Article by: ETO Markets
In the Eurozone market, EUR/USD has rebounded strongly, gaining over 2 cents since Monday’s multi-week lows, driven by US Dollar weakness as the Dollar Index (DXY) fell below 108.00. The Greenback’s decline coincides with uncertainty surrounding President Trump’s trade policies, particularly the delay of tariffs on Canadian and Mexican goods while maintaining a 10% tariff on Chinese imports. Despite the dollar's current weakness, tariffs could support it in the long run. Meanwhile, central banks remain under scrutiny—while the Fed kept interest rates steady at 4.25%-4.50% amid strong US economic performance and persistent inflation, the ECB cut rates by 25 basis points, signalling potential further easing to curb inflation above its 2% target. Trade tensions could further impact the euro, potentially strengthening the dollar and pressuring EUR/USD toward parity. With structural challenges in the eurozone, including Germany’s slowdown, the euro’s long-term outlook remains uncertain despite short-term gains.
In the Japan market, USD/JPY plunged to its lowest level since December 13, dropping to the 153.00 range amid hawkish Bank of Japan (BoJ) expectations. Japan’s nominal wages surged 4.8% in December—the fastest in nearly three decades—while real wages rose for a second consecutive month, reinforcing expectations of further BoJ tightening. Additionally, Japan’s service sector expanded for a third straight month, with the PMI climbing to 53.0 in January, adding strength to the Yen. Meanwhile, persistent US Dollar weakness, driven by expectations of a dovish Federal Reserve (Fed), further fuelled USD/JPY’s decline. Weaker US job market data, with job openings falling to 7.6 million in December, supports the case for Fed rate cuts, widening the policy divergence between the Fed and BoJ. Growing concerns over Trump's trade policies and US-China tensions also boost demand for the safe-haven Yen. Traders now await the US ADP employment report and ISM Services PMI for further market direction.
EUR/USD dipped to 1.0390 in the Asian session on Thursday after two days of gains, as traders await Eurozone Retail Sales data. While annual sales growth is expected to rise to 1.9% in December, the monthly figure is projected to decline by 0.1%, adding to the euro’s subdued sentiment. Ongoing expectations of ECB policy easing, driven by confidence in inflation returning to 2%, continue to weigh on the currency. Meanwhile, the US Dollar Index (DXY) stabilizes around 107.70 after a three-day decline, providing downward pressure on EUR/USD. Fed Vice Chair Philip Jefferson signalled a cautious approach to rate cuts, emphasizing the need to assess Trump’s policies, while weaker US ISM Services PMI data added uncertainty. Traders now focus on Friday’s US Nonfarm Payrolls (NFP) report, which could influence the Fed’s next policy moves.
From a technical perspective, EUR/USD has rebounded from recent lows near …, with initial support at …. A break below this level could push the pair toward …, the lowest point in 2025. On the upside, key resistance lies at …(year-to-date high), followed by …(December peak) and the 100-day SMA at …. Momentum indicators suggest a cautious outlook—while the RSI has recovered to 49, signalling improving momentum, the ADX at 21 indicates a weakening trend. This mixed technical picture suggests potential consolidation unless a breakout occurs in either direction.
USD/JPY rebounded over 50 pips from its lowest level since December 12, as the Japanese Yen trimmed intraday gains amid risk-on sentiment and a modest US Dollar recovery. However, JPY depreciation remains limited due to expectations that the Bank of Japan (BoJ) will continue raising rates, in contrast to the Federal Reserve's (Fed) anticipated rate cuts by year-end. The narrowing rate differential between Japan and the US continues to favour the Yen. Meanwhile, concerns that Japan could face US trade tariffs and a rebound in US Treasury yields provided some support for the USD. Data showing rising Japanese real wages strengthened bets on further BoJ hikes, with markets pricing a 94.8% chance of a September rate increase. In the US, weaker job market data and softer ISM Services PMI figures weighed on the dollar, reinforcing expectations of Fed easing. Traders now focus on US jobless claims and Friday’s Nonfarm Payrolls (NFP) report for further direction.
From a technical perspective, USD/JPY's breakdown below the …-… confluence—formed by the 100- and 200-day SMAs—confirms a bearish outlook. A drop below … further reinforces downside momentum, with potential targets at …, …, and key horizontal support at …. Oscillators remain away from oversold conditions, suggesting room for further declines. On the upside, any recovery faces strong resistance at …, with a breakout above this level possibly triggering a short-covering rally toward … and the …-… region. A sustained move past … would invalidate the bearish bias and shift the trend in favour of bulls.
