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Markets were adrift last week as traders grappled with intensifying global risks. The unresolved twin threats of a full-blown trade war and escalating Middle East conflict kept investors on the defensive. Despite some tentative diplomatic efforts, neither front showed meaningful progress, leaving equities vulnerable after months of sustained gains. With investor confidence fraying, global indexes may soon face deeper corrections.

Amid the cautious mood, Dollar took the lead, buoyed by Fed’s policy hold and slower projected easing. Yet beneath the surface, Euro is gaining traction on improving confidence in the Eurozone economy, and divergence of ECB policy and other central banks.

In the week’s performance table, Euro and Aussie followed the greenback near the top. At the other end, Yen underperformed the most as doubts on BoJ rate hike grew. Sterling struggled on soft UK data, while Loonie also underwhelmed. Swiss Franc and Kiwi held to the middle of the pack.

Dual Pressures of Tariff Uncertainty and Middle East Conflict Continue

Global markets struggled for direction last week, as trade and geopolitical tensions weighed heavily on investor sentiment. Despite some optimism around diplomatic overtures, the outlook remains clouded by slow-moving negotiations and unresolved flashpoints. S&P 500, like many global indices, continued to show signs of fatigue amid the rising uncertainty.

On the geopolitical side, the highly anticipated meeting in Geneva between European foreign ministers and Iran's Abbas Araqchi yielded little progress. Iran reiterated its refusal to negotiate under threat and demanded that Israel cease its attacks and face accountability. While Tehran expressed openness to discussing uranium enrichment limits, it drew a firm red line against a full ban.

The fragile optimism quickly also faded as Israel and Iran exchanged fresh missile attacks on Saturday. The renewed violence signals that tensions are likely to persist into the coming week and beyond. While direct US intervention remains on hold, the risk of escalation remains ever-present and continues to cast a shadow over markets.

Meanwhile, there was scant progress on the trade front. It's reported that the EU is now pushing for a 10% reciprocal tariff framework to align with the US-UK deal, but no breakthrough has been reported. Canada's Prime Minister Mark Carney has threatened retaliatory tariffs by late July on US steel and aluminum imports. Meanwhile, Japan canceled a key bilateral security dialogue with Washington, as disputes over defense spending and trade policy intensified. The cancellation is a symbolic setback, revealing just how strained relations have become.

The most pressing concern for markets is the ticking clock on the 90-day tariff truce. With less than three weeks remaining, there's growing anxiety that US President Donald Trump may soon issue unilateral tariff letters to multiple trading partners. A unilateral tariff escalation could trigger sharp market reactions, especially given how sensitively investors have been pricing trade-related risk into both equities and currencies.

Technically, S&P 500 continued to lose upside momentum as seen in D MACD. While further rise cannot be ruled out, considering bearish divergence condition, strong resistance should emerge from 6147.43 high to limit upside. On the downside, break of 5921.20 support will be the first sign of short term topping, and bring deeper pullback to 55 D EMA (now at 5827.40). Further break there will target 38.2% retracement of 4835.04 to 6059.40 at 5991.69, with risk of near term bearish reversal.

Dollar Holds Ground on Fed Caution, While Waller Breaks Ranks

Dollar found a degree of footing last week as expectations around Fed policy injected some near-term stability. As anticipated, Fed kept its target range unchanged at 4.25–4.50%. The updated dot plot revealed a slower-than-expected easing path. While two rate cuts are still projected for 2025, the median forecast now sees just one cut per year in both 2026 and 2027, lifting the year-end federal funds rate forecasts to 3.6% and 3.4%, respectively.

Yet Fed Chair Jerome Powell was forthright in tempering the significance of these projections, saying no policymakers held their rate path “with a great deal of conviction.” The central bank’s Monetary Policy Report to Congress followed up with similar caution, noting that while tariff-induced inflation may be showing up in goods prices, it remains too early to assess the overall impact.

Nevertheless, Fed Governor Christopher Waller broke ranks slightly, floating the possibility of a rate cut as soon as July. Waller argued that the inflation impact from tariffs would likely be one-off and non-persistent. More concerning to him was the potential for labor market deterioration.

Waller's divergence from other Fed colleagues comes at a sensitive time politically. Powell’s current term expires in May 2026, and the likelihood of Trump installing a new Fed Chair—potentially someone more aligned with his view on interest rates—is growing. Waller, a 2020 Trump appointee to Fed Board, may be in the running. While no formal shortlist has emerged, markets may grow increasingly sensitive to such succession politics in coming months.

Despite Waller’s comments, market expectations for a July cut remain subdued, with fed fund futures still assigning a nearly 90% probability to a hold. September remains the market’s favored timeline for the next move, with over 70% chance.

Technically, there is no clear sign of bottoming in Dollar Index yet with 99.39 resistance intact. Recent decline from 110.17 is still in favor to continue towards 61.8% projection of 110.17 to 97.92 from 101.97 at 94.40.

However, momentum could further diminish on the next fall. Selloff in Dollar is unlikely to be as one-sided as seen earlier in the year. At least, Yen would stay pressured due to diminishing hope of another BoJ rate hike this year. Commodity currencies and Sterling could be pressured if risk sentiment turned sour.

Meanwhile, firm break of 99.39 will confirm short term bottoming, and bring rebound through 55 D EMA (now at 100.16).

Euro Set to Outperform Again on Economic Optimism and Diverging Policy Paths

While the Dollar ended the week as the top performer, it’s Euro that is quietly showing greater underlying strength. EUR/USD’s late-week jump suggests the pair may soon breakout of range, with Euro outperforming the greenback again. Supporting this outlook is a clear improvement in economic sentiment, most notably in Germany, the Eurozone’s growth engine.

The June ZEW survey showed a remarkable 22.3-point jump in economic sentiment to 47.5. Current conditions improved by 10 points—the strongest rise in over a year. Growing investment and consumer demand are behind the pickup, helped by fiscal measures from the new German government. This policy mix, together with ECB’s earlier rate cuts, could finally lift Germany out of the stagnation that’s persisted for nearly three years.

Additionally, ECB’s easing cycle is certainly nearing its conclusion, possibly with just one recalibration cut remaining. That sets it apart from central banks like BoE, which is still on a "gradual and cautious" rate reduction path, and SNB, which may be forced into negative rates again. Even Fed, which has been on pause since late 2024, may soon re-join the global easing trend once tariff-driven inflation uncertainties clear.

The technical picture supports Euro strength across the board too. EUR/GBP's rebound from 0.8354 extended higher last week. Further rise is expected to 61.8% retracement of 0.8737 to 0.8354 at 0.8591. Firm break there will pave the way to 0.8373 resistance.

EUR/AUD's late rally suggests that retreat from 1.7880 might have completed at 1.7626 already. Break of 1.7880 will target 61.8% retracement of 1.8554 to 1.7245 at 1.8054. Firm break there will pave the way to 1.8554.

EUR/JPY's near term rise also continued last week, and it's on track to 100% projection of 154.77 to 164.16 from 161.06 at 170.45 next.

EUR/USD Weekly Outlook

EUR/USD stayed in consolidations below 1.6300 last week and outlook is unchanged. Initial bias remains neutral this week first. Further rise is expected as long as 1.1372 support holds. Firm break of 1.1630 will resume the rise from 1.1076 and target 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927 next.

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 1.1604 support holds.

In the long term picture, a long term bottom should be in place already at 0.9534, on bullish convergence condition in M MACD. Rise from there could be a corrective bounce or the start of an up trend. In either case, next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.

EUR/USD stayed in consolidations below 1.6300 last week and outlook is unchanged. Initial bias remains neutral this week first. Further rise is expected as long as 1.1372 support holds. Firm break of 1.1630 will resume the rise from 1.1076 and target 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927 next.

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 1.1604 support holds.

In the long term picture, a long term bottom should be in place already at 0.9534, on bullish convergence condition in M MACD. Rise from there could be a corrective bounce or the start of an up trend. In either case, next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.

USD/JPY's price action from 139.87 could be a correction to fall from 158.86, or reversing whole decline. In either case, further rally is in favor as long as 142.79 support holds. Initial bias stays on the upside this week, and break of 146.27 will target 148.64 resistance next. On the downside, below 145.11 minor support will turn intraday bias neutral again.

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 137.72) and even below.

GBP/USD's extended decline from 1.3631 last week confirmed short term topping. But as a temporary low was formed at 1.3381, initial bias remains neutral this week first. Near term risk will stay on the downside as long as 1.3631 resistance holds. Below 1.3381 will extend the correction to 38.2% retracement of 1.2076 to 1.3631 at 1.3278.

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 1.2923) 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.

USD/CHF's recovery from 0.8054 extended higher last week but upside was capped below 0.8247 resistance. Initial bias remains neutral this week first and further fall is expected. On the downside, below 0.8054 will bring retest of 0.8038 low first. Firm break there will resume larger down trend to 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757. Nevertheless, firm break of 0.8247 will extend the corrective pattern from 0.8038 with another rising leg, and target 0.8475 resistance again.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8675) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

In the long term picture, price action from 0.7065 (2011 low) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). It's uncertain if the fall from 1.0342 is the second leg of the pattern, or resumption of the down trend. But in either case, outlook will stay bearish as long as 0.9200 resistance holds. Retest of 0.7065 should be seen next.

AUD/USD gyrated lower last week but momentum has been weak. Initial bias remains neutral this week first. Considering bearish divergence condition in D MACD, a short term top could be formed at 0.6551. On the downside, firm break of 0.6455 support will bring deeper decline to 38.2% retracement of 0.5913 to 0.6551 at 0.6307, even as a correction. Nevertheless, break of 0.6551 will resume the rally from 0.5913 instead.

In the bigger picture, there is no clear sign that down trend form 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

In the long term picture, fall from 0.8006 is seen as the second leg of the corrective pattern from 0.5506 long term bottom (2020 low). Hence, in case of deeper decline, strong support should emerge above 0.5506 to contain downside to bring reversal. On the upside, firm break of 0.6941 will argue that the third leg has already started back to 0.8006.

USD/CAD rebounded after edging lower to 1.3538 last week. Considering bullish convergence condition in D MACD, a short term bottom could be in place. Firm break of 1.3749 support turned resistance will turn bias back to the upside for 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017), as a corrective move. nevertheless, break of 1.3633 minor support will bring retest of 1.3538 low.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

In the long term picture, as long as 55 M EMA (now at 1.3494) holds, up trend from 0.9056 (2007 low) should still resume through 1.4791 at a later stage. However, sustained trading below 55 M EMA will argue that the up trend has already completed, with rise from 1.2005 to 1.4791 as the fifth wave. 1.4791 would then be seen as a long term top and deeper medium term down trend should then follow.

GBP/JPY edged higher to 196.38 last week but quickly retreated. Initial bias remains neutral this week first. Further rally is expected as long as 193.75 support holds. Firm break of 196.38 will resume the whole rally from 184.35 to 199.79 resistance. Break there will target 100% projection of 180.00 to 199.79 from 184.35 at 204.14.

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.

In the longer term picture, while a medium term top was formed at 208.09 (2024 high), it's still early to conclude that the up trend from 122.75 (2016 low) has completed. But GBP/JPY is at least in a medium term corrective phase, with risk of correction to 55 M EMA (now at 176.62).

EUR/JPY's rally continued last week after interim retreat and there is no sign of topping yet. Initial bias is on the upside this week for 100% projection of 154.77 to 164.16 from 161.06 at 170.45. For now, near term outlook will stay cautiously bullish as long as 166.01 support holds, even in case of another retreat.

In the bigger picture, price actions from 175.41 are seen as correction to up trend 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.

In the long term picture, while 175.41 is at least a medium term top, it's still early to conclude that up trend from 94.11 (2012 low) has completed. A medium term corrective phase is in progress with risk of deeper fall back to 55 M EMA (now at 150.56).

EUR/GBP's rebound from 0.8354 continued last week despite interim retreat. With late break of 0.8563 temporary top, initial bias is back on the upside this week for 61.8% retracement of 0.8737 to 0.8354 at 0.8591. Firm break there will pave the way to 0.8373 resistance. On the downside, below 0.8524 minor support will turn intraday bias neutral again.

In the bigger picture, price actions from 0.8221 medium term bottom are merely forming a corrective pattern to the down trend from 0.9267 (2022 high). Nevertheless, there is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

In the long term picture, price action from 0.9499 (2020 high) is seen as part of the long term range pattern from 0.9799 (2008 high). Range trading should continue between 0.8201 and 0.9499, until there is clear signal of imminent breakout.