Key Developments Shaping the Forex Landscape:
- Tokyo’s Core CPI in Japan disappoints, reinforcing USD/JPY stability above 149.
- Tariff concerns limit EUR/USD advances, keeping it below the 1.0530 mark.
- Anticipation builds for German Preliminary CPI and US Core PCE data releases today, crucial for shaping monetary policy expectations ahead of the ECB and Fed decisions, and upcoming payroll figures.
- Next week’s agenda is packed with vital US and EU economic indicators, including the Eurozone Core CPI and ISM Manufacturing PMI.
Macroeconomic Forces at Play
Japan’s latest Tokyo Core CPI reading fell short of expectations, decreasing from 2.5% to a 2.2%—the lowest in three months. This outcome provided support for the US Dollar Index, bolstering USD/JPY and ensuring the pair remained above the 150 threshold. Earlier in the month, USD/JPY had revisited December 2024 lows around 148.50 amidst optimism surrounding Japanese inflation trends and potential interest rate hikes.
Today’s focus shifts to the release of German Preliminary CPI and US Core PCE data. These releases highlight contrasting economic challenges: Germany faces potential deflationary pressures, evidenced by a recent German CPI (m/m) of -0.2%, while the US grapples with persistent inflation risks, underscored by a US CPI (m/m) surge to 0.5%—a 17-month peak. This divergence emphasizes the significant economic gap between these major economies, impacting the 53 Eur Usd exchange rate indirectly as it reflects broader economic trends affecting EUR/USD.
Entering a new month, the combination of escalating tariff threats, a robust US Dollar, and persistently high US inflation could collectively exert upward pressure on the greenback. This environment makes the 1.0530 level in EUR/USD particularly significant as markets assess the currency pair’s next move.
The upcoming week is poised to introduce further volatility into the markets, with key US and EU economic indicators scheduled for release. The European Central Bank’s Main Refinancing Rate decision, alongside the ISM Manufacturing and Services PMIs, and Friday’s crucial payroll data, will offer vital insights into the near-term economic trajectory and influence 53 EUR USD and broader EUR/USD valuations.
Technical Analysis: Decoding Market Uncertainties
EUR/USD Outlook: 3-Day Time Frame – Log Scale
Chart Source: TradingView – EUR/USD Price Movement Analysis
The EUR/USD pair encountered resistance at the channel’s mid-zone and the 1.0530 level, primarily due to the strengthening US Dollar and growing apprehension regarding potential EU tariffs. This resistance has propelled the pair downwards, testing the ascending trendline that connects the series of higher lows established between January and February 2025, currently near the 1.0380 mark. This level is critical as a breach could signal further bearish momentum.
Should EUR/USD decisively break below the 1.0380 support, it could pave the way for additional declines, potentially targeting the 2025 lows around 1.0300 and 1.0250. Looking at a wider perspective, a sustained close below 1.0200 might trigger a more pronounced downward trajectory towards 1.0130, parity at 1.0000, and even 0.9880. Conversely, if EUR/USD manages to overcome the 1.0530 resistance, subsequent resistance levels at 1.0620, 1.0700, and 1.0850 could become focal points for bullish activity. Traders are closely monitoring whether 53 EUR USD (referring to levels around 1.0530) can be decisively broken or will continue to act as a ceiling.
USD/JPY Outlook: 3-Day Time Frame – Log Scale
Chart Source: TradingView – USD/JPY Price Movement Analysis
USD/JPY has demonstrated resilience, maintaining its position above the December 2024 lows at 148.50 and extending its gains beyond the 150.00 psychological level. Supported by a strong US Dollar Index, the pair is now exhibiting bullish momentum, targeting resistance levels at 151.50, 154.80, 156.80, and 158.80.
Given the persistent risks associated with tariffs and inflation, the US Dollar Index may sustain its upward trajectory, potentially limiting gains across the broader currency markets in 2025. From a bearish standpoint for USD/JPY, a break below 148.50 could open the door for further downside, with potential targets at 146.90 and 143.60, respectively.
Analysis by Razan Hilal, CMT
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