Article by: ETO Markets
This week, EUR/USD continued its strong ascent, breaking the 1.11 level for the first time since late September 2024. The primary driver was the EU's 90-day suspension of new US tariffs to facilitate trade negotiations, a response to President Trump's adjustments to tariffs on various countries, including increased levies on Chinese imports. The ECB meets on April 17th, with markets anticipating the first rate cut since mid-2023 (a 25bp reduction to 2.25%). This expectation is supported by Eurozone inflation falling to 2.2% in March, nearing the 2% target. However, uncertainty surrounding US trade policy clouds the European economic outlook and could influence future ECB actions. Eurozone unemployment data provided support, declining to 6.1% in Feb 2025. Currently, EUR/USD is trading near 1.137, reflecting a weekly gain of about 2.1% and showing resilience in the trade environment.
In the Asian Pacific market, the USD/JPY pair remained pressured, falling to a multi-month low near 141.603. Global trade tensions and resulting risk aversion boosted demand for the safe-haven Japanese Yen. BoJ Governor Ueda indicated potential policy action if US tariffs harm Japan's economy. The BoJ, meeting April 30th-May 1st, is expected to keep rates at 0.5%, though markets foresee a possible hike to 0.75% by July. Meanwhile, AUD/USD executed a V-shaped recovery, reversing the prior week's losses. After testing resistance near 0.638, it consolidated around 0.635, supported by improved risk sentiment and stable commodity prices. The AUD/USD has climbed roughly 7% from its April 9th low of 0.591. Analysts suggest a break above 0.6400 could pave the way towards the 200-day moving average and the November 2024 high (0.6408). In summary, Asia-Pacific currencies were highly sensitive to trade developments. The Yen strengthened on haven demand, while the Aussie dollar benefited from better risk appetite. Market participants continue to monitor evolving US trade policies and central bank responses.
The Euro versus the US Dollar (EUR/USD) continues its strong performance, currently consolidating around the 1.1370 level after easing back from a recent three-year peak near 1.1470 established on April 11th. This significant upward trend from the 1.08 level seen earlier in 2025 is primarily driven by diminishing confidence in the US Dollar, largely due to concerns over the economic impact of widespread US tariffs imposed on the EU and China, which has prompted capital outflows from American assets towards Europe. Diverging economic narratives also play a role, with Eurozone inflation proving relatively sticky compared to softening US price pressures, alongside escalating global trade tensions where the Euro, unusually, has found some favour as a relative safe-haven asset. However, potential drags on the Euro include the widely anticipated 25 basis point interest rate cut from the European Central Bank this week (April 18th), which is already factored in by markets but keeps the focus on diverging monetary policy paths, especially with further ECB cuts expected. Additionally, the looming threat of EU counter-tariffs carries the risk of escalating the trade dispute, potentially harming the Eurozone economy. Market sentiment remains broadly supportive of the Euro, evidenced by rising speculative long positions and institutional forecasts targeting the 1.15-1.20 range, though underlying caution persists due to trade uncertainties and noted risks of a US economic slowdown.
From a technical perspective, EUR/USD is pausing near … after its sharp ascent. While the pair holds comfortably above key long-term moving averages like the 200-day EMA (around …), indicating the underlying bullish structure remains intact, the 14-day Relative Strength Index (RSI) reading near 70.82 suggests overbought conditions. This raises the possibility of further sideways consolidation or a corrective dip before any potential move higher. Immediate resistance is located around the upper Bollinger Band at … and the recent high of …. A decisive push above this …-… congestion zone would target the significant psychological level of …. Looking lower, initial support can be identified at the April 15th low around …. A breach of this level could see the pair test dynamic support near the 21-day EMA, currently situated around …, with the next major support zone found near the psychological … mark, which also roughly corresponds to the 20-day simple moving average.
The US Dollar remains distinctly on the back foot against the Japanese Yen, continuing a pronounced downtrend that recently pushed the pair to multi-month lows around the 141.60 level. Whilst seeing a modest intraday recovery on Thursday, the fundamental backdrop largely favours further Yen strength. Bearish sentiment towards USD/JPY is primarily fuelled by expectations of a narrowing interest rate differential, as persistently softer US economic data, such as the recent weaker-than-anticipated Producer Price Index and retail sales figures, bolsters bets for Federal Reserve rate cuts commencing potentially as soon as May. Conversely, commentary from Bank of Japan officials and rising household inflation expectations maintain prospects of further policy tightening in Japan. Adding to Yen support are heightened safe-haven flows stemming from global trade tensions, particularly surrounding US tariff policies impacting Japan and the escalating US-China trade conflict, alongside persistent geopolitical uncertainties in the Middle East. Although improved risk sentiment offered the USD some brief respite, and there's some caution the BoJ might delay hikes due to tariff impacts, the prevailing market mood remains pessimistic for the pair, underscored by speculative positioning data showing a significant increase in net long Yen contracts.
From a technical standpoint, the recent decisive break below the … support zone and subsequent slide beneath … have reinforced the strong bearish outlook for USD/JPY. The price currently trades well below all significant Simple Moving Averages, with the 20-day SMA sitting substantially higher around …, highlighting the established downward trajectory. Momentum indicators concur, with the MACD line (-1.90) positioned firmly below its signal line (-1.25) and showing a negative histogram (-0.65). Immediate support is eyed near the recent multi-month low printed around …; this area aligns closely with the lower Bollinger Band (currently near 141.11) and the psychological … mark which was breached earlier. A sustained failure to hold above 141.60 would open the door for a test of the next major support level, the 2024 low recorded at 139.58. On the upside, any recovery attempts are likely to encounter initial resistance near …, followed by the …-… area, ahead of the more significant …-… former support, now resistance zone, which roughly coincides with the falling 10-day SMA (around …). Whilst the Relative Strength Index (RSI at 33.28) nears oversold territory, suggesting caution for aggressive shorts, the overall technical picture remains skewed to the downside.
