The forex market constantly evolves, influenced by economic policies, geopolitical events, and investor sentiment. This weekly analysis provides insights into major currency pairs fundamental and technical outlooks, helping traders make informed decisions.
Fundamental Analysis: Global Currency Market Overview
AUD/USD: Australian Dollar Under Pressure
The Australian dollar has been one of the weakest performers in the forex market, losing nearly 12.5% since late September. Despite Australia’s trade surplus with the US, external factors have weighed heavily on the currency.
Additionally, the Reserve Bank of Australia (RBA) remains the only G10 central bank that has yet to cut interest rates—something that may soon change, adding further pressure on the AUD.
JPY/USD: Yen’s Sensitivity to US Treasury Yields
The Japanese yen’s movement is primarily driven by two key factors:
- US 10-year Treasury Yield – A strong correlation exists between the yen’s value and changes in US yields.
- Bank of Japan (BOJ) Rate Hike Speculation – The swaps market suggests a 50% probability of a BOJ rate hike in June and an 80% probability in July. If the yen weakens further, the BOJ may act sooner than expected.
EUR/USD: ECB’s Policy Divergence Hurting Euro
The European Central Bank (ECB) is expected to cut interest rates at least twice more before the US Federal Reserve makes any moves. This divergence puts downward pressure on the euro. Additionally, geopolitical uncertainties—such as increased defense spending by European nations—may contribute to the long-term weakness of the euro.
GBP/USD: UK Navigating Between US and EU Interests
The British pound has so far avoided direct impact from US economic policies, but concerns remain. UK Prime Minister Keir Starmer aims to improve EU relations, yet there’s a risk that Britain may struggle to balance its relationship between the US and the EU.
Over the past 60 days, GBP/USD and GBP/EUR have maintained a 0.80 correlation, highlighting a strong connection between the two pairs.
CAD/USD: Canadian Dollar Faces Trade Uncertainty
The US decision to delay the 25% tariff on Canadian imports helped the Canadian dollar recover. However, uncertainty about future trade policies could limit further gains. Additionally, the US-Canada 2-year yield spread has slightly narrowed, affecting the loonie’s strength against the US dollar.
USD Outlook: US Dollar Dominance Continues
Two main factors drive the US dollar:
- Economic Strength – Despite recent retail sales data, the US economy continues to grow, and the labor market remains strong.
- Tariff Threats – US trade policies create volatility, but the market favors buying USD when tariffs are introduced and selling when the threats subside.
Technical Analysis: Key Trading Levels for Major Pairs
USD/JPY Technical Analysis (H4 Chart)
- Trend: Bearish within a descending channel
- Resistance: 153.000
- Support: 151.000
Trading Plan: Look for short-term buy opportunities towards 153.000, but expect a bearish continuation towards 151.000 once sellers regain control.
EUR/USD Technical Analysis (H4 Chart)
- Trend: Bullish within an ascending channel
- Resistance: 1.05300
- Support: 1.04000
Trading Plan: Consider buying towards 1.05300. If the price rejects this level, a bearish retracement towards 1.04000 is possible.
XAU/USD (Gold) Technical Analysis (H4 Chart)
- Trend: Bullish within an ascending channel
- Resistance: 2960.00
- Support: 2890.00
Trading Plan: Look for long positions towards 2960.00, but be prepared for a possible pullback to 2890.00 if resistance holds.
The forex market is dynamic, and staying informed is key to making profitable trades. As central banks adjust monetary policies and global trade relations shift, traders must adapt to changing market conditions.
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