Euro May Extend Gains; Yen Strengthens, but Market Reversal Risks Persist

The foreign exchange market remains under pressure from prevailing uncertainty, although corrective movements in major currency pairs appear to be nearing completion.

EUR/USD

The EUR/USD pair is trading above 1.1700, showing resilience following a pullback from local highs. The pair is supported by falling US Treasury yields and a broadly weaker US dollar. Tomorrow’s releases of Germany and Eurozone Purchasing Managers’ Indices (PMIs), along with the European Central Bank’s interest rate decision, may determine the short-term trajectory and act as a catalyst for a new impulse. Key support remains at 1.1600.

Technical analysis of EUR/USD suggests a potential retest of recent highs around 1.1810, as a Tweezers formation has developed on the daily timeframe following a rebound from the 1.1550–1.1600 area. A firm break below the base of this pattern would invalidate the scenario of renewed upward momentum.

Key events that may influence EUR/USD movement:

Today at 17:00 (GMT+3): Eurozone Consumer Confidence Index
Tomorrow at 11:00 (GMT+3): Eurozone Services PMI
Tomorrow at 15:15 (GMT+3): ECB Interest Rate Decision

USD/JPY

The USD/JPY pair is trading just below 147.00, marking its third consecutive day of decline after failing to consolidate above 149.00. Rising geopolitical tensions and a decline in risk appetite may increase demand for the yen as a safe-haven currency. In addition, investors are still weighing the likelihood of changes in the Federal Reserve’s rhetoric, amid weak US data and rumours of a possible leadership change at the central bank.

The nearest area where the downward momentum could slow lies in the 145.70–146.00 range. A daily close above 147.00 may signal yen weakness and open the way for another test of the 149.00 level.

Key events likely to affect USD/JPY pricing:

Today at 17:00 (GMT+3): US Existing Home Sales
Today at 17:30 (GMT+3): US Crude Oil Inventories
Tomorrow at 15:30 (GMT+3): US Initial Jobless Claims