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Minneapolis Fed President Neel Kashkari warned today that major shifts in US trade policies are clouding the outlook for monetary policy, making it difficult for the Fed to move on interest rates before September.

While “anything is possible,” Kashkari said in an interview with Bloomberg TV, he’s unsure whether the picture will be “clear enough” by then. Much hinges, he added, on whether trade negotiations between the US and its partners yield concrete deals in the coming months, which could “provide a lot of the clarity we are looking for.”

The uncertainty, Kashkari explained, is weighing on economic activity. He emphasized the stagflationary nature of the tariff shock, noting that its impact will depend on both the scale and duration of the levies.

On financial markets, Kashkari acknowledged that rising US Treasury yields might reflect a broader reassessment by global investors about the risks of holding American assets. He suggested that the current bond market reaction could signal a new global paradigm.

Key Highlights

• EUR/USD is moving higher above the 1.1320 resistance.
• It cleared a key bearish trend line with resistance at 1.1280 on the 4-hour chart.
• GBP/USD gained pace for a move above the 1.3500 level.
• USD/JPY declined steadily below the 145.00 level.

EUR/USD Technical Analysis

The Euro formed a base and started a fresh increase above the 1.1250 resistance against the US Dollar. EUR/USD even surpassed 1.1280 to enter a positive zone.

Looking at the 4-hour chart, the pair settled above the 1.1300 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair cleared a key bearish trend line with resistance at 1.1280.

There was a break above the 50% Fib retracement level of the downward move from the 1.1573 swing high to the 1.1065 low. On the upside, the pair could face resistance near the 1.1380 level.

The next key resistance sits near the 1.1420 level. The first major resistance sits at 1.1500. A close above the 1.1500 level could set the pace for another increase. In the stated case, the pair could even clear the 1.1550 resistance. The next major stop for the bulls could be near the 1.1620 resistance.

On the downside, immediate support sits near the 1.1300 level. The next key support sits near 1.1280. Any more losses could send the pair toward the 1.1250 pivot level in the near term. The main support could be near 1.1165.

Looking at GBP/USD, the pair started a major increase and was able to clear the 1.3500 resistance zone to move into a bullish zone.

Upcoming Economic Events:

• ECB's President Lagarde speech.
• ECB's Nagel speech.

Trouble is piling up for the US. After trade wars, fiscal issues are now weighing on the dollar. Moody’s became the latest major agency to strip the US of its highest credit rating. Lawmakers passed a controversial, sweeping tax cut bill by a slim margin. A weak auction of 20-year Treasury bonds gave rise to concerns about cooling demand for treasuries from foreign investors. Finally, threats to raise tariffs on imported iPhones to 25% and on EU goods to 50%, brought back the relevance of the early April trade with simultaneous declines in stocks, bonds and the dollar.

As a result, the ‘sell America’ trade returned with renewed vigour. Among the main casualties has been the US dollar. The White House policy has shaken confidence in it, and rumours of coordinated currency intervention after the G7 summit in Canada are stirring the imagination of USD bears. And then there are the fiscal problems. Should we be surprised by the fall of the US currency?

After the Plaza Accord in 1985, the main beneficiaries of interventions were European currencies and the Japanese yen. Now, they are EUR and JPY, with a weight in DXY of 57.6% and 13.6%, respectively, so the dollar has nothing to do but return to decline.

The retreat in the last five days after four weeks of recovery has taken the dollar index back to the area below 2023 and 2024. All eyes are now on the area of this year’s lows, which are 1.5% below current levels. A failure below them will confirm the end of the corrective rebound and the beginning of the downside momentum into the 90 area to the 2021 and 2018 lows.

GBPUSD: ⬆️ Buy

• GBPUSD broke multi-month resistance level 1.3430
• Likely to rise to resistance level 1.3600

GBPUSD currency pair recently broke above the key multi-month resistance level 1.3430, which stopped the previous sharp daily uptrends in September and April.

The breakout of the resistance level 1.3430 should accelerate the active impulse wave 5 from the start of May.

Given the clear daily uptrend and strongly bearish US dollar sentiment seen today, GBPUSD currency pair can be expected to rise to the next resistance level 1.3600 (the target for the completion of the active impulse wave 5).

USDCAD: ⬇️ Sell

• USDCAD reversed from strong resistance area
•  Likely to fall to support level 1.3755

USDCAD currency pair recently reversed down from the strong resistance area between the round resistance level 1.4000 intersecting with the upper daily Bollinger Band and the resistance trendline of the daily down channel from March.

The downward reversal from this resistance area started the C-wave of the active ABC correction (2).

USDCAD currency pair can be expected to fall to the next support level 1.3755 (the former low from the start of May and the target for the completion of the active ABC correction (2)).

Trade war roared back into focus late last week, derailing fragile market sentiment already strained by concerns over the ballooning US deficit. The catalyst came in the form of a sharp threat from US President Donald Trump on European Union imports. This abrupt escalation shattered hopes that the 90-day truce period would lead to calmer trade diplomacy, and instead reignited fears of a broader trade war just as markets were struggling to absorb fiscal uncertainty.

US equities tumbled in response, with heavy losses across major indices, while European bourses weren’t spared either. Risk aversion swept through global markets, pushing investors toward traditional safe-haven assets.

Dollar, which had already been under pressure from Moody’s downgrade and debt sustainability concerns, took another hit and ended the week as the worst-performing major currency. Confidence in US assets appears increasingly fragile as both fiscal and trade risks deepen.

Aussie followed as the second weakest, burdened not just by global risk aversion but also by the dovish tone from RBA earlier in the week, while Loonie also suffered at the bottom.

In contrast, the Japanese Yen and Swiss Franc surged to the top of the FX leaderboard, clearly benefiting from haven demand. Gold also staged a powerful rally, with its bullish momentum signaling deep market unease.

Euro and Sterling settled in the middle of the pack. While the Euro showed some vulnerability to Trump's tariff threat, it remained relatively supported. Sterling, meanwhile, was underpinned by a series of stronger-than-expected economic data, including upside surprises in inflation and retail sales.

Trade War Returns to Spotlight as Trump’s Tariff Threat on EU Hammers Markets, Dollar Slides

The global financial markets, which had been preoccupied with US sovereign debt concerns and the impact of a Moody’s downgrade earlier in the week, saw sentiment quickly shift as trade war tensions re-emerged. The trigger came late Friday, when US President Donald Trump declared he is “recommending a straight 50% Tariff on the European Union,” citing frustration with stalled negotiations. The announcement stunned investors and reignited fears of a wider spiral, sending US stocks and Dollar sharply lower into the weekly close.

Equity markets, which had enjoyed a strong six-week rally driven by optimism from the 90-day tariff truce with major trading partners, were caught off guard. As little tangible progress was made halfway through the truce period, Trump’s shift back to hardline tactics was interpreted as a sign that the administration may be preparing to walk away from negotiation tables. The renewed threat has not only clouded the outlook for trade but also raised concerns over the policy direction in Washington.

Speaking at a White House event, Trump made clear his stance: “I’m not looking for a deal. I mean, we’ve set the deal. It’s at 50%.” Treasury Secretary Scott Bessent echoed the sentiment, suggesting the tariff threat was intended to “light a fire under the EU.” These remarks hinted at a deliberate strategy to escalate pressure on Brussels ahead of the June 1 deadline.

In response, European Commission Vice President Maros Sefcovic stated the EU remains “fully engaged” and committed to securing a mutually beneficial deal. He emphasized that negotiations must be “guided by mutual respect, not threats,” and warned the EU stands ready to defend its interests. Despite diplomatic overtures, the tone on both sides suggests little ground has been gained, making further market volatility likely as the deadline nears.

In summary, the re-ignition of trade tensions with the EU has thrown markets back into uncertainty. With US fiscal policy already under scrutiny and tariff escalation threatening global growth, investors may remain on the defensive until clearer direction emerges, either through a breakthrough in negotiations or a change in Washington’s rhetoric. Until then, volatility and risk aversion are likely to dominate.

Technically, DOW's extended decline last week indicates that a short term top was already formed at 42842.04. More consolidations would be seen with risk of deeper decline. But overall near term outlook will stay bullish as long as 38.2% retracement of 36611.78 to 42842.04 at 40462.08 holds.

However, rise from 36611.78 is seen as the second leg of the medium term corrective pattern from 45073.63 high. So, even in case of another rise, DOW should start to lose momentum again as it approaches 45073.63.

Dollar Index's late break of 99.17 support argues that corrective rebound from 97.92 might have completed at 101.97 already. Further decline is now in favor in the near term to retest 97.92 low first. Firm break there will resume the larger down trend to 61.8% projection of 100.17 to 97.92 from 101.97 at 94.40.

European Stocks Also Hit by Tariff Shock; DAX and CAC Signal Near-Term Tops

European equities also slumped in tandem with the US on Friday on Trump's tariff threat. The announcement dealt a direct blow to investor sentiment across the region, with Germany’s DAX and France’s CAC 40 each falling around -1.6% on the day.

However, Germany’s equity outlook, and to a lesser extent the region's, should remain underpinned by fiscal expansion at both national and EU levels, which could cushion downside risks and support a medium-term bullish outlook.

Technically, the late selloff in DAX indicates that 24154.24 record high should already be a short term top. Near term risk is mildly on the downside for pull back to 55 D EMA (now at 22610.12). Nevertheless, strong support should emerge from 38.2% retracement of 18489.91 to 24154.24 at 21989.23 to contain downside to bring rebound.

CAC should have formed a short term top at 7955.53, and turned into consolidations. Given CAC's underperformance comparing to DAX, there is risk of dipping through 38.2% retracement of 6763.76 to 7955.53 at 7500.27. But strong support should be seen above 61.8% retracement at 7219.02 to contain downside.

Aussie Under Fire as RBA's Dovish Cut Fuels July Easing Bets

Aussie ended last week as one of the weakest performers among major currencies, additionally weighed down by the dovish 25bps rate cut from RBA. While the move was widely expected, RBA Governor Michele Bullock revealed that the board had actively considered a larger 50bps reduction before settling on the more measured step.

Bullock also deliberately leave the door open for fasting easing, as she indicated that "if we need to move quickly, we can. We have got space."

Alongside the cut, RBA downgraded its 2025 GDP growth forecast from 2.1% to 1.9% and revised year-end CPI projections sharply lower, from 3.7% to 3.0%.

These adjustments cemented the market’s view that the easing cycle has room to run, with rate futures now assigning more than 50% probability to another cut as early as July and fully pricing in a second 25bps cut by August.

Technically, AUD/JPY failed to sustain above 38.2% retracement of 109.36 to 86.03 at 94.94, and retreated from there. Focus is now on 92.10 cluster support (38.2% retracement of 86.03 to 95.63 at 91.96).

Strong rebound from 91.96/92.10 will retain near term bullishness. Further break of 95.63 will solidify the bullish case that whole fall form 109.36 has completed as a three-wave correction to 86.03.

However, firm break of 91.96/92.10 will argue that the rebound has completed. More importantly, the down trend from 109.36 is likely still in progress for another low below 86.03.

Gold Eyes Fresh Record High as Safe Haven Flows Persist

Gold rallied strongly last week, supported by a confluence of factors including persistent concerns over the US fiscal outlook and escalating global trade tensions.

With global equities showing signs of strain and long-dated US Treasury yields on the rise, capital has flowed steadily into Gold. The precious metal’s resilience suggests it may be gearing up to break above the record high of 3500, especially if risk aversion intensifies in the days ahead.

Technically, corrective decline form 3499.79 should have completed with three waves down to 3120.34. That came after strong support from 55 D EMA (now at 3177.32) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04.

Further rise is expected as long as 3279.22 support holds, to retest 3499.79 high first. Decisive break there will resume larger up trend to 61.8% projection of 2584.24 to 3499.79 from 3120.34 at 3686.14 next.

GBP/USD Weekly Outlook

GBP/USD's up trend resumed by breaking through 1.3442 resistance last week. Initial bias remains on the upside this week for 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.3874. On the downside, below 1.3389 minor support will turn intraday bias neutral again first.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2843) holds, even in case of deep pullback.

In the long term picture, for now, price actions from 1.0351 (2022 low) are still seen as a corrective pattern to the long term down trend from 2.1161 (2007 high) only. However, firm break of 1.4248 resistance (38.2% retracement of 2.1161 to 1.0351 at 1.4480) will be a strong sign of long term bullish reversal.

EUR/USD's extended rally last week suggests that corrective fall from 1.1572 has already completed at 1.1064. Initial bias stays on the upside this week for retesting 1.1572 first. Firm break there will resume larger up trend to 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. However, below 1.1255 minor support will dampen this view and turn intraday bias neutral again.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0837) holds.

In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1300) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.

USD/JPY's extended decline last week suggests that rebound from 139.87 has already completed at a corrective move to 148.64. Initial bias remains on the downside tis week for retesting 139.87 low. On the upside, above 144.31 minor resistance will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

In the long term picture, it's still early to conclude that up trend from 75.56 (2011 low) has completed. A medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 137.17) and even below.

GBP/USD's up trend resumed by breaking through 1.3442 resistance last week. Initial bias remains on the upside this week for 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.3874. On the downside, below 1.3389 minor support will turn intraday bias neutral again first.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2843) holds, even in case of deep pullback.

In the long term picture, for now, price actions from 1.0351 (2022 low) are still seen as a corrective pattern to the long term down trend from 2.1161 (2007 high) only. However, firm break of 1.4248 resistance (38.2% retracement of 2.1161 to 1.0351 at 1.4480) will be a strong sign of long term bullish reversal.