The euro begins the session without clear support after the ECB previously raised rates by 25 basis points. The decision itself has already been largely priced in, and the regulator’s recent comments indicate caution regarding further tightening, primarily due to high energy costs. For EUR/USD, this reduces the strength of the local factor in favor of the single currency.
The dollar retains stronger short-term momentum. On September 16, the Fed raised its rate range to 3.75–4.00%, and most officials expect at least one more hike by year-end. Additional support for the US currency comes from fresh statements indicating that inflation remains too high, so the market continues to price in the possibility of further policy tightening.
The interest rate differential still favors the US, while for the eurozone, expensive energy simultaneously poses inflationary and economic risks. Despite the previous sessions’ decline in EUR/USD, the dollar factor does not appear fully exhausted. With current expectations maintained, the priority remains a moderate continuation of the pair’s decline.
Trading idea: SELL 1.1485, SL 1.1515, TP 1.1410
GBPUSD: SELL 1.3390, SL 1.3420, TP 1.3320
The pound gains local support from more resilient UK data: August retail sales grew stronger than expected, and the Bank of England kept its rate at 3.75%, with three committee members voting for a hike. These signals reinforce expectations of further policy tightening, but so far do not give the pound a clear advantage over the dollar.
For GBP/USD, the comparison of the two regulators’ positions is more important. The Fed has already raised its rate to 3.75–4.00% and maintains its focus on elevated inflation, whereas the Bank of England ultimately left its rate unchanged at its last meeting. UK inflation may accelerate due to energy costs, but such a scenario could simultaneously weaken consumer demand and limit economic growth rates.
After a series of sell-offs, part of the dollar’s momentum has already been realized, so the potential for continued movement has become more limited. Nevertheless, fresh UK data so far only restrains pressure on the pound rather than reversing the relative trend. As long as the market retains expectations of further Fed tightening, the base case allows for a gradual decline in GBP/USD.
Trading idea: SELL 1.3390, SL 1.3420, TP 1.3320
USDJPY: SELL 156.70, SL 157.25, TP 155.45
For the yen, the main factor of the current session is not only the interest rate differential but also the increased risk of actions by Japanese authorities. The Bank of Japan raised its rate to 1.25% on September 18, however, the yen did not receive sustained support after the decision due to disagreements within the board and cautious signals about further steps. This previously maintained the dollar’s advantage.
The situation changed after reports of a check on currency quotes by Japanese authorities, which the market usually views as a possible preliminary step before intervention. Against the backdrop of reduced liquidity due to the weekend in Japan, such a factor can significantly increase USD/JPY sensitivity to official signals and limit dollar purchases in the current session.
The Fed remains more hawkish than the Bank of Japan, and the interest rate differential still supports the dollar in the medium term. However, after the pair’s rise in previous days, part of this advantage has already been reflected in the price, while the risk of intervention has become a fresh local factor. Therefore, for today’s horizon, the priority shifts in favor of a decline in USD/JPY.
