As of Friday, May 9, 2025, global forex markets are digesting a mix of central bank decisions, economic data, and political developments. Overall sentiment is cautiously optimistic but with pockets of volatility. The U.S. Federal Reserve held interest rates steady at its latest FOMC meeting, acknowledging heightened risks to both employment and price stability. Meanwhile, the Bank of England surprised few by cutting rates, and a newly announced US-UK trade deal lifted risk appetite. U.S. economic releases painted a resilient picture – initial jobless claims dipped to 228K, slightly better than expected (230K) and below the prior 241K, and productivity data showed a decline alongside rising labor costs, underscoring lingering inflationary pressures (Q1 nonfarm productivity -0.8%, unit labor costs +5.7% annualized). These factors kept U.S. Treasury yields elevated and the Dollar firm. In contrast, oil prices, which had plunged to four-year lows earlier in the week, staged a 3% rebound off ~$60/bbl lows – a sign of stabilizing commodity markets, though energy costs remain far below last year’s peaks. Volatility in FX has been event-driven; traders expect range-bound conditions to prevail until a fresh catalyst (like next week’s U.S. CPI report) prompts a breakout.
In the currency space, attention centered on GBP/USD, USD/JPY, and NZD/USD. The British pound (GBP) experienced whipsaw price action: the BoE’s policy shift and a US-UK trade pact initially buoyed Sterling, but the strong Dollar and profit-taking erased those gains. The Japanese yen (JPY) weakened sharply as yield differentials widened – the Fed’s steady stance versus the BoJ’s dovishness drove USD/JPY to multi-month highs. The New Zealand dollar (NZD) struggled under the weight of looming RBNZ rate cuts and risk flows, leaving NZD/USD near key support. Below we break down each pair’s narrative, technical picture, and tactical trading strategy.
GBP/USD
GBP/USD was volatile this week, swayed by central bank moves and geopolitical news. On Thursday, the Bank of England cut its policy rate by 25 bps to 4.25%, marking the first rate reduction since the tightening cycle began. The decision was expected but notably came with a divided vote (7-2 in favor of the cut, with two members preferring to hold rates). This “hawkish cut” signaled that not all BoE policymakers are leaning dovish, which initially helped support the pound. Adding to Sterling’s support was a surprise US-UK trade deal announcement: U.S. President Donald Trump and UK Prime Minister Keir Starmer agreed on a new trade pact, a development that briefly pushed GBP/USD above 1.3300. However, the pound’s rally was capped by a resurgence in U.S. dollar strength. Solid U.S. data (including the upbeat jobless claims) and rising U.S. yields underpinned the greenback, limiting GBP/USD’s upside. After peaking around $1.3370 mid-week, Cable retreated and hovered in the low-1.3300s by Friday. The pair has now logged several days of lower highs and lower lows, suggesting bullish momentum has faded ahead of the 1.3400 hurdle.
Technicals in Focus
GBP/USD 5-minute chart, May 7–8, 2025. The pair spiked on BoE news (left) before reversing lower.
The technical picture shows a market losing steam. On the daily chart, GBP/USD’s uptrend has stalled after failing to break 1.3400. In fact, the pair has formed a short-term down-channel this week, evidenced by lower swing highs and lows. Momentum indicators have turned neutral-to-bearish: the Relative Strength Index (RSI) has slipped from overbought readings down toward the mid-50s, its weakest level since mid-April, indicating waning buying pressure. The MACD is still above zero but its histogram is shrinking, with a bearish crossover now looming as price softens. Likewise, Stochastics have rolled over from overbought territory and are pointing downward, though not yet oversold. All these signals point to consolidation or a modest pullback in the near term. Key chart levels are evident – immediate support lies at 1.3250 (the intraday low post-BoE) and a breach there would expose the next support around 1.3200. On the upside, 1.3400 is the first resistance (and a trigger for renewed bullish momentum if surpassed); above that, the year-to-date high at ~1.3440 and the 1.3500 psychological level are the next targets for bulls.
Trading Strategy
Sell on Rallies: Consider selling into strength around 1.3340–1.3380, anticipating that the recent lower-highs pattern will continue. Targets: 1.3250 as a first take-profit, and 1.3200 on an extended move. Stop-loss: above 1.3410 to cap risk in case of a bullish breakout.
Alternate Scenario – Breakout Buy: If GBP/USD manages a strong break above 1.3400 on a closing basis, it would signal returning strength. In that case, a long entry could target 1.3440 (recent peak) and 1.3470 next. This counter-trend buy should be kept on a tight stop below 1.3360, as the overall trend is still fragile.
USD/JPY
USD/JPY extended its bullish surge this week, climbing as investors continued to favor the higher-yielding dollar over the low-yield yen. The policy divergence theme is front and center: the Federal Reserve’s on-hold stance, combined with robust U.S. data, has kept U.S. Treasury yields elevated, whereas the Bank of Japan remains ultra-dovish, maintaining negative rates and yield curve control. This widening interest rate differential put strong upward pressure on USD/JPY. In addition, risk sentiment improved on the margin – the announcement of a US-UK trade deal and optimism around global trade and China’s demand helped buoy equity markets, reducing the appeal of the safe-haven yen. The yen also saw no support from its domestic front; BoJ Governor Ueda and the Ministry of Finance gave no new signals of concern as the yen weakened, beyond the usual watchful rhetoric. As a result, USD/JPY broke above the ¥145.00 level decisively, a region that in past years has drawn intervention threats. The pair traded as high as the ¥145.8–¥146.0 area, its highest in several months, before slowing down. Traders are now on alert for any pushback from Japanese officials (as the mid-¥140s is historically sensitive territory), but so far, the path of least resistance remains upward for USD/JPY.
Technicals in Focus
USD/JPY 5-minute chart, May 8, 2025. The pair rallied sharply through 145.50 on strong U.S. data.
Technically, USD/JPY is in a well-defined uptrend. The pair has carved out a series of higher highs and higher lows over the past two weeks, and momentum indicators confirm the bullish bias. The daily RSI is hovering around 70, indicative of overbought conditions typical of a strong rally (RSI > 70). Similarly, the Stochastic oscillator is at the top of its range (>80), which suggests the rally may be due a breather, but not necessarily a reversal. The MACD indicator shows a widening gap between the signal and MACD line in positive territory, reflecting strong upward momentum with no immediate divergence. Price action is comfortably above key moving averages (e.g. 50-day MA), and dips have been shallow – a sign of persistent dip-buying interest. Resistance: The late-week high around 145.85 is immediate resistance; above that, the 146.00 handle and 147.00 (round-number levels) are in focus. Notably, the 148.00–150.00 zone looms further out as a region of prior intervention talk (from late 2022), but that is still a stretch away. Support: On the downside, 145.00 is the first buffer (prior breakout level and psychological mark). Below that, 144.50 emerges as support (a congestion area from earlier in the week), followed by the 143.50 zone (near the previous week’s highs). The uptrend would remain intact above these supports, but a break under 143.5 could signal a deeper correction.
Trading Strategy
Buy the Dips: The strategy is to remain bullish on USD/JPY. Traders can look to buy on a pullback into the 145.00–145.20 support zone, which served as the breakout region. Targets: 145.80 (recent high) for partial profits, and 146.50 next. Stop-loss: below 144.50, to exit if the pair loses the key support and momentum falters.
Alternate Scenario – Cautious Short: If USD/JPY falls decisively below 144.50 (signaling a potential short-term top), a contrarian short trade could target a dip toward 143.50. Such a trade goes against the main trend, so it should be handled carefully – use a tight stop above 145.00 to guard against a quick resumption of the uptrend.
NZD/USD
NZD/USD traded with a heavy tone this week, as the kiwi struggled against a generally firm U.S. dollar and dovish expectations for New Zealand’s rates. The macro backdrop for the NZD has turned bearish: New Zealand’s latest data releases (including employment figures) highlight a cooling economy, and inflation has retreated into the RBNZ’s target range. Market consensus is that the Reserve Bank of New Zealand will cut rates by 25 bps at its upcoming meeting on May 28th (following a cut in April), which would bring the policy rate down to 3.50%. The prospect of easier monetary policy has been a key factor weighing on the kiwi. In contrast, the U.S. Fed’s pause is seen as temporary and U.S. rates are still relatively high, attracting capital into USD. NZD/USD started the week near 0.6000 but was unable to hold gains. There were brief rebounds – for instance, positive news out of China (strong May Day holiday spending) and general risk-on sentiment allowed the pair to bounce on Tuesday – but each bounce was sold into. Commodity price trends offered little support: crude oil is still languishing in the low $60s and other commodities are not in a sustained uptrend, dulling the appeal of commodity-linked currencies like NZD. By week’s end, NZD/USD slipped to the 0.59 figure, down about ~1% for the week, and was approaching key support territory as traders positioned ahead of the RBNZ’s decision and more U.S. data.
Technicals in Focus
NZD/USD 5-minute chart, May 7–8, 2025. The kiwi’s intraday rallies were sold, with a downtrend evident.
From a technical standpoint, NZD/USD has shifted from an uptrend to a range-bound decline. In April, the pair rallied almost 10% off its yearly lows and briefly broke above 0.6000, but that rally stalled at a major resistance near 0.6000 (a psychological level and area of prior highs). Now the pair is making lower highs, indicating distribution. The 0.5940–0.5950 region that previously acted as support (including several pivot levels) has given way, turning into near-term resistance. Momentum indicators are reflecting the shift: the RSI, which was overbought in mid-April, has fallen back toward the 40-50 range, suggesting momentum is now on the bearish side. The MACD has flattened out; its lines are converging just above the zero line, hinting that a cross into negative territory is possible if the decline continues. Stochastic oscillators have eased from overbought levels and are mid-range, not yet oversold – leaving scope for further downside before a corrective bounce. Importantly, NZD/USD is hovering above an area of strong support: around 0.5880 (recent intraday low) down to 0.5840, which aligns with weekly support and the 61.8% Fibonacci retracement of the prior rally. According to technical analysis sources, immediate support is at 0.5890, followed by 0.5842, then 0.5790 (extending to the next Fibonacci level). A clear break below 0.5880 would likely trigger stop-loss selling and could accelerate the drop toward the mid-0.58s. On the flip side, any upside correction will face layers of resistance: 0.5965 is noted as the first hurdle (minor recovery high), and 0.6000 remains the key ceiling – NZD/USD needs to climb back above 0.6000 to even consider a bullish reversal of the current downtrend.
Trading Strategy
Sell into Strength: The bias remains bearish, so a strategy is to sell on rallies. If NZD/USD lifts toward the 0.5960–0.6000 zone (previous support turned resistance), it could present an attractive entry for shorts in line with the fundamental and technical downtrend. Targets: 0.5900 for a quick profit, then 0.5840 as an extended target if bearish momentum continues. Stop-loss: above 0.6020, just beyond the 0.6000 pivot, to protect against a trend reversal.
Alternate Scenario – Oversold Bounce: Should the kiwi continue to slide without a bounce and approach the 0.5880 support, more aggressive traders might attempt a brief long (counter-trend) near that support, aiming for a rebound back toward 0.5950. This is a countertrend play against a strong downtrend, so it carries higher risk. It’s critical to use a tight stop – for example, below 0.5840 – since a break of 0.5880 could quickly lead to further losses. Any long trade should be viewed as a short-term tactical rebound rather than a trend change at this stage.
Market Outlook
Looking ahead, traders will shift focus to upcoming economic releases and how policymakers react. In the United States, the spotlight is on the April CPI inflation report due May 13 – this will be a pivotal input for the Fed’s next steps. If inflation data comes in muted, it could reinforce the Fed’s patience in holding rates steady; however, any upside surprise in price growth might rekindle speculation of further tightening or delay any talk of rate cuts. Alongside CPI, other U.S. data like retail sales and consumer sentiment will be watched to gauge whether the economy is withstanding higher rates. Another key theme is the fiscal outlook: negotiations over the U.S. debt ceiling and budget continue in Washington. The prior impasse had started to unnerve markets, and while there are hopes for a resolution, any signs of stalemate or approaching default deadlines could spur risk aversion (which might benefit safe havens like the yen and USD). On the political front, President Trump’s pro-growth agenda (including trade deals and possibly pressure for lower rates) will be balanced against Fed Chair Powell’s commitment to central bank independence – any explicit clashes or comments on Fed policy from the White House could inject additional volatility.
In the UK, now that the BoE has delivered a rate cut, attention turns to the data trajectory. If UK inflation or wage growth in the coming weeks prove hotter than expected, the BoE’s “dovish tilt” could be short-lived, and the pound might find some footing. Conversely, signs of a cooling economy would affirm the BoE’s easing path and keep Sterling rallies in check. The new UK government under PM Starmer will also outline fiscal plans soon; any indications of increased spending or changes to BoE’s remit (unlikely, but worth monitoring) could influence GBP sentiment. New Zealand will see its RBNZ meeting at the end of May – anticipation of that cut will likely keep NZD subdued, but surprises (or a less dovish tone from the RBNZ) could spark a short-covering bounce in NZD/USD. External factors like China’s economic performance (critical for NZ exports) and commodity prices (dairy, metals, energy) remain secondary drivers for the kiwi.
Bottom line: Markets are entering the next week with a cautiously balanced stance. The major central banks have signaled that data will dictate policy moves, so every key release is a potential volatility trigger. We expect trading ranges to hold overall, but event risk is high – a significant deviation in U.S. inflation, a breakthrough (or breakdown) in U.S. fiscal talks, or any unexpected geopolitical development could all shift risk sentiment abruptly. Traders should stay nimble and keep an eye on bond yields and equity markets for cross-asset clues. For now, the U.S. dollar retains an edge with its yield appeal, but selective opportunities exist to play countertrend moves on clear technical signals. As always, prudent risk management (honoring stop losses and not overleveraging) is crucial in these headline-driven markets.
Sources: Key data and policy details have been drawn from recent news and analysis, including central bank announcements, economic reports, and financial news services. These provide the factual backbone for the analysis above and underscore the market’s current focus on economic fundamentals and policy divergence. The technical levels and indicator readings are based on standard chart analysis of the mentioned currency pairs, corroborated by reputable market commentary. This comprehensive outlook integrates the fundamental drivers with technical insights to inform trading strategies for the days ahead.