GBP/USD trades with mild gains near 1.3550 in Wednesday’s early European session.
The positive outlook of the pair remains intact above the key 100-day EMA.
The immediate resistance level is seen at 1.3630; the initial support level is located at 1.3540.
The GBP/USD pair trades on a positive note around 1.3550 during the early European trading hours on Wednesday. Nonetheless, the potential upside for the major pair might be limited, as UK political turmoil and ongoing tensions in the Middle East could weigh on the British Pound (GBP) against the Greenback.
UK Prime Minister Keir Starmer is facing rising pressure to set a date for his departure after elections across much of the country resulted in massive losses for his ruling Labour Party. While Starmer stated he will not resign, the resulting political “noise” and rising UK gilt yields have created localized pressure on the GBP.
Traders will closely watch the US Producer Price Index (PPI) report, which is due later on Wednesday. Markets expect the US PPI inflation to rise to 4.9% YoY in April from 4.0% in March. The core PPI, excluding volatile food and energy prices, is expected to show a rise of 4.3% YoY in April versus 3.8% prior. If the report shows a hotter-than-expected outcome, this could boost the US Dollar (USD) and create a headwind for the major pair.
Technical Analysis:
In the daily chart, GBP/USD holds a mild bullish bias as spot remains above the 20-day Bollinger simple moving average (SMA) and comfortably over the 100-day SMA, suggesting underlying dip-buying interest. The Relative Strength Index (RSI) hovers close to the mid-50s, hinting at steady rather than overstretched upside momentum while price grinds higher within the Bollinger envelope.
On the topside, immediate resistance emerges at the upper Bollinger band near 1.3630, where recent rallies could stall if buyers fail to extend the breakout. On the downside, initial support is seen at the 20-day Bollinger SMA around 1.3540, followed by the 100-day SMA at roughly 1.3483; a deeper pullback would then look to the lower Bollinger band near 1.3458 as a stronger floor.
EUR/USD struggles to gain any meaningful traction as a combination of factors supports the USD.
Fed rate hike bets and rising US-Iran tensions underpin the buck, capping the upside for the pair.
The technical setup warrants some caution for bearish traders and positioning for deeper losses.
The EUR/USD pair is seen consolidating the previous day’s heavy losses and oscillating in a narrow band, below mid-1.1700s, during the Asian session on Wednesday. Traders now seem hesitant and opt to move to the sidelines ahead of a meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping.
In the meantime, hotter-than-expected US consumer inflation figures released on Tuesday lifted market bets for an interest rate hike by the US Federal Reserve (Fed) in 2026. Apart from this, the diminishing odds for a US-Iran peace deal, amid disagreements over Tehran’s nuclear program and the Strait of Hormuz, continue to underpin the US Dollar (USD) and act as a headwind for the EUR/USD pair.
From a technical perspective, the recent move up witnessed over the past two weeks or so has been along an upward-sloping channel. Moreover, spot prices hold above the 200-period Simple Moving Average (SMA) on the 4-hour chart, maintaining a modestly constructive near-term tone despite softening momentum.
Meanwhile, the Relative Strength Index (RSI) has eased towards the mid-40s, while the Moving Average Convergence Divergence (MACD) has slipped slightly below zero with the histogram turning negative. This hints that upside traction is losing strength even as the EUR/USD pair stays supported by its underlying trend structure.
That said, it will still be prudent to wait for a sustained break below the ascending channel support near the 1.1715 region and the 200-period SMA at 1.1692 before positioning for further losses. Acceptance below the latter would weaken the EUR/USD pair’s current constructive bias and expose deeper retracements within the broader range.
On the topside, initial resistance is aligned with the upper boundary of the parallel channel around 1.1830. A convincing breakout through the said barrier would open the way for a more decisive bullish extension.
(The technical analysis of this story was written with the help of an AI tool.)
EUR/USD 4-hour chart
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 Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.12%
0.16%
0.69%
0.11%
-0.15%
-0.03%
0.35%
EUR
-0.12%
0.03%
0.65%
-0.03%
-0.29%
-0.20%
0.21%
GBP
-0.16%
-0.03%
0.11%
-0.05%
-0.34%
-0.21%
0.17%
JPY
-0.69%
-0.65%
-0.11%
-0.64%
-0.86%
-0.73%
-0.30%
CAD
-0.11%
0.03%
0.05%
0.64%
-0.17%
-0.09%
0.22%
AUD
0.15%
0.29%
0.34%
0.86%
0.17%
0.12%
0.51%
NZD
0.03%
0.20%
0.21%
0.73%
0.09%
-0.12%
0.36%
CHF
-0.35%
-0.21%
-0.17%
0.30%
-0.22%
-0.51%
-0.36%
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).
USD/CHF flat lines near 0.7805 in Wednesday’s early European session.
Chinese and US leaders will hold talks in Seoul ahead of a high-profile leaders’ summit.
SNB is expected to hold rates at zero through 2026, according to Reuters poll.
The USD/CHF pair trades on a flat note around 0.7805 during the early European trading hours on Wednesday. Traders await the key US inflation data and continue to assess the developments surrounding US-China talks later this week.
The South China Morning Post reported on Wednesday that US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng will hold trade and economic talks in South Korea ahead of US President Donald Trump’s official visit to China.
The Trump-Chinese President Xi Jinping summit will take place in Beijing on Thursday and Friday. Earlier on Tuesday, Trump said that he would prioritize trade discussions during his summit with Chinese President Xi Jinping, and downplayed the amount of attention they would devote to the Iran war.
The US Producer Price Index (PPI) report will take center stage later on Wednesday. Markets expect the headline US PPI to show a rise of 4.9% YoY in April, compared to 4.0% in March, while the core PPI is projected to show an increase of 4.3% YoY in April versus 3.8% prior. Any signs of hotter inflation in the US could fuel bets on Federal Reserve (Fed) interest rate hikes later this year, which support the Greenback against the Swiss Franc (CHF).
The Swiss National Bank (SNB) has kept its policy rate unchanged at 0%. Reuters economists predict rates will hold at zero throughout the remainder of 2026, forcing the bank to rely primarily on currency intervention to control Franc strength.
“The SNB is not willing to introduce negative rates at this stage as the bar remains higher than back in 2015 … We continue to expect the SNB to remain on hold for the foreseeable future,” said Nikolay Markov, lead economist at Pictet Asset Management.
AUD/USD remains on the back foot for the second straight day amid a bullish US Dollar.
The lack of follow-through selling warrants caution before positioning for further losses.
The bullish technical setup backs the case for the emergence of dip-buying at lower levels.
The AUD/USD pair struggles to capitalize on the overnight bounce from the 0.7200 neighborhood and trades with a negative bias for the second straight day on Wednesday. Spot prices, however, lack bearish conviction and currently trade around the 0.7235 region as investors opt to move to the sidelines ahead of the Trump-Xi summit.
In the meantime, the US Dollar (USD) stands firm near its highest level in over one week amid reviving bets for an interest rate hike by the US Federal Reserve’s (Fed), bolstered by Tuesday’s hot US consumer inflation figures. Furthermore, fading hopes for a US-Iran peace deal underpin the USD’s safe-haven status and contribute to capping the risk-sensitive Aussie. However, the Reserve Bank of Australia’s (RBA) hawkish outlook continues to act as a tailwind for the AUD/USD pair.
Spot prices hold well above the 100-period Exponential Moving Average (EMA), keeping a mild bullish bias. Moreover, the Relative Strength Index (RSI) hovers just above the neutral 50 line, hinting at modest upside pressure. However, the Moving Average Convergence Divergence (MACD) flattens slightly below zero and suggests only tentative momentum, making it prudent to wait for acceptance above mid-0.7200s before placing fresh bullish bets on the AUD/USD pair.
On the downside, initial support is seen at the 100-period EMA around 0.7190, where a break would expose a deeper corrective pullback and weaken the current constructive tone. As long as the AUD/USD pair remains above this moving average, dips are likely to be contained, keeping the broader focus on whether buyers can sustain the recovery and build a more convincing advance in the sessions ahead.
(The technical analysis of this story was written with the help of an AI tool.)
EUR/JPY remains steady as the Euro declines, offsetting Yen weakness.
The OECD projects the Bank of Japan will increase short-term policy rates to 2% by the end of 2027.
Bundesbank President Joachim Nagel warned that rising energy costs make an ECB interest rate hike increasingly likely.
EUR/JPY remains flat after registering modest losses in the previous day, trading around 185.00 during the Asian hours on Wednesday. The currency cross remains stable as the Euro’s (EUR) decline is driven by a wave of risk aversion following faded hopes for Middle East peace, which effectively offsets Japanese Yen (JPY) weakness.
However, the Japanese Yen may gain ground against its major peers as the Bank of Japan’s April Summary of Opinions revealed that policymakers are considering further rate hikes as early as their next meeting, driven largely by inflation risks linked to rising oil prices.
The Organisation for Economic Co-operation and Development (OECD) has recommended that Japan primarily utilize consumption tax increases to bolster its national revenue. On the monetary front, the Bank of Japan (BOJ) is projected to raise short-term policy rates to 2% by the end of 2027, though it must remain flexible enough to modify the pace and maturity of its bond-buying activities should financial or bond market disruptions occur.
The Euro may also receive support from a hawkish tone surrounding the European Central Bank (ECB) policy outlook. Bundesbank President Joachim Nagel said on Wednesday that the probability that the central bank will need to raise borrowing costs due to the Iran war is rising. Meanwhile, ECB Governing Council member Martin Kocher said on Monday that there’s no need to delay the interest rate hikes if energy prices don’t improve swiftly.
On the data front, Japan’s current account surplus increased to JPY 4,681.5 billion in March from JPY 3,625.3 billion in the same month a year earlier. These figures surpassed market expectations of JPY 3,879 billion, marking the largest amount on record. Traders now await the Eurozone quarterly Gross Domestic Product (GDP) and Employment Change data for the first quarter of 2026 due later in the day.
The offshore yuan held steady for a second consecutive session at 6.79 per dollar on Wednesday, holding near its strongest level since February 2023, as markets positioned themselves ahead of the highly anticipated summit between US President Donald Trump and Chinese President Xi Jinping. Over the two-day talks, the leaders of the world’s two largest economies are expected to discuss a broad agenda that includes trade relations, tariffs, AI, Taiwan, and the ongoing Middle East conflict. However, President Trump has indicated he intends to focus primarily on trade, tempering the likelihood that the Iran conflict will feature prominently in the talks. Both sides are expected to push for an extension of the current trade truce, as tariffs remain a point of tension in the two countries’ relationship. China has long criticised US measures, while the Trump administration pursues investigations into Beijing’s trade practices.
The US Consumer Price Index is expected to rise 3.7% YoY in April as energy prices remain persistently high.
Annual core CPI inflation is expected to edge slightly higher to 2.7%.
EUR/USD’s technical outlook highlights a bullish stance that lacks momentum.
The US Bureau of Labor Statistics (BLS) will publish the April Consumer Price Index (CPI) data on Tuesday. The report is expected to show another significant leap in consumer inflation after March’s sharp increase, driven by the elevated Oil prices due to the ongoing conflict between the United States (US) and Iran.
The monthly CPI is forecast to rise 0.6%, following the 0.9% increase recorded in March, while the annual reading is seen climbing to its highest level since September 2023 at 3.7%, from 3.3% in March. Core CPI figures, which exclude volatile food and energy prices, are expected to come in at 0.4% and 2.7%, on a monthly and yearly basis, respectively.
From the beginning of the conflict in the Middle East on February 28 to the end of April, the barrel of West Texas Intermediate (WTI) rose more than 50%. Although crude Oil prices corrected lower in the first week of May, they are still about 40% above where they were before the US-Iran war.
Previewing the inflation data, “our economists expect headline inflation to rise by +0.58% month-on-month, moderating from March’s +0.9%, but still relatively firm,” said Deutsche Bank’s Jim Reid.
“In contrast, the core measure is projected to accelerate to +0.39% MoM from +0.2%, suggesting underlying price pressures remain sticky even as energy-related effects fade. The YoY rates would move from 3.3% to 3.8% for the former and from 2.6% to 2.8% for the latter,” Reid added.
What to expect in the next CPI data report?
CPI figures for April will reflect the impact of persistently high Oil prices on inflation. Since this is largely anticipated, core inflation figures will help markets gauge whether rising energy costs are spilling over into the broader economy and driving up the prices of other goods and services.
A reading above the market expectation of 0.4% in the monthly core CPI could feed into concerns over high inflation getting entrenched in the economy. Conversely, a print below analysts’ forecast could ease fears over prices getting out of control. Still, even in this latter scenario, investors are unlikely to breathe a sigh of relief because the US-Iran crisis remains unresolved and the lack of naval activity in the Strait of Hormuz continues to pose a significant risk to global energy supply chains.
Minneapolis Federal Reserve (Fed) President Neel Kashkari said the price shock from a prolonged closure of the strait could put inflation expectations at risk and requires a strong policy response. Similarly, St. Louis Fed President Alberto Musalem noted that inflation is meaningfully above the Fed’s target and added that policymakers need to worry about the underlying inflation, along with tariff and Oil shocks.
How could the US Consumer Price Index report affect EUR/USD?
Markets currently see about a 73% chance of the Fed leaving the policy rate unchanged at 3.5%-3.75% by the end of the year, and price in about a 20% probability of a 25 basis points (bps) hike, according to the CME FedWatch Tool.
Source: CME Group
A stronger-than-forecast monthly core CPI print for April could cause investors to lean toward a rate hike later in the year. In this scenario, the US Dollar (USD) could gather strength with the immediate reaction.
On the other hand, a soft core CPI print could have the opposite effect on the USD’s valuation. However, unless there are any significant developments hinting at the US-Iran conflict coming to an end soon, any negative impact on the USD could remain short-lived.
“Investors will be on heightened alert for the possibility of further delays to the first rate cut – or even an inability to ease in 2H26 altogether – should energy prices rise sharply and persistently due to an escalation or prolongation of the Middle East conflict,” UOB Group’s Alvin Liew explains.
“A broader oil-related price spillover across the CPI basket would materially complicate the inflation outlook, raising the risk that the anticipated year-end cut is pushed into 2027,” Liew elaborates.
Eren Sengezer, FXStreet European Session Lead Analyst, shares a brief technical outlook for EUR/USD.
“EUR/USD’s near-term technical outlook points to a bullish stance that lacks strength. The Relative Strength Index (RSI) indicator on the daily chart holds above 50 but retreats after testing 60, and the pair struggles to pull away from the 20-day Simple Moving Average (SMA) despite closing well above it to end the previous week.”
“On the upside, the first resistance area aligns at 1.1800-1.1820, where the upper limit of the Bollinger Band and the Fibonacci 61.8% retracement of the February-April downtrend align. In case EUR/USD manages to stabilize above this region, 1.1900-1.1910 (round level, Fibonacci 78.6% retracement) could be seen as the next hurdle ahead of 1.2000 (psychological level).”
Looking south, a strong support area seems to have formed at 1.1730-1.1680 (Fibonacci 50% retracement, 100-day SMA, 200-day SMA). If EUR/USD drops below the lower limit of this range and starts using it as resistance, technical sellers could take action. In this case, 1.1660 (ascending trend line) could be seen as an interim support level before 1.1560 (Fibonacci 23.6% retracement).”
EUR/JPY rises as the Japanese Yen weakens following disappointing Japanese household spending data and shrinking consumer demand.
The BoJ Summary shows some members favor rate hikes while others urge caution regarding Middle East instability.
The Euro gains ground as hawkish ECB rhetoric fuels expectations for continued interest rate hikes through June.
EUR/JPY extends its gains for the fourth successive day, trading around 185.40 during the Asian hours on Tuesday. The currency cross appreciates as the Japanese Yen (JPY) struggles following the disappointing release of Japan’s Household Spending data.
Japan’s economic outlook faced renewed pressure on Tuesday after the internal affairs ministry reported a significant 2.9% year-over-year drop in consumer spending for March. This steeper-than-expected decline marks the fourth consecutive month of shrinking personal expenditures, as persistent inflationary pressures continue to erode household purchasing power. The data underscores a fragile domestic recovery, further complicated by growing global economic anxiety stemming from the escalating tensions between the United States and Iran.
Inside the Bank of Japan (BoJ), policymakers appear to be navigating a complex path toward normalization. The Summary of Opinions from the April meeting revealed that while some members believe real interest rates are low enough to support further hikes, others remain wary of the unpredictable Middle East situation. Despite these geopolitical uncertainties, the consensus suggests that a rate hike remains likely as early as the next meeting. This hawkish tilt was complemented by diplomatic efforts, as Finance Minister Satsuki Katayama reaffirmed close cooperation on currency stability with US Treasury Secretary Scott Bessent.
Meanwhile, the EUR/JPY cross continues to gain traction, bolstered by a resilient Euro (EUR) and a decisively hawkish European Central Bank (ECB). Governing Council member Martin Kocher emphasized that the bank will not hesitate to push forward with interest rate hikes if energy prices remain elevated. With financial markets now pricing in a 92% probability of a rate hike in June and anticipating three total increases by 2026, the widening policy divergence between the ECB and the BoJ is providing a steady tailwind for the pair.
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