The midweek forex landscape is defined by cautious optimism as traders brace for key U.S. inflation data and digest underwhelming global developments. The U.S. Dollar is mixed ahead of today’s CPI release (forecast ~2.5% y/y) – a report that could sway Federal Reserve policy expectations. Global sentiment is tentative: U.S.–China trade talks in London yielded only a vague “framework” agreement, tempering risk appetite in early sessions. Meanwhile, central bank signals add cross-currents – the European Central Bank’s recent rate cut (and hints of nearing policy trough) lend the euro resilience, the British pound faces pressure after soft UK jobs data fueled bets on a dovish Bank of England tilt, and the yen remains on its back foot as steady U.S. yields and a rebound in equities sap demand for safe havens. Against this backdrop, we analyze EUR/USD, GBP/USD, and USD/JPY, outlining their technical setups and trading strategies for the sessions ahead.
EUR/USD
Technicals in Focus
EUR/USD is consolidating near its weekly highs after bulls failed to clear the 1.1440 resistance on the first attempt. The short-term trend remains bullish, with the pair trading above its 50-period EMA (a sign of dynamic support) and holding a series of higher lows. Momentum oscillators are cooling – the euro’s recent pullback has eased overbought RSI conditions – suggesting the rally paused to digest gains. Notably, despite brief dips, buyers defended support in the mid-1.13s (around 1.1375), keeping the pair within a tight range at the highs. Price action on the 5-minute chart shows a coiling pattern just below 1.1440, indicating that a decisive breakout or correction may be on deck. A push above 1.1450 would mark a fresh monthly high and open the door toward the next resistance at 1.1520, while a break under 1.1375–1.1350 support could signal a deeper pullback toward the 1.1300 area.
Trading Strategy: Bias – Neutral to Bullish
With the euro’s uptrend intact but momentum moderated, a buy-on-dips approach is favored. Traders may look for entries on pullbacks into the $1.1380–1.1400 zone – near trend support – with the expectation that euro bulls will regroup above 1.1350 support. Initial upside targets lie at 1.1460, then 1.1520, aligning with the next resistance levels. A breakout and daily close above 1.1440 would reinforce the bullish case, potentially accelerating toward the $1.15 handle. Conversely, stop-losses can be positioned below 1.1340 (just under the 1.1375 support pivot) to guard against a deeper reversal. While technicals point upward, it’s prudent to remain nimble ahead of the U.S. CPI release – a hotter inflation surprise could spur a USD rebound and test the euro’s resolve. In summary, we maintain a cautiously bullish stance on EUR/USD, awaiting a breakout from its consolidation and keeping an eye on key levels for confirmation.
GBP/USD
Technicals in Focus
GBP/USD has shifted to a defensive posture after breaking down from a rising wedge pattern on the short-term charts. The pair’s failure to sustain the uptrend triggered a sharp fall on Tuesday – exacerbated by disappointing UK labor market figures – sending it from the mid-1.35s to a trough near 1.3450. Notably, the 1.3490 support (former range floor) was breached intra-day, though the decline stalled as pound buyers stepped in around 1.3450, which coincides with the mid-line of the Bollinger Band on the daily chart. The technical bias has turned bearish in the near term: GBP/USD is now trading below its 50-period EMA, indicating persistent downside pressure. The Relative Strength Index has flipped from overbought to downward-sloping, reflecting building bearish momentum. Overall, lower highs on the bounce attempts and a failure to reclaim 1.3550 suggest rallies are likely to be sold. Immediate resistance is seen at 1.3520–1.3530 (recent swing high and wedge retest area), with stronger resistance at 1.3585 (a key peak from earlier in June). On the downside, a clear break below 1.3450 would expose the next support around 1.3400, and below that the 1.3300 region emerges as a probable bearish target.
Trading Strategy: Bias – Bearish (Sell Rallies)
Given the pound’s technical breakdown and negative fundamental backdrop, the strategy favors short positions on recoveries. A modest bounce into the $1.3500–1.3530 zone (near the broken wedge support and 20-period moving average) can offer a better risk/reward entry to initiate shorts. From there, the downside objective is a retest of 1.3400, with an extension toward 1.3305 (the projected target from the head-and-shoulders/wedge pattern) if selling pressure accelerates. Take-profit orders could be set in the mid-1.33s to secure gains ahead of potential buying interest at those multi-week lows. A protective stop-loss is prudent above 1.3580 – ideally just above 1.3600 or even 1.3655 (which, if reached, would invalidate the bearish reversal by breaking the right shoulder of the pattern). This stop placement is above the critical resistance and recent swing high, ensuring the trade is exited if the pound’s strength returns unexpectedly. Traders should monitor incoming U.S. data and any BoE commentary; a softer U.S. dollar post-CPI or hawkish surprise from BoE officials could spur a sharper rebound in GBP/USD. Until then, the path of least resistance appears lower, with selling into strength as the preferred play.
USD/JPY
Technicals in Focus
USD/JPY continues to march higher, buoyed by positive momentum and a bullish chart structure. The pair has broken above a short-term bearish trendline, confirming an end to its recent correction, and is trading comfortably above its 50-period EMA, indicating robust upward bias. Price action is carving out a rising triangle pattern, with higher lows compressing under a horizontal cap around ¥145.5–¥145.6. This pattern suggests accumulation and often precedes continuation – in this case, an upside breakout. In the interim, support at ~144.30–144.40 (the triangle’s lower boundary) has been reinforced by buyers on dips. The RSI on the 4H chart is in bullish territory (mid-50s to 60s) but not overbought, and a recent test of an RSI uptrend line hinted at a momentum reset before the next leg up. Should USD/JPY surmount the 145.65 resistance (triangle top), it would likely unlock a swift rally toward the 147.00–147.50 zone, which marks the measured move target and late-2022 highs. On the flip side, key support lies at 143.65 – a decisive break below that would negate the bullish formation, potentially sending the pair down to 141.5–142.0 (next support area). For now, trend indicators and price structure point upward, but traders should be aware the yen can strengthen abruptly on any surge in risk aversion or intervention concerns once levels above 145+ come into play.
Trading Strategy: Bias – Bullish (Buy Dips)
The dollar-yen uptrend looks poised to continue, so we favor buying on pullbacks. An attractive entry zone is around ¥144.3–¥144.5, near triangle support and the 20-period MA. Entry confirmation could come from bullish candlestick patterns or an uptick in momentum indicators at that support. From there, the upside targets are ¥146.0 (initial resistance) followed by ¥147.4 – the triangle breakout objective and a potential inflection point from last year. Stop-losses for long positions can be placed just below ¥143.5 (under the 143.65 invalidation level), as a fall through that support would likely signal a trend shift or deeper correction. This roughly $0.8 risk is justified by the multi-yen upside potential if the bullish scenario plays out. It’s worth managing the trade as USD/JPY approaches the mid-147s; profit-taking or tighter stops are sensible there given the risk of official rhetoric about yen weakness at higher levels. In summary, USD/JPY’s positive pressures remain dominant, and we stay constructively bullish on the pair while key supports hold – aiming to ride the uptrend, but ready to adjust if sentiment or fundamentals abruptly change.
Market Outlook
Looking ahead, forex volatility may surge around high-impact events in coming sessions. The U.S. inflation report (CPI) due later today is a marquee risk event – a result above forecasts could strengthen the dollar by rekindling Fed tightening bets, while a cooler reading might weaken the dollar and boost risk-sensitive currencies. Beyond the data, monetary policy signals will be closely followed: the Fed’s meeting next week and any hint of rate path changes could redefine trends, the Bank of England’s June 19 meeting comes into focus amid the UK’s cooling labor market (markets anticipate a more cautious or dovish tone), and European Central Bank speakers (such as Chief Economist Philip Lane on Wednesday) may offer clues on how much further the ECB will adjust policy. Global sentiment catalysts are also on the radar – traders are digesting the U.S.–China trade negotiations outcome; any fresh developments (or setbacks) in these talks can sway risk appetite, thereby influencing safe-haven flows into the yen or dollar. Equity market trends (Wall Street’s strength with Nasdaq leading gains) and commodity price moves (e.g. oil fluctuations) will serve as barometers of risk sentiment that can spill over into FX. In summary, the coming days are set to be driven by a mix of economic data and geopolitical headlines. We expect traders to remain nimble – managing positions around event risk – as the forex market navigates these crosswinds, with the dollar’s direction hinging on whether incoming information reinforces the narrative of U.S. economic resilience or prompts a reconsideration of the global growth and policy outlook.