. • A narrowing gap between US and Japanese interest rates is further adding to the bullish momentum of the Yen. • USD/JPY is supported close to 151.40 and 150.00, but resistance is found at 152.70 and 154.00. • The USD gets some support from the Fed’s determination to hold rates higher, capping USD/JPY losses deeper than this. The Japanese Yen keeps gaining strength with Japan’s 2.8% Q4 GDP growth increasing hopes of higher rate hikes from the Bank of Japan (BoJ). The constricting US-Japan rate gap, coupled with soft US economic indicators, has held the USD/JPY pair close to a one-week low. The US Dollar is still under the gun after the sudden 0.9% fall in US retail sales to signal weakening consumer expenditures. Moreover, uncertainty surrounding former President Donald Trump’s so-called reciprocal tariffs has contributed to market uncertainty, which has dampened the USD further. Investors currently expect a stronger Yen in the short term, with major support levels at 151.40 and 150.00. USD/JPY Daily Price Chart TradingView Prepared by ELLYANA Even though the USD is weak, the Federal Reserve’s aggressive stance on interest rates serves as a counterbalance, stopping further losses in the USD/JPY pair. The Fed’s hesitation to reduce rates in the near future gives some relief to the USD, but its upside is still limited by prevailing sentiment. The USD/JPY technical levels are being watched closely by traders, with resistance at 152.70 and 154.00, which would see a short-covering rally if broken. Still, with the BoJ tightening measures and a closing rate gap, the bullish momentum in the Yen is set to continue, placing pressure on the currency pair during the next few sessions. TECHNICAL ANALYSIS USD/JPY currency pair is trading close to significant support levels at 151.40, with further downside risk towards the psychological 150.00 level. Daily chart oscillators are still in bearish territory, and the decreasing US-Japan rate gap continues to support the Yen. A slide below 150.90 could further enhance selling pressure, driving the pair towards the 149.60-149.55 range and possibly testing the 149.00 support. On the higher side, any bounce might find stiff resistance at 152.70, which coincides with the 200-day Simple Moving Average (SMA). A breakout above 153.15 (100-day SMA) may result in a short-covering rally, pushing the pair to 154.00 and the 154.75-154.80 supply area. But since fundamentals favor the Yen, the overall trend will remain bearish unless USD bulls take charge again. FORECAST USD/JPY pair can recover if some conditions are met. A breach above the 152.00 level may propel the pair towards the robust resistance level of 152.70, where the 200-day Simple Moving Average (SMA) is located. A firm breakout above this level might lead to a short-covering rally, driving the pair towards the 153.15 region (100-day SMA). If bullish pressure intensifies, the subsequent target is around the 154.00 psychological level, then the 154.45-154.50 supply zone. Another push higher might have the pair retracing last week’s high in the vicinity of the 154.75-154.80 area, if the US Dollar regains power on the back of aggressive Federal Reserve policy or improved risk appetite for global markets. USD/JPY remains below 152.00, with near-term support around 151.40-151.45. A break below here might trigger selling pressure faster, taking the pair down to 150.90, which is the lowest level since December 10. Further falls might test the psychological 150.00, with longer losses making the descent towards the support

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