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Technical Analysis – EUR/USD calm despite “hotter” core CPI data from Eurozone

The EUR/USD pair failed to rally despite stronger-than-expected Eurozone inflation data, suggesting that investors remain cautious about the euro’s strength amid mixed economic signals from the region. On one hand, inflation pressures appear to be re-emerging, while on the other, cyclical sectors such as manufacturing continue to show weakness, and the labor market is displaying increasingly concerning signs of slowing momentum.

The preliminary May CPI report showed headline inflation rising by 3.2% year-over-year, in line with forecasts and unchanged from the previous reading. However, core CPI surprised to the upside, accelerating to 2.6% versus expectations of 2.4% and the prior reading of 2.2%. EUR/USD is currently trading in the middle of an upward-sloping price channel. The key resistance zone appears to be located around 1.167โ€“1.170, while 1.160 remains an important support level.

The EMA50 and EMA200 moving averages (orange and red lines) are positioned close to current market levels, suggesting that the 1.164 area could act as a short-term momentum pivot. Given that the current relatively modest recovery follows a sharp decline from the 1.20 area, it remains possible that the pair is forming a bearish flag pattern. A break below 1.160 would strengthen that technical scenario and potentially signal a continuation of the broader downtrend.

Source: xStation5

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Euro consolidates losses against the British Pound despite high inflation figures

  • EUR/GBP inches up from 0.8639 lows but remains capped below 0.8650 on Tuesday.
  • The Euro has been little moved by the hot Eurozone inflation levels released earlier on the day.
  • The Pound maintains a bid tone as UK politics jump into the back seat.

The Euroย (EUR) remains vulnerable against theย British Poundย (GBP) on Tuesday, capped below 0.8650, consolidating losses from the previous two trading days. The hotterย Eurozoneย inflation figures have failed to provide any significant support to the Euro, as they do not alter the view that the European Central Bank (ECB) will hikeย ratesย next week.

Preliminary data released by Eurostat on Tuesday revealed that the Eurozone Harmonised Index of Consumer Prices (HICP) accelerated to a 3.2% year-on-year (YoY) growth in May, in line with market expectations, from 3.0% (YoY) in April. Likewise, the core HICP rose to a one-year high of 2.5% in the 12 months to May, up from 2.2% in April, above market expectations of a 2.4% increase.
The data confirms the inflationary impact of the energy shock stemming from Iranโ€™s war, while the increase in core inflation suggests that price pressures are spilling through the broader economy, adding pressure on households and businesses. This practically confirms a 25-basis-point rate hike at next week’s monetary policy meeting.

The Sterling, on the other hand, is showing some strength as Prime Minister Keir Starmer seems to have withstood calls to resign, following the disastrous result in May’s local elections, which eases concerns about a void of power, at least for now.

Earlier on Tuesday, Consumer Credit eased to GBP 1.86 billion in April from the upwardly revised GBP1.90 billion in March, with Mortgage approvals increasing to 65.94K from 63,97 K in March against market expectations of a moderate decline. Net Lending to Individuals fell to GBP 6.2 billion in April from GBP 8.7 billion in March. The Pound, however, was little moved after these figures.

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Euro Little-Changed as Investors Assess Inflation Data

The euro held near $1.165 as investors processed mixed signals from Eurozone inflation data and the Middle East conflict. Euro-area inflation climbed to 3.2% in May, its highest in over two and a half years, driven by soaring energy costs tied to the war. However, core inflation accelerated more than expected to 2.5%, and services inflation rose to 3.5%, signaling broadening price pressures beyond energy. The data precedes next weekโ€™s European Central Bank meeting, with markets pricing in a 95% chance of a 25-basis-point rate hike, with two or possibly three increases expected this year. Meanwhile, ECBโ€™s Isabel Schnabel cautioned on Monday that itโ€™s premature to specify the number of rate hikes needed, while Lithuaniaโ€™s Gediminas ล imkus suggested another hike after June is probable. Elsewhere, oil prices fell amid conflicting reports from US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu on Lebanon talks, with Iran pausing US negotiations until clashes cease.

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British Pound nudges higher as traders await progress on Middle East peace talks

  • GBP/USD posts modest gains near 1.3460 in Tuesdayโ€™s Asian session.ย 
  • The potential upside for the pair might be limited as the status of Iran’s peace talks remains unclear.ย 
  • US ISM Manufacturing PMI rose to 54 in May, stronger than expected.ย ย 

The GBP/USD pairย trades in positive territory around 1.3460 during the Asian trading hours on Tuesday. However, renewed tensions in the Middle East might cap the upside for the major pair as Iran has reportedly withdrawn from negotiations with the US. Traders will closely monitor the developments surrounding Middle East peace talks.

Iranโ€™s state media said Tehran on Monday had suspended talks over Israelโ€™s actions in Lebanon. Separately, US President Donald Trump stated that he believes an agreement to reopen the Strait of Hormuz and extend the ceasefire with Iran is reachable โ€œover the next week.โ€ Mixed signals and uncertainty in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

Data released by the Institute for Supply Management (ISM) on Monday showed that the US Manufacturing Purchasing Managers’ Index (PMI) rose to 54 in May from 52.7 in April. This figure came in better than the market expectation of 53.0.

On the UKโ€™s front,ย BoEย governor Andrew Bailey said on Friday that the UK central bank is in no rush to raise interestย ratesย while the outcome of the Iran war remains uncertain and the UKโ€™s growth rate stays weak. Money market futures now imply 32 basis points (bps) of tightening this year, one quarter-point hike, and roughly a 30% chance of a second, according to Reuters.ย 

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New Zealand Dollar remains depressed against firmer USD; hawkish RBNZ limits losses

  • NZD/USD attracts some sellers for the second straight day amid a modest USD strength.
  • Geopolitical uncertainties and rising Fed rate hike bets offer some support to the buck.
  • The RBNZโ€™s abrupt hawkish shift could act as a tailwind for the NZD and help limit losses.

The NZD/USD pairย trades with a negative bias for the second straight day, albeit it lacks bearish conviction and holds above the previous day’s swing low. Spot prices currently trade near the 0.5925-0.5920 region, down around 0.15% for the day on the back of a modest US Dollar (USD) strength.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, looks to build on the previous day’s gains amid the uncertainty over US-Iran peace talks and hawkish USย Federal Reserveย (Fed) expectations. In fact, US President Donald Trump asserted that peace talks were ongoing with Iran, and said that he will have an agreement to extend the ceasefire and reopen the Strait of Hormuz over the next week. Iran, however, warned that it would suspend negotiations following fresh US strikes and an Israeli military operation in Lebanon.

This keeps geopolitical risk premium in play and acts as a tailwind for the safe-haven USD. Meanwhile, renewed tensions in the Middle East continue to fuel concerns over inflation and expectations that the US central bank will raise borrowing costs by the end of this year. According to the CME Group’s FedWatch Tool, traders are assigning over a 50% chance that the Fed will hike interestย ratesย by at least 25 basis points (bps) at the December policy meeting. This turns out to be another factor underpinning the USD and exerting pressure on the NZD/USD pair.

The downside, however, seems limited in the wake of the Reserve Bank of New Zealand’s (RBNZ) abrupt hawkish shift. The central bank’s forecast strongly projects a 25 bps rate increase at the upcoming July 8 meeting and indicated that the OCR could reach roughly 2.85% by the end of this year, implying up to three rate hikes. This might continue to lend some support to the New Zealand Dollar (NZD) and hold back traders from placing aggressive bearish bets around the NZD/USD pair, warranting caution before positioning for any further losses.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.21%0.04%0.21%0.34%0.22%0.80%0.74%
EUR-0.21%-0.17%0.02%0.13%0.01%0.62%0.54%
GBP-0.04%0.17%0.21%0.30%0.17%0.79%0.69%
JPY-0.21%-0.02%-0.21%0.15%0.05%0.60%0.52%
CAD-0.34%-0.13%-0.30%-0.15%-0.13%0.45%0.39%
AUD-0.22%-0.01%-0.17%-0.05%0.13%0.61%0.53%
NZD-0.80%-0.62%-0.79%-0.60%-0.45%-0.61%-0.10%
CHF-0.74%-0.54%-0.69%-0.52%-0.39%-0.53%0.10%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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Swiss Franc remains calm ahead of Trade Balance data

  • USD/CHF stabilizes as the US Dollar gains safe-haven support following reports that Iran halted indirect negotiations with America.
  • The Greenback rose as renewed Middle East tensions fueled inflation fears and expectations of elevated Federal Reserve interest rates.
  • Despite a minor GDP miss, Swiss consumer and industrial activity demonstrated remarkable resilience.

USD/CHF moves little after registering modest gains in the previous day, trading around 0.7870 during the Asian hours on Tuesday. The pair steadies as the US Dollar (USD) remains firm on increased safe-haven demand after Tasnimย newsย agency indicated that Tehran has halted indirect negotiations with the United States. Traders await the Swiss Trade Balance data release due later in the day.

According to the report, Iran and its “Resistance Front” allies, spanning Yemen, Lebanon, and Iraq, have established an agenda to completely block the critical Strait of Hormuz and activate additional fronts, including the Bab el-Mandeb Strait, as a means to punish Israel and its supporters.

The escalation was further compounded by an Axios report on X stating that Iran deployed additional naval mines in the strait last week. These combined developments pose a severe obstacle to a swift resolution of the crisis, which has already effectively shut down the Strait of Hormuz, a vital chokepoint for global oil and liquefied natural gas supplies.

Renewed tensions in the Middle East continue to fuel global inflation concerns and stoke expectations of elevatedย Federal Reserveย (Fed) policyย rates. Reflecting these persistent inflationary pressures, financial markets are now pricing in a potential Federal Reserve (Fed) rate hike before the year ends, with the CME FedWatch tool currently indicating a 39% probability of a quarter-point increase in December.

On Monday, recent economic data from Switzerland presented a mixed but generally strong picture of the country’s financial health. On the growth front, Switzerland’s Gross Domestic Product (GDP) expanded by 0.4% quarter-on-quarter in the three months to March, falling slightly short of initial market estimates that had predicted a 0.5% expansion.

Despite the minor GDP miss, consumer and industrial activity showed remarkable resilience. Retail sales in Switzerland surged by 1.6% year-on-year in April 2026, far exceeding market expectations for a modest 0.2% rise and following an upwardly revised 1% gain in the previous month.

Compounding this positive momentum, the country’s industrial sector saw a significant boost as the procure.chโ€“UBSย Manufacturing PMIย jumped to 57.3 in May 2026 from 54.5 in April. This reading easily beat the market forecast of 54, marking the highest level of manufacturing expansion Switzerland has seen since July 2022.

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AUD/JPY Price Forecast: Strengthens above 114.00, bullish bias holds above key technical support

  • AUD/JPY gathers strength to near 114.35 in Tuesdayโ€™s early European session.
  • The constructive outlook for the cross prevails above the key 100-day EMA, with bullish RSI momentum.ย 
  • The first upside barrier emerges at 114.75; the initial support level is seen at 113.85.ย 

The AUD/JPY cross trades in positive territory around 114.35 during the early European session on Tuesday. Traders will closely monitor the developments surrounding the Middle East ceasefire amid mixed signals from US President Donald Trump. 

Trump stated early Tuesday that he believes an agreement to reopen the Strait of Hormuz and extend the ceasefire with Iran is reachable โ€œover the next week.โ€ On Monday, US President shrugged off the possible collapse of peace negotiations with Iran, saying, โ€œI donโ€™t care if theyโ€™re over, honestly.โ€ 

The likelihood of stronger verbal intervention from Japanese authorities might help limit the Japanese Yenโ€™s (JPY) losses. Finance Minister Satsuki Katayama said on Tuesday the officials stood ready to respond in the currency market as needed and refrained from commenting on recent exchange-rate moves.

The speech by Bank of Japan (BoJ) Governor Kazuoย Uedaย will be the highlight later on Wednesday. Ueda could offer some hints as to whether the central bank will proceed with a rate increase the following week.

Chart Analysis AUD/JPY

Technical Analysis:

In the daily chart, AUD/JPY holds a bullish near-term bias as spot remains well above the 100-day simple moving average (SMA) and the Bollinger middle band. Price is pressing the upper side of the recent consolidation, while the Relative Strength Index (RSI) at 57.46 stays in positive territory without yet signaling overbought conditions, suggesting buyers still retain control but with reduced momentum compared to the prior peak.

On the topside, immediate resistance is aligned with the Bollinger upper band at 114.75, and a daily close above this barrier would open the way for a continuation of the broader uptrend. On the downside, initial support emerges at the Bollinger middle band around 113.85, ahead of the lower band at 112.98, with the 100-day SMA at 111.30 acting as a deeper structural floor that would need to give way to materially challenge the prevailing bullish structure.

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Offshore Yuan Remains at Multi-Year High

The offshore yuan strengthened to around 6.76 per dollar on Tuesday, holding near its strongest level since February 2023, as investors increasingly regarded Chinese assets as a relative safe haven amid heightened geopolitical tensions involving Iran. Geopolitical uncertainty persisted after the latest developments indicated that Iran had suspended indirect talks with Washington over Israel’s military operations in Lebanon, even as US President Trump asserted that negotiations remained ongoing. China’s diversified energy supply base and comparatively limited direct exposure to the Middle East have reinforced the attractiveness of its financial markets during the conflict, underpinning the yuan’s resilience. However, further upside in the yuan may be capped by Beijing’s preference for exchange-rate stability, as reflected in the People’s Bank of China’s continued weaker-than-expected daily fixings, as well as potential dollar-buying interventions by major state-owned banks.