Article by: ETO Markets
In European Market, EUR/USD has climbed to multi-month highs, propelled by Europe’s brighter growth prospects after Germany unveiled a €500 billion infrastructure fund. Meanwhile, the US Dollar has softened due to domestic economic concerns and erratic trade policy cues from President Trump. Trade tensions have intensified with hefty tariffs imposed on Canada, Mexico, and China—though Mexico enjoys a temporary USMCA exemption—while a potential Russia–Ukraine peace deal adds geopolitical uncertainty. The Federal Reserve opted to keep rates unchanged, emphasizing solid U.S. fundamentals, whereas the ECB trimmed rates by 25 basis points and tempered its growth forecast. EUR/USD’s path forward hinges on trade policy evolution, monetary policy divergence, and political developments.
In Asian Market, USD/JPY dipped below 148, a low not seen since October 2024, as Japan’s Rengo wage talks disappointed markets. Speculative short positions in yen futures have spiked, echoing last August’s selloff sparked by a Bank of Japan rate hike and weak U.S. jobs data. BCA Research points to Japan’s negative real rates as a driver of a yen-funded AI stock bubble, vulnerable to rising yields or waning AI hype. A drop below 145 could unleash a market-wide selloff, risking the collapse of this AI-driven asset surge.
The euro is facing headwinds as the European Central Bank maintains its hawkish stance amid mixed economic data from the eurozone, while the Federal Reserve’s anticipated rate cuts could temper the dollar’s strength. Bearish macro factors include weaker-than-expected eurozone GDP growth and industrial production, raising concerns about a potential economic slowdown. Political uncertainties within the EU, particularly surrounding fiscal policies, are also weighing on the euro. However, the divergence in monetary policies, with the ECB holding rates steady while the Fed considers cuts, provides some support for the euro. Market sentiment is cautiously bearish, with investors awaiting further clarity on the policy directions of both central banks.
Technically, EURUSD is in a consolidation phase after a recent rally, hovering around $… as of March 20, 2025. The price is testing a critical support level at $… backed by the 20-day Simple Moving Average at $…, which could halt further declines. Resistance is encountered at $…, reinforced by the upper Bollinger Band at $…. The MACD remains flat at 0.012646, indicating a lack of clear directional momentum, while the RSI at 67.23 suggests neutral conditions. The technical outlook leans bearish, with a potential downside move if support at $1.08598 fails to hold.
The Japanese yen is gaining strength amid safe-haven demand, driven by geopolitical tensions and uncertainties surrounding the Federal Reserve’s policy decision. Bullish macro factors for the yen include the Bank of Japan’s commitment to its ultra-loose monetary policy, contrasting with the Fed’s potential rate cuts, which narrows the interest rate differential. Rising geopolitical risks, such as the Israel-Gaza conflict and trade policy concerns, further bolster the yen’s safe-haven appeal. However, any hawkish signals from the Fed could strengthen the dollar, potentially capping the yen’s gains. Market sentiment is mixed, with investors seeking clarity from the Fed’s economic projections.
Technically, USDJPY is in a downtrend, trading at $… on March 20, 2025, below its 50-day Simple Moving Average of $…. Support is evident by the lower Bollinger Band at $…. A successful break down could trigger $… as core support level as it is recent swing low level. Resistance is encountered at $…, recent swing high, near the 20-day SMA at $…. The MACD at -0.948114 indicates bearish momentum, and the RSI at 41.13 supports a downward bias below neutral. The technical outlook remains bearish, with potential for further declines if support at $148.172 is broken.
