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Cable rose 0.5% on Friday morning and cracked psychological 1.3500, hitting the highest since February 2022.

Fresh acceleration higher was sparked by upbeat UK retail sales, which strongly beat forecasts in April and boosted risk sentiment.

Bullish continuation pattern is developing on weekly chart as cable broke through key resistances at 1.3434/44 (2024/2025 tops), with weekly close above these levels to validate the signal.

This week’s action was shaped in a large bullish candle which is on track to offset initial reversal signals from weekly Hammers and Doji candles in past four weeks.

Also, the pair is on track to complete the fourth consecutive month of strong gains that adds to bullish outlook, along with a kind of bear-trap that formed below 1.3200 psychological support on monthly chart.

Recent solid UK economic data, hotter than expected inflation and weakening dollar are likely to continue to underpin the pound.

Sustained break of 1.3434/44 pivots to signal continuation of larger uptrend and expose targets at 1.3643/1.3748 (Jan / Feb 2022 tops) and unmask psychological 1.40 barrier.

Meanwhile, overbought conditions may pause rally for consolidation / limited correction, which would mark positioning for further advance.

Former breakpoints (1.3434/44) reverted to initial but solid supports, with 4-hr chart higher base at 1.3390 zone to contain dips and keep bulls intact.

Res: 1.3500; 1.3557; 1.3600; 1.3643.
Sup: 1.3484; 1.3444; 1.3434; 1.3390.

The British pound has posted gains on Friday. In the European session, GBP/USD is trading at 1.3484, up 0.49% on the day. The pound has gained 1.5% this week and is trading at levels not seen since Feb. 2022.

UK retail sales surge 5% in April

The markets were expecting a banner reading from April retail sales but the actual numbers crushed the forecast. Annual retail sales surged 5%, up from a downwardly revised 1.9% and above the market estimate of 4.5%. This marked the fastest pace of growth since Feb. 2022.

Monthly, retail sales climbed 1.2%, up from a downwardly revised 0.3% in March and blowing past the market estimate of 0.2%. The surge was driven by sharp gains in food store sales and department stores, as favorable weather brought out consumers.

The UK economy has been struggling and strong consumer spending has been a bright spot. Monthly retail sales have now increased for four straight months, which last occurred in 2020.

The UK consumer spending more and is showing more optimism. The GfK consumer confidence index for May improved to -20 from -23 and beat the market estimate of -22. The improvement is likely a result of the de-escalation in global trade tensions as well as the Bank of England rate cut in early May.

The impressive retail sales report, together with higher-than-expected inflation in April will raise expectations for the BoE to hold rates at its next meeting on June 18.

There are no key US releases today but we'll hear from three FOMC members. There has been plenty of Fedspeak this week, with a message that the US tariffs will take a toll on the US economy, even with the temporary deal with China, and that the Fed favors a wait-and-see stance before further rate cuts.

GBP/USD Technical

• GBP/USD has broken above several resistance lines and is putting pressure in resistance at 1.3493.
• There is support at 1.3393 and 1.3367

GBPUSD 1-Day Chart, May 25, 2025

ECB Chief Economist Philip Lane expressed confidence that services inflation will continue to moderate, citing subdued outcomes in recent wage agreements.

Speaking at a lecture, Lane noted that the current wage settlements for 2025 are already "quite low," with those for 2026 appearing even more restrained. That suggested easing cost pressures in the services sector, a key driver of core inflation.

However, Lane tempered optimism by pointing to the persistent volatility in the global economic environment. He highlighted large recent swings in exchange rates and energy prices, attributing them to structural shifts in the global trading system.

ECB Governing Council members Olli Rehn and Yannis Stournaras signaled support for a rate cut in June, provided that incoming data confirms the current trend of stabilizing inflation and moderate growth. Rehn stressed the importance of maintaining a data-dependent approach amid a backdrop of “pervasive uncertainty” stemming from geopolitical tensions and global trade conflicts.

Speaking in an interview with Kathimerini, Rehn noted that "if incoming data and macroeconomic analysis confirm the current outlook for stabilizing inflation and somewhat subdued growth, the appropriate response in June would be to continue monetary easing and lower interest rates."

However, he cautioned against making any assumptions beyond June. "let's stay on the path of data-driven decision-making at every meeting, especially as we find ourselves under the clouds of pervasive uncertainty due to geopolitics and trade wars," he emphasized.

Stournaras echoed the view of a June cut, but suggested the ECB may pause thereafter to reassess. "I believe we will reduce interest rates one more time in June and then I see a pause," he said.

The cryptocurrency market added a mere 0.7% in 24 hours, but an important 5% in seven days to $3.5 trillion. This increase is important as it falls in the area of the market peaks reached in December and January.

The sentiment index jumped to 78, last seen in January, confirming a similar situation to what we saw earlier in the year.

Bitcoin repeated highs on Thursday evening, rising to $111.8k and pulling back slightly to $110.5k by Friday morning. The rise was attributed to the advancement of stablecoin legislation, capital inflows into 12 U.S. ETFs of about $4.2 billion in May, purchases by Strategy, which has accumulated more than $50 billion worth of tokens, and U.S. fiscal concerns. Unlike previous BTCUSD rallies, the current upward movement is not solely driven by momentum, but by increased demand and White House loyalty.

Ethereum continues to struggle for the 200-day moving average at $2650. This is also the area of February’s protracted consolidation and the important pivot level from August to October last year. A break of current resistance could kick-start a rally to $4000.

The Democrats have dropped their opposition, and the Senate will soon consider the Stablecoin legislation. It would place tighter restrictions on money laundering, improve consumer protections, and unify business rules for U.S. and foreign companies.

Fiscal concerns are weakening the dollar and pushing up Treasury bond yields. According to Galaxy Digital, it is becoming increasingly dangerous to invest in a country with such huge debts. Investors are looking for alternatives and are finding them in Bitcoin. No wonder the paths of BTCUSD and the S&P 500 have diverged.

The euro has regained strength against the dollar, with EUR/USD holding steady at 1.1312 on Friday.

Key drivers behind EUR/USD’s movement

The US dollar remains vulnerable as investor concerns over the US fiscal outlook persist. President Donald Trump’s proposed budget bill – featuring tax cuts and heightened defence spending – has stoked fears of surging national debt.

According to the Congressional Budget Office, the bill could inflate the US national debt by nearly $4 trillion, raising alarms over long-term fiscal stability.

Further pressuring the dollar, Moody’s recently downgraded the US credit rating from Aaa to Aa1, citing widening budget deficits and rising debt-servicing costs.

Meanwhile, investor appetite for US assets has waned amid sluggish progress in trade negotiations.

Although this week saw limited high-impact US data releases, the market has welcomed the brief lull. Today, traders will focus on April’s new home sales report for fresh directional cues.

Technical analysis: EUR/USD

H4 Chart:

EUR/USD dipped to 1.1255 before correcting to 1.1311, with a consolidation range nearing completion. We anticipate a downward expansion towards 1.1120, supported by the MACD indicator, whose signal line has exited the histogram zone and points decisively downward.

H1 Chart:

The pair is forming a downward impulse structure, followed by a correction to 1.1311. Today, a renewed decline towards 1.1240 appears likely. A break below this level could extend the downtrend to 1.1170. This scenario is corroborated by the Stochastic oscillator, with its signal line hovering above 80, poised to drop towards 20.

Conclusion

With the dollar weighed down by fiscal concerns and a credit rating downgrade, EUR/USD may extend its gains. Traders should monitor today’s US housing data for further momentum.

• USDCAD retreats after short-lived recovery attempt.
• Long-term support trendline in focus as bears target April’s low of 1.3748.

USDCAD has surrendered much of its May gains after repeated attempts to break above the 1.4000 mark faltered, pushing the pair back into negative territory this week.

Adding to the pressure, Trump’s narrowly passed tax-cut bill in the House on Thursday is expected to significantly increase the already ballooned federal debt. This development raises concerns about a potential default and threatens the dollar’s safe-haven feature.

From a technical perspective, the pair is now seeking support near the familiar trendline at 1.3827, drawn from the 2021 low, after failing to convincingly surpass the 23.6% Fibonacci retracement level of the February–May downtrend. If this support level also gives way, attention will shift to the April low of 1.3748, and then towards a more critical support zone between the tentative trendline at 1.3663 and the lower boundary of the descending channel at 1.3600. A break below this region could worsen the medium-term outlook, potentially driving the pair down to the September 2024 double-bottom area around 1.3420.

Technical indicators suggest continued downside potential. The RSI remains above the oversold threshold of 30, and the stochastic oscillator has yet to bottom out below 20, indicating that selling interest may persist.

For the outlook to improve, bulls would need to push decisively above 1.4000 and overcome both the 50- and 200-day exponential moving averages (EMAs), which have recently formed a death cross. The upper boundary of the descending channel lies nearby as well. A bullish breakout from this zone could open the door to test the 38.2% Fibonacci retracement level at 1.4150, followed by the 50% level at 1.4270.

In summary, USDCAD remains under bearish pressure and may continue to struggle unless the 1.3835 region can effectively stem halt the current selling momentum.

The USD/CAD chart is currently showing clear signs of a bearish trend, characterised by a sequence of lower highs and lower lows (A→B→C→D→E→F→G).

This week’s decline suggests the downward structure may continue to develop, putting the current yearly low around the 1.3770 level at risk.

Why Is USD/CAD Falling?

On one hand, the US dollar remains under pressure:

→ Following last week’s downgrade of US debt ratings by Moody’s, investor attention has shifted to the country’s $36 trillion debt burden.

→ A tax bill backed by Donald Trump — recently passed in the Republican-controlled House of Representatives — could add trillions more to the national debt. Market participants may be increasingly concerned about the US’s fiscal outlook, prompting a shift towards safe-haven assets.

On the other hand, the Canadian dollar has strengthened this week relative to other major currencies. Tuesday’s CPI figures from Canada came in above analysts’ expectations and may be seen as a sign that the inflation surge could delay any potential rate cuts by the Bank of Canada.

USD/CAD Technical Analysis

In early May, we outlined a descending channel on the USD/CAD chart — a structure that remains relevant today.

The current price is hovering near the channel’s median line, which could indicate a temporary balance between supply and demand. However, with Canadian retail sales data due at 15:30 GMT+3 today, the risk of increased volatility remains high. A new weekly low cannot be ruled out.

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Daily Pivots: (S1) 192.23; (P) 192.91; (R1) 193.93; More...

Intraday bias in GBP/JPY remains neutral at this point. While deeper pullback might be seen, further rally is expected as long as 190.22 structural support holds. On the upside, above 194.18 minor resistance will turn bias back to the upside for 196.38 resistance. However, sustained break of 190.22 will indicate near term reversal.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 175.94 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 161.67; (P) 162.55; (R1) 163.29; More...

Intraday bias in EUR/JPY remains neutral at this point. Further rally is in favor as long as 161.57 support holds. On the upside, break of 163.35 minor resistance will bring retest of 165.19 first. Break of 165.19 will resume the rise from 154.77 to 166.67 resistance. However, firm break of 161.57 will indicate near term reversal, and turn bias back to the downside.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.