The forex markets navigated a volatile session on Tuesday, 03 June 2025, amid a mix of central bank expectations and geopolitical headwinds. European trading was centered on inflation data and policy signals, with Eurozone May CPI (flash estimate) expected to ease to 2.0% (y/y) from 2.2%, setting the stage for the European Central Bank (ECB) meeting later this week. The ECB is widely anticipated to cut interest rates by 0.25% to 2.0% on Thursday, a prospect that has bolstered the euro and risk sentiment. Meanwhile, global investors remained cautious as U.S.-China trade tensions re-escalated – U.S. President Trump’s surprise move to double tariffs on metal imports stoked trade war fears, undermining the U.S. dollar. The US Dollar Index slumped to a six-week low as data showed U.S. manufacturing contracted for a third straight month in May, reinforcing bets that the Fed may tilt dovish. Overall market sentiment was mixed: safe-haven flows into currencies like JPY and CHF increased, yet high-beta currencies found support from a broadly weaker dollar and hopes that policy easing (from the ECB and possibly the Fed) would cushion global growth. Traders focused on these cross-currents, with volatility driven by central bank speculation, trade headlines, and key economic releases out of North America, Europe, and Asia.
EUR/USD
EUR/USD H4 chart showing the pair in a strong uptrend above an ascending trendline (black). The euro broke past the 1.1400 handle (red line) and is nearing the late-April highs around 1.1500+, while Stochastic oscillators are in overbought territory.
Technicals in Focus
EUR/USD extended its bullish run, settling at four-month highs as buying momentum remained robust. The pair’s recent rally above the former resistance at 1.1420 has been sustained, confirming a breakout with strong positive momentum. Price action is riding a minor bullish trendline on the short-term charts (see black trendline on the H4 chart above), indicating that dips have been shallow and promptly bought. Momentum indicators are flashing overbought conditions – the Relative Strength Index (RSI) is hovering in the upper-70s after entering “strong overbought” levels, and the Stochastic Oscillator is similarly elevated (around 80+). Notably, RSI has begun to show mild negative divergence (flattening despite higher price highs), but so far the euro’s advance has “offloaded” the overbought pressure without any significant decline. This resilience suggests bulls still control the trend, as even overbought signals have not spurred more than modest pauses. The MACD on the daily chart (not shown) remains firmly in bullish territory – the MACD line is above the signal line with a growing histogram, reflecting solid upward momentum. However, traders should be mindful that momentum is now stretched; oscillators like Stochastic are at extreme highs, hinting that the rally could be due for a breather. In summary, the technical backdrop for EUR/USD is strongly bullish in trend terms (higher highs and higher lows, above key MAs), but with short-term indicators in overbought zones, a consolidation or minor pullback cannot be ruled out before the next leg higher.
Trading Strategy
Bias: Bullish (Buy on dips). The path of least resistance remains upward for EUR/USD, but an entry on a pullback may offer a better risk-reward given stretched intraday indicators. Buy Zone: Consider buying on dips into the $1.1360 – $1.1420 support zone. This area contains the broken 1.1420 resistance (now support) and the lower bound of the short-term trendline (around 1.1365). Target: Initial upside target at $1.1500, near the psychological level and recent swing highs (late-April peak). A successful push through 1.1500 would open the door toward $1.1570 – $1.1600 (next resistance zone), and potentially $1.1700 on an extended rally. Stop-Loss: A reasonable stop can be placed below $1.1300, just under last week’s support and the rising trend line – a break below 1.1300 would violate the short-term bullish structure. Alternatively, if bullish momentum accelerates without a dip, a breakout entry above $1.1445 (Tuesday’s high) could be considered, aiming for the same upside targets, but still with a stop kept tight (e.g. under 1.1400). Keep an eye on ECB news – any dovish surprise on Thursday could provoke volatility; however, for now the euro’s technical bias remains upward as long as it holds above the mid-1.13s.
USD/CAD
USD/CAD H4 chart illustrating the pair’s downtrend. Prices are trading below a falling trendline (black) and under the 50-period EMA (orange), with horizontal support around 1.3690 (green line) in focus. The RSI (14) is hovering around the 35 level, showing weak momentum.
Technicals in Focus
USD/CAD continued to grind lower, extending a steady downtrend that has been in place for several weeks. The pair has made a series of lower highs and lower lows, reflecting dominant bearish trend control. On the short-term chart (see above), USD/CAD is trading well below its 50-period EMA (orange line), which has acted as a dynamic resistance on bounces. The downsloping trendline drawn from late April highs is intact (black line on chart), underscoring persistent selling pressure. Importantly, price is approaching a critical support zone around 1.3690 – 1.3700. This level has been highlighted by recent analyses as a make-or-break floor; it corresponds to the late-May low and a minor psychological level. Momentum indicators are showing the effects of the prolonged decline. The RSI is languishing in the low-40s to high-30s range (currently ~36 on the H4, as shown), which is near but not yet at classical oversold (<30) – this indicates bearish momentum is still prevalent, though not extreme. The Stochastic oscillator is also hovering in the oversold territory on shorter timeframes, suggesting downside momentum could be slowing as the pair nears support. Moreover, we see hints of divergence: while price made marginal new lows, the RSI hasn’t made new lows, potentially signaling waning selling momentum. Nonetheless, negative signals still dominate – there’s “negative pressure from trading below the EMA50” and lingering bearish bias on RSI – so caution is warranted if attempting to catch a bottom. In summary, USD/CAD’s technical picture is bearish but at an inflection point: the pair is pressing on key support (~1.3690) and any decisive break lower could trigger another leg down, whereas holding this support might spur a relief rebound.
Trading Strategy
Bias: Bearish (Sell on Rallies). Given the strong downtrend, strategies favor selling into strength, while being mindful of the nearby support. Sell Zone: A bounce toward the 1.3780 – 1.3820 region could offer a better entry to short. This zone aligns with a recent minor swing high and the underside of the 50-period EMA. If the pair retraces into this area, it would likely encounter renewed selling interest. Target: Look for a retest of the 1.3690 support, and on a clear break below 1.3690, a move down to $1.3600 or even $1.3550 could unfold in the short term. Notably, some forecasts project support at 1.3625 as an interim level – below that, the door opens to a larger drop (the next significant support might be around 1.3500 – 1.3480, and further out 1.3285 if the downtrend accelerates). Stop-Loss: A protective stop could be placed above 1.3865, which is just beyond the recent consolidation ceiling. A break above 1.3865 would breach the falling trendline and the last lower high, signaling a possible trend reversal (and in that case, upside toward 1.4000+ could come into play). An alternative strategy is to sell a decisive daily close below 1.3690 (confirmation of support break), targeting the low-1.36s initially – however, be wary of a false breakdown given the oversold readings. Note: The Canadian dollar’s strength is partially tied to firm oil prices (WTI crude has been trading around the mid-$60s), and traders will also be eyeing the Bank of Canada’s upcoming rate decision. Any hints of policy shifts from the BoC on Wednesday could spark additional volatility in USD/CAD. For now, maintain a bearish stance unless the pair stages a clear trend reversal signal above the mid-1.38s.
AUD/USD
AUD/USD H4 chart showing the pair range-bound within a rising channel. Price is above the 50-period EMA (orange) and trending higher in a gentle bull channel (black lines). Key horizontal levels are marked: ~0.6500 as resistance (red line at top of channel) and ~0.6400 as support (green line). The RSI (14) reads ~61, reflecting modest bullish momentum.
Technicals in Focus
AUD/USD posted modest gains, grinding higher within a well-defined range. The pair has been “trading above its EMA50” which provides dynamic support on dips, and it remains confined in a minor bullish channel on the short-term charts (see the black trend lines on the H4 chart). Notably, the Aussie dollar has struggled to decisively break the 0.6500 handle, with multiple attempts to clear ~0.6500/0.6520 in recent sessions failing to sustain (a double-top near 0.65 is evident). This has left AUD/USD range-bound between roughly 0.6400 (support) and 0.6500–0.6560 (resistance). On the technical indicators front, momentum is tilted mildly positive. The RSI is in the low 60s (above the midline 50), indicating the pair is in bullish territory but not overbought. Similarly, the Stochastic Oscillator has been climbing from mid-range; it’s not yet in extreme overbought zone, suggesting some room for further upside push. The MACD recently made a bullish crossover on the 4H timeframe – its signal line turn above zero confirms a shift to upward momentum in the short term. Overall, “positive signals on the RSI” are present and price action shows higher lows since mid-May, implying an underlying upward bias. However, the uptrend channel is relatively shallow, and the repeated failures at 0.65 caution that bullish momentum may be lacking a strong catalyst. In fact, a reversal pattern is potentially forming – some analysts note a possible “Head and Shoulders” topping pattern around the 0.65 area. While not yet confirmed, this pattern, coupled with channel resistance, means the Aussie faces a hurdle. To the downside, immediate support lies around 0.6400–0.6420 (marked by recent lows and the lower channel line). A break below the channel support (around 0.6400) would turn the short-term outlook bearish, whereas a clear breakout above 0.6560 would invalidate the range ceiling and could accelerate gains. In summary, AUD/USD’s technical posture is cautiously bullish within a range – the pair is inching upward with support from a weaker USD, but it needs to clear 0.65 decisively to unleash a stronger rally.
Trading Strategy
Bias: Neutral-to-Bullish (Range-bound with upside bias). The strategy for AUD/USD acknowledges the current range; we prefer to buy on dips as long as key support holds, while being prepared to flip stance if the range breaks. Buy Zone: Consider buying near support around 0.6400 – 0.6420. This zone encompasses the lower bound of the rising channel and the 50-day moving average area, which has consistently held in recent pullbacks. Additionally, 0.6375 is a notable level (approximate neckline of the potential head-and-shoulders) – maintaining above that keeps the bullish structure intact. Target: First target is a retest of the 0.6500 resistance region. If bullish momentum finally punches through 0.6500/0.6520, look for a rally toward 0.6565, which is the top of the channel and recent range high【27†image】. A decisive break past 0.6565 would signal a bullish breakout – in that event, an extended target at 0.6700 comes into view (a level highlighted by larger timeframe projections). Stop-Loss: A stop can be placed below 0.6340. This is beneath the channel support and the “head and shoulders” trigger level; any daily close below ~0.6340 would suggest a bearish reversal, invalidating the long setup. If stopped out, the bias would shift to bearish, with attention to 0.6300 or 0.6250 as next supports. Another approach is to wait for a confirmed breakout above 0.6520 and go long on that momentum, but given the nearby resistance, a safer play is buying dips until a breakout actually occurs. Note: The fundamental backdrop for AUD includes the Reserve Bank of Australia’s recent policy moves and key data releases. The RBA cut rates by 25 bps in May (to 3.85%) and has since adopted a wait-and-see stance; no meeting was scheduled for today due to a new reduced frequency, but the RBA’s June meeting minutes and Q1 GDP data this week will be crucial. Indeed, AUD/USD remains in a holding pattern pending growth data – “traders will focus on Q1 GDP to see if a slowing economy warrants further RBA easing,” as one outlook noted. Additionally, keep an eye on risk sentiment (e.g. U.S.-China trade developments); being a pro-risk currency, the Aussie could quickly break its range if global sentiment shifts suddenly.
Market Outlook
Looking ahead, traders should monitor several major events and data releases that could set the tone for the rest of the week:
- ECB Policy Decision (Thursday, June 5): The ECB is widely expected to cut rates by 25 bps in its upcoming meeting. The degree of dovishness in President Lagarde’s guidance will be pivotal for EUR-crosses. A rate cut is largely priced in; hence, focus will be on any signals about future easing or economic assessments. For EUR/USD, a less aggressive easing or optimistic tone might extend its rally, whereas hints of further stimulus could cap euro gains or trigger a pullback from overbought levels.
- Bank of Canada Meeting (Wednesday, June 4): The BoC’s interest rate announcement could inject volatility into USD/CAD. The market consensus is that the BoC will hold rates steady, given a balancing act between sticky inflation and slowing growth. Nonetheless, any shift in tone – for instance, a surprise cut or a hawkish hold – will impact the Canadian dollar. CAD traders will also watch BoC commentary on growth and commodity prices; with oil relatively firm, the bar for dovish surprise might be higher. If the BoC signals confidence and no immediate easing, USD/CAD’s downtrend may resume (CAD strength), whereas a dovish lean could spur a short-term bounce in USD/CAD.
- Australia Q1 2025 GDP (due Wednesday): This report will be a key health check for the Australian economy. Analysts expect growth to slow, reflecting the lagged impact of past rate hikes and external headwinds. A weaker-than-expected GDP reading would fuel speculation of further RBA rate cuts, potentially pressuring AUD (and breaking that 0.6400 support). Conversely, any upside surprise in growth could bolster the case that the RBA’s easing cycle is done, supporting AUD and possibly prompting an upside breakout in AUD/USD’s range.
- US Non-Farm Payrolls (Friday, June 6): The U.S. jobs report will be a crucial driver for the USD across the board. After signs of economic “fragility” emerging (e.g. soft manufacturing data), the May payrolls will show whether the labor market remains a pillar of strength or if it’s starting to soften. A strong NFP (and wage growth) could revive some dollar strength by tempering Fed rate-cut bets, potentially pausing EUR/USD’s ascent and aiding USD/JPY, USD/CAD higher. However, a weak payrolls number would reinforce the narrative of a slowing U.S. economy – likely extending the USD sell-off and benefiting currencies like the euro and Aussie. All eyes will also be on the unemployment rate and earnings figures for clues to inflationary pressure.
Beyond these scheduled events, geopolitical and trade developments remain wildcard factors. The U.S.-China trade skirmish is back in focus – any progress or further escalation in negotiations can rapidly shift risk appetite. Likewise, headlines around U.S. fiscal policy (such as budget debates or stimulus measures) and other global developments (e.g. European political news or OPEC’s stance on oil output) could sway forex sentiment. Traders should maintain a nimble approach: volatility is likely to stay elevated as markets digest central bank actions and data. In this environment, respecting technical levels and keeping an ear to the ground for news is paramount. Overall, the outlook for the major pairs discussed (EUR/USD, USD/CAD, AUD/USD) will hinge on how these upcoming catalysts play out – with central bank guidance and economic indicators poised to either reinforce current trends or catalyze a reversal. Stay alert and prepared to adjust strategies as new information hits the wires in the days ahead.