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The EUR/USD pair dropped to 1.1746 on Tuesday, with the US dollar holding a slight edge before correcting. The greenback faced pressure after Donald Trump announced new tariffs on 14 countries that have yet to secure trade agreements with the US.

Among the affected nations were major exporters such as Japan and South Korea, which will face a 25% duty on their goods starting 1 August.

Trump also signed an executive order delaying the deadline for reciprocal tariffs from 9 July to 1 August, granting more time for negotiations.

Additionally, he warned of a further 10% tariff on countries aligned with the anti-American BRICS policy, coinciding with the bloc’s summit in Brazil.

Earlier in the week, the US dollar had strengthened as trade tensions eased, and expectations of a Federal Reserve rate cut diminished. A robust June labour market report weakened the case for imminent monetary easing, with markets now all but dismissing the likelihood of a July rate reduction.

Technical Analysis: EUR/USD

H4 Chart:

On the H4 chart, EUR/USD saw an upward wave to 1.1747, with a consolidation range now forming around this level. A potential expansion to 1.1760 is possible, followed by a likely decline to 1.1650, which would set the boundaries of this range. If the pair breaks above the range, gains could extend towards 1.1885. Conversely, a downside break may trigger a fall to 1.1611, with further downside potential towards 1.1570. This outlook is supported by the MACD indicator, where the signal line remains below zero, indicating a sharp downward trend.

H1 Chart:

On the H1 chart, the pair continues consolidating around 1.1717, with an expected upward expansion to 1.1777. However, the bullish momentum appears exhausted, and a downward wave to 1.1700 could materialise at any moment, potentially extending to 1.1611. The Stochastic oscillator reinforces this view, with its signal line below 80 and trending downward towards 20.

Conclusion

The EUR/USD remains under pressure amid uncertainties over tariffs and shifting expectations for the Fed’s rate outlook. Technically, the pair shows limited upside potential, with key support levels at 1.1650 (H4) and 1.1611 (H1). A break lower could accelerate declines, while an upward breakout may signal a short-term recovery.

Today, the AUD/USD pair experienced a spike in volatility. According to ForexFactory, analysts had forecast that the Reserve Bank of Australia (RBA) would cut interest rates from 3.85% to 3.60%. However, the market was caught off guard as the central bank opted to keep rates unchanged.

The RBA stated the following:

→ It remains cautious in its inflation outlook and awaits further evidence confirming that inflation is on track to return to the 2.5% target.

→ The decision to hold the rate was made by a vote of six to three — a rare instance of a split opinion among committee members.

The initial market reaction to the RBA’s unexpected move was a sharp appreciation of the Australian dollar. However, this was followed by a quick pullback in the minutes that followed (as indicated by the arrows).

Technical Analysis of the AUD/USD Chart

Since early July, price action in AUD/USD has been forming a descending channel (marked in red). In this context:

→ Today’s sharp rally and subsequent retracement underscored the significance of the upper boundary of the channel;

→ The pair tested a previously broken ascending trendline (the lower line of the blue channel);

→ Although the price briefly rose above the 0.65450 level, this area may now act as resistance going forward.

There is a possibility that, as forex trading unfolds throughout the day, AUD/USD could retreat towards the median line of the descending channel. Such a move could be interpreted as follows:

→ The initial reaction to the RBA decision may have been premature;

→ Selling pressure persists, which might trigger a move towards the support zone near 0.64850.

Looking ahead, the trajectory of AUD/USD in July 2025 will be largely influenced by developments surrounding a potential trade agreement between the United States and other countries, including Australia.

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Despite US President Trump issuing 14 new tariff letters on Monday, 7 July, Asian stock markets defied expectations. Unlike the sharp sell-off following the 1 April “Liberation Day” tariff announcement, regional indices rallied, many reaching three- to five-day highs in today’s Asian mid-session.

Most Asian stock markets rally despite fresh US tariff warnings

The market reaction suggests growing scepticism about the White House following through decisively on tariff threats. While the letters outlined tariff rates ranging from 25% to 40% on exports from Japan, South Korea, South Africa, and several Southeast Asian nations (e.g., Malaysia, Thailand, Indonesia, Cambodia, Myanmar, and Laos), Trump extended the 9 July tariff deadline to 1 August and even hinted at a further extension to finalize trade negotiations.

European stock markets outperformed US

Hong Kong’s Hang Seng Index rose 0.7%, and Singapore’s Straits Times Index continued its record-breaking run, climbing 0.6% to an all-time intraday high of 4,057. South Korea’s KOSPI 200 surged 2%, while Japan’s Nikkei 225 edged up 0.4%.

Meanwhile, European stock markets outperformed the US. With Europe spared from the latest round of tariff letters and reports of a possible US-EU trade deal emerging this week, the German DAX gained 1.2%, reaching a four-day high. In contrast, the S&P 500 dropped 0.8%, trimming earlier losses of 1.25%. US equity futures showed mild recovery in Asia, with the S&P 500 and Nasdaq 100 E-minis up 0.1% and 0.2%, respectively.

FX markets mixed as AUD rebounds on RBA Surprise

Currency markets were mixed. The Australian dollar led gains, rising 0.7%, followed by the New Zealand dollar (+0.4%) and the euro (+0.2%), while the Japanese yen weakened 0.1%.

The AUD/USD posted a bullish reversal, reclaiming its 20-day moving average at 0.6520 as support. Although traders had anticipated a 25-bps rate cut by the RBA, the central bank held rates steady at 3.5%, citing trade-related uncertainty and choosing to monitor conditions before acting.

Economic data releases

Fig 1: Key data for today’s Asia mid-session (Source: MarketPulse)

Chart of the day – Start of a potential impulsive bullish sequence for Hang Seng Index

Fig 2: Hong Kong 33 CFD Index minor trend as of 8 July 2025 (Source: TradingView)

The recent 4% minor corrective decline seen on the Hong Kong 33 CFD Index (a proxy of the Hang Seng Index futures) from the 25 June high to the 4 July low is likely to have ended. The Hong Kong 33 CFD Index is now likely to be in the process of undergoing a potential fresh impulsive bullish sequence within its medium-term uptrend phase.

The hourly RSI momentum indicator has shaped a bullish divergence condition as its oversold region and staged a bullish momentum breakout on Monday, 7 July (see Fig 2).

Watch the 23,690 key short-term pivotal support for the next intermediate resistances to come in at 24,270, 24,490, and 24,850.

On the other hand, failure to hold at 23,690 negates the bullish tone for a slide towards the next support at 23,450 (also the 50-day moving average), and only a break below it sees a deeper corrective decline to expose the next intermediate support at 23,060 in the first step.

In a decision split 6 in favour, 3 against, the RBA Board decided to wait before cutting rates. It wasn’t a shoo-in to cut, and in the end, the RBA chose caution over decisiveness.

• The RBA Monetary Policy Board defied widespread expectations and kept the cash rate on hold at its July 2025 meeting. The post-meeting statement noted the gradual recovery in private sector demand and a tight labour market as justification for the decision. It also said that the Board judged that it could wait for a “little more information”, which the Governor subsequently clarified included the quarterly CPI and another labour force release.
• In its May minutes, the Board had expressed a preference to be “cautious and predictable” in its conduct of monetary policy. Today it erred on the side of the former. The general tone of today’s post-meeting statement was of a central bank that has not been updating its view of the economy that quickly.
• The decision was split 6–3. In the post-meeting media conference, Governor Bullock emphasised that this was a question of timing, not direction. A majority of Board members simply opted to wait for more information, principally the Q2 CPI release.
• We read the tone of the media conference as flagging that the rate cut is still on for August, provided the trimmed mean inflation rate for June quarter does not surprise too much on the upside. Accordingly, we reinstate the likely timing of the next cut to August, though there is a small chance even this is delayed. We also retain the spread-out timing (November, February, May) of subsequent cuts as being in line with the cautious approach the RBA has flagged.
• At the media conference, the Governor confirmed that, should market pricing again move out of line with what the RBA ends up doing, the RBA will not use an inter-meeting speech to guide market expectations, as this would prejudge the Board’s subsequent decisions.

The RBA Monetary Policy Board has defied market pricing and the great majority of private sector economists’ views (including ours) by opting to keep the cash rate on hold at 3.85%. As we noted when we moved the expected August cut to the July meeting, cutting this month was not the ‘shoo-in’ that markets expected. The RBA has been a reluctant rate-cutter in recent months, especially earlier in the year. Still, the decision to hold is surprising, and the 6–3 split vote shows how finely balanced the decision was. Given the lack of consensus on the Board, the low information content of the post-meeting statement was not that surprising; this was the text a split Board could agree upon.

While votes are unattributed, we think it is unlikely that the external Board members all voted to hold while the Governor, Deputy Governor and new Treasury Secretary all voted to cut. It is more likely that the Governor, Deputy and some external Board members aligned to a staff recommendation to hold, but not all the external members were convinced to wait.

While underlying inflation is now clearly inside the 2–3% target range and headed down, the post-meeting statement chose to highlight the 2.9% year-ended rate for trimmed mean inflation as at the March quarter. More than half the information from this calculation is very stale data from the middle of last year. In the post-meeting media conference, the Governor claimed that other observers were more focused on headline inflation. In our view, this is a misreading of the current debate. Reasonable estimates of the current pulse of trimmed mean inflation – using either the monthly indicator trimmed mean or a shorter-run calculation on the quarterly data than a year-ended percentage change – are noticeably lower than 2.9%.

There is also little sign of an update in the RBA’s read of the economy in the rest of the statement text. The pick-up in private sector demand was again highlighted, even though the RBA had to revise down its near-term consumption forecast in successive SMPs. Weak productivity growth was cited twice despite the vagaries of measurement and the low information value it has for future inflation. In the media conference, the Governor discussed the “conundrum” that productivity growth has been weak and unit labour costs are strong, but inflation is coming down. We would argue that part of the issue has been compositional shifts in measurement, and part of it is that the RBA is over-indexing on the idea that prices are a (mostly constant) markup over costs.

The statement noted that “The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.” It is not clear why the currently available information was not enough to make this judgement. In the media conference, the Governor clarified that in five weeks’ time, the quarterly CPI, another monthly labour force release and refreshed forecasts would be available.

The main other lesson from today’s decision is the step change it implies for the RBA’s approach to communication. With the Monetary Policy Board more explicitly central to the decision-making process (in form only – they always were central in substance), the RBA Governor will be unwilling to push back on market pricing in between meetings because they will want to avoid pre-judging what the Board decides, or prejudicing the deliberations, at the next meeting. This means that episodes of the RBA surprising market pricing, as it has done today, will be more common. This is one of the downsides of the RBA Review recommendations. Not only are there fewer inter-meeting speeches by the senior officials now that there is a press conference instead, but those opportunities might also not be used to steer market pricing.

We read the tone of the media conference as flagging that the rate cut is still on for August, provided the trimmed mean inflation rate for June quarter does not surprise too much on the upside. Accordingly, we reinstate the timing of the next cut to August. We also retain the spread-out timing (November, February, May) of subsequent cuts as being in line with the cautious approach the RBA has flagged.

There is a (small) risk that even August is too soon for the RBA, if the CPI surprises on the upside. Our own current nowcast for June quarter is marginally above what their May SMP forecasts seem to imply. The Governor also mentioned that the data might come in slightly above their forecasts.

In addition, the spread-out timing highlights the risk that the RBA will be surprised on the downside by inflation later this year and need to catch up. This adds to the probability that our current base-case of 2.85% ends up being correct, rather than something higher.

Markets

The US yesterday made a next step in the strategy that it considers necessary to ‘eliminate the Trade Deficit disparity’ with trading partners. The US sent letters to 14 trading partners informing them of new tariffs it will impose on August 1. The tariffs are mostly close to, sometimes slightly lower compared to what was announced at Liberation Day. Some examples. South Africa faces a tariff of 30%, Indonesia 32%, Malaysia 25% and Thailand 36%. Major trading partners Japan and South Korea were both informed of a 25% tariff. They are still involved in trade negotiations, but the US apparently wants to put some pressure for them to make further concessions as this is difficult due to the domestic political context (e.g. July 20 Upper House elections in Japan). Next to sending letters, the US administration also delayed the global new deadline for reciprocal tariffs to August 1. It also warns that if nations decide to raise their tariffs (retaliation) they will again be added to the tariff applied for that country. The EU didn’t receive any letter. Sources suggest that the EU is moving closer to a deal with the US but it aims to reach some exceptions on the baseline 10% and some ad hoc specifications/adjustments to sector tariffs. However, negotiations are still ongoing and an agreement needs the final approval President Trump. Markets apparently basically saw the current move as a ‘delay’ of the July 9 deadline allowing for further negotiations/modifications. De facto this also prolongs the period of limited visibility both for markets and for monetary policymakers including the Fed. In this respect, expectations of Fed policy later this year hardly changed. The market still sees a cumulative 50 bps of rate cuts this year. US yields rose between 1.5 bps (2-y) and 5.4 bps (30-y). The underperformance at the long end of the curve was broad-based, probably partially driven by higher LT Japanese yields. German yields added 2.0/3.6 bps across the curve. US equities dropped after the publication of the first letters, but finished off the intraday lows (S&P 500 -0.79%). Uncertainty on the economic impact for US trading patterns supported the dollar (DXY at 97.48 from 96.96, EUR/USD 1.171 from 1.178; USD/JPY 146.05 from 144.4).

Asian equity markets modestly rebound as investors apparently appreciate room for further negotiations. The dollar eases slightly (DXY 97.36; EUR/USD 1.1738, USD/JPY unchanged near 146). As visibility remains low also for the Fed as long as the trade negations continues, some further technical trading (rather than sustained further gains) might be on the cards for the US dollar. On the interest rate markets we again keep close eye at the long end of the yield curves. The Japan 30-y yield again jumps 9 bps (3.07%) and keeps debt sustainability as a live theme. The market focus will remain on the US trade policy (e.g. news on progress with the EU). The eco calendar again only contains second tier data. The US Treasury will sell $58 bln of 3-y notes.

News & Views

The Reserve Bank of Australia surprised by keeping the policy rate unchanged at 3.85% this morning. Another cut to 3.6% was widely expected. The central bank said inflation broadly moved according to the May forecast but nevertheless spotted some upside surprises “at the margin”. With rates now 50 bps lower than a few months ago and wider economic conditions evolving broadly as expected, the RBA believes it can wait for a little more information (and therefore confirmation) that inflation is sustainably returning to the 2.5% target. And while the outlook remains uncertain, especially regarding trade, the RBA sees private domestic demand recovering and household incomes picking up, in part thanks to a still-tight labour market. Australian swap rates jump more than 12 bps at the front end of the curve, allowing AUD/USD to recover most of the losses incurred yesterday and thereby preserving the upward sloping trend channel. The pair is currently trading around 0.654, up from 0.649 at the open.

UK house prices again failed to grow in June, data from one of the country’s biggest lenders showed. After contracting by 0.3% in May, average housing prices were unchanged last month just shy of £300k. The numbers chime with last week’s findings of the Nationwide Building Society that showed the biggest price drop since early 2023. The housing market struggles to recover amid buyers being hit by a rise in stamp duty in April. Sellers, meanwhile, are flocking to the market with the number the highest in a decade, data from Rightmove revealed, pressuring prices from the supply side.

The ongoing rally in the FTSE Index, originating from the April 7, 2025 low, continues to unfold as a five-wave impulse structure within the Elliott Wave framework. This signals sustained bullish momentum. From the April 7 low, wave 1 peaked at 7984.19. Wave 2 pullback followed which concluded at 7599.56. The index then surged in wave 3, reaching 8902.4. The subsequent wave 4 correction manifested as a double three Elliott Wave structure, as evidenced on the 1-hour chart. From the wave 3 peak, wave (w) declined to 8809.91. It was then followed by a wave (x) recovery to 8858.56. The decline in wave (y) reached 8741.4, completing wave ((w)) in a higher degree. The rally in wave ((x)) peaked at 8831.9 before the index resumed lower in wave ((y)). Within this decline, wave (a) ended at 8757.97. Wave (b) ended at 8792.43, and wave (c) concluded at 8706.91, finalizing wave ((y)) of 4.

The FTSE has since turned higher in wave 5, requiring a break above the wave 3 high of 8902.4 to negate the possibility of a double correction. The structure from the wave 4 low is developing as a five-swing sequence, reinforcing the bullish outlook. From wave 4, wave (i) reached 8818.44, wave (ii) corrected to 8726.92, wave (iii) advanced to 8828.16, and wave (iv) pulled back to 8738.99. The final wave (v) concluded at 8837.75, completing wave ((i)) in a higher degree. A wave ((ii)) pullback is anticipated, likely correcting the cycle from the June 26, 2025 low in a 3, 7, or 11-swing pattern before resuming higher, provided the pivot at 8706.91 remains intact. This structure underscores a robust bullish bias, with the index poised for further upside as long as key support levels hold.

FTSE 60-Minute Elliott Wave Technical Chart

FTSE Elliott Wave Technical Video

https://www.youtube.com/watch?v=ViZWtU9bvqs

We’re back to square one in terms of the US tariff disaster, as the US has started sending letters to countries revealing their tariff rates—and the rates don’t look much different from those announced on the so-called Liberation Day. 25% for South Korea and Japan, 25% for Malaysia; 30% for South Africa; and 40% for Myanmar and Laos.

There’s no fresh news regarding Taiwan and India, but the levies on some Asian nations are clearly pointing the finger at China—due to transshipments. Looking at the first wave of numbers, only one country appears to have pulled itself out of the tariff turmoil with minimal damage: the UK, with a tariff rate of 10%. The EU could also pull off a 10% rate as soon as this week—which would be great. But for the rest, the tariffs don’t look good, and the three-month risk rally is in jeopardy—even though markets remain on a surprising wave of optimism that defies the renewed tensions Asian tariffs will place on supply chains and prices.

The S&P 500 retreated 0.70% from an all-time high on Monday, but futures are positive on news that the new tariff negotiation deadline has been pushed to August 1. The Nikkei was down yesterday but is up again today on hopes that negotiations will continue and that the 25% levies could be reversed. The Stoxx 600 was also in the green yesterday, on optimism that Europe could pull off a good deal.

But this is all too much unexplained optimism. The deadline extension is not good news, per se. It simply adds to the uncertainty. It’s yet another sign that the deadline won’t be a line in the sand, and that tariffs set in the coming days and weeks won’t be carved in stone, either. They will be constantly changed—raised, lowered—and used as a go-to threat in every situation.

Repricing risks?

It’s probably time to start pricing back in the trade risks that were priced out far too quickly—under the umbrella of the so-called TACO trade. Trump isn’t chickening out, and inflation is knocking on the door. One reason why the tariff-led price pressures were initially contained is that many companies chose to swallow the costs while waiting to see if the tariffs were just a negotiation tactic. But if the tariffs are here to stay—and are constantly changing—businesses will have no choice but to adopt prices.

According to Goldman, companies are set to pass on 70% of the tariff costs through higher prices.

So one of the following scenarios will likely play out:

• Consumers absorb the tariffs, companies continue exporting to the US, and earnings stay intact—but inflation rises, upsetting the Federal Reserve (Fed) and pushing back (or reversing) rate-cut expectations. That could upset investors given relatively high valuations.
• Consumer spending crumbles, US GDP slows—possibly offsetting some of the tariff-led inflation—and company earnings take a hit. But the Fed could step in if inflation pressures remain tolerable.

Reality will probably fall somewhere in between: prices will rise, earnings will be pressured, the Fed will wait as US growth slows and inflation risks loom—and global investors may increasingly cut exposure to US assets, repatriating funds to alternative markets like the EU and Japan. Note that, a potential wave of Japanese repatriation could further weigh on US Treasury yields and amplify a broader risk-off move. And rising Japanese yields are also becoming an additional threat to the risk rally. The 10-year JGB yield is back to 1.50% this morning. When JGB yields rise, they become more attractive to Japanese investors—especially institutions like pension funds and insurers—who have historically been major buyers of US Treasuries and global equities, including US stocks. The ongoing trade tensions between the US and Japan could accelerate such repatriation—even though Japanese authorities earlier this year said they wouldn’t use capital flows as a negotiation tool. But things are moving too fast to rely on what was said a few months ago.

In FX, the US dollar rebounded yesterday and is consolidating gains on the back of the optimism stemming from the deadline extension to August 1. But if you think that deadline will be the only one—and not just one of many in Trump’s tariff playbook—then buying dollars on trade optimism looks like a weak reason. The EURUSD remains bid below 1.17. The AUDUSD is bouncing back today after the Reserve Bank of Australia (RBA) surprised by not cutting rates, contrary to expectations. Instead, policymakers cited strength in the labour market and a more balanced inflation outlook for keeping rates unchanged.

In energy and metals, US crude rallied to the 200-DMA but is seeing resistance at that level, as both a larger-than-expected OPEC output hike and renewed trade tensions weigh on the oil outlook. Copper futures on COMEX are retreating from the highest levels since April 2. That’s one area where price action actually makes sense.

In summary, markets continue to react in a suspiciously optimistic way, ignoring the risks and implications of tariffs on supply chains, earnings, inflation and growth. Assuming everything will be magically resolved in the next three weeks is like seeing unicorns in the sky. Something must give.

Daily Pivots: (S1) 197.30; (P) 198.15; (R1) 199.52; More...

GBP/JPY's rally from 184.35 resumed by breaking through 198.78 and intraday bias is back on the upside. Firm break of 199.79 resistance will target 100% projection of 180.00 to 199.79 from 184.35 at 204.14 next. For now, near term outlook will stay bullish as long as 195.33 support holds, in case of retreat.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a correction to rally from 123.94 (2020 low). The pattern might still extend with another falling leg. But in that case, strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. Meanwhile, decisive break of 208.09 will confirm long term up trend resumption.

Daily Pivots: (S1) 170.17; (P) 170.74; (R1) 171.61; More...

EUR/JPY's rally continues today and intraday bias stays on the upside. Next target is 138.2% projection of 154.77 to 164.16 from 161.06 at 174.03. On the downside, below 169.86 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 175.41 (2024 high) are seen as correction to up trend from 114.42 (2020 low). The pattern might still extend with another falling leg. But in that case, strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. Meanwhile, decisive break of 175.41 will confirm long term up trend resumption.

Daily Pivots: (S1) 1.7963; (P) 1.8030; (R1) 1.8109; More...

Intraday bias in EUR/AUD is turned neutral again with current retreat. Further rally is expected as long as 1.7872 support holds. Above 1.8094 will target 161.8% projection of 1.7245 to 1.7705 from 1.7459 at 1.8203. Firm break there will target 1.8554 resistance. However, sustained trading below 1.7872 will turn bias back to the downside for 1.7459/7705 support zone instead.

In the bigger picture, price actions from 1.8554 medium term are seen as a corrective pattern. While deeper pullback might be seen, downside should be contained by 38.2% retracement of 1.4281 (2022 low) to 1.8554 at 1.6922 to bring rebound. Up trend from 1.4281 is expected to resume at a later stage.