The EUR/USD pair remains constrained below the 1.0900 mark as traders exercise caution ahead of crucial U.S. Retail Sales data. The U.S. Dollar (USD) steadied on Monday, supported by safe-haven flows and recent labor market data, which showed that first-time unemployment claims slightly dropped to 220,000. This resilience in the job market continues to provide support for the greenback, limiting the Euro’s upside.
EUR/USD Outlook: Technical Weakness Amid European and Geopolitical Uncertainty
Market participants are also closely monitoring developments in Europe, particularly Germany’s upcoming fiscal reform vote and ongoing U.S.-Russia talks. These factors add another layer of uncertainty, keeping the Euro in a defensive position.
From a technical perspective, EUR/USD’s failure to sustain gains above 1.0850 raises concerns among buyers. The next support level is seen at 1.0800, with a potential drop toward 1.0730 if downward momentum strengthens. Conversely, a move above 1.0900 could see resistance at 1.0940.
Japanese Yen Under Pressure Despite BoJ Expectations
The Japanese Yen (JPY) remains on the defensive, struggling against the U.S. Dollar ahead of key central bank events. The Bank of Japan (BoJ) is widely expected to maintain its cautious stance, despite growing speculation about future interest rate hikes. A recent wage negotiation concluded with an average salary increase of over 5%, further fueling inflationary concerns and giving the BoJ a reason to tighten policy.
Adding to JPY’s woes, China’s newly announced economic stimulus measures provided a lift to global risk sentiment. The Chinese government has rolled out policies aimed at boosting household incomes and reviving the property market, reducing the demand for safe-haven assets like the Yen.
USD/JPY technical analysis shows that failure to breach the 149.00 mark suggests limited bullish conviction. However, a break beyond 149.20 could trigger further upside momentum toward 150.00 and potentially 151.30. On the downside, immediate support sits at 148.25, with further declines targeting 147.00 if selling pressure intensifies.
Market Sentiment & Key Events to Watch
Investors are keeping a close eye on several macroeconomic events that could influence currency movements in the coming days:
- U.S. Retail Sales Data: A weaker-than-expected report could dampen USD demand and support EUR/USD.
- Federal Reserve’s Interest Rate Path: Markets are pricing in rate cuts starting in June, with further reductions likely in July and October.
- Bank of Japan Policy Decision: Any signals of tightening could boost JPY strength against the USD.
- Geopolitical Tensions: Ongoing conflicts and trade disputes may drive risk aversion, influencing safe-haven demand.
As the week unfolds, traders will react to economic indicators and central bank decisions, determining whether EUR/USD can break past 1.0900 or if USD/JPY continues its volatile trajectory.
