As we look ahead to the first trading week of May 2025, forex traders will be keep a close eye on market movements in the midst of tariff samba dance and monetary polices. With uncertainties looming upon every step, the U.S. dollar has experienced its weakest monthly performance in over 2 years. Key pairs that will be of great interest are the USD/JPY, EUR/USD, and GBP/USD. The Bank of Japan dovish stance remains following downgraded economic forecasts and the British pound pullback may be on the horizon as manufacturing contractions continue and technical factors show bearish divergence. Traders should also keep an eye on the economic calendar as ISM manufacturing PMI and employment data are expected to cross this wires in May.
EUR/USD
EUR/USD Daily Chart
EUR/USD reversal since the beginning of the year remains intact with bulls in control. The 9 and 21 day SMA on the daily chart is pointing to a period of consolidation before another possible push higher. The pair is indeed at its highest level since 2022 as uncertainty continues to weigh on the U.S. dollar on the back of recent tariff dance by the Trump administration. Pullbacks towards previous pivot high of 1.0955 will be eyed as buying opportunities as the short-term medium term effects of possible tariff deals are expected to have negative effects on the greenback. Key dates to keep an eye on for possible breakout point (period end of consolidation of 1.1566 – 1.0950) will be around July 07, 2025 and the end of September 2025.
Looking ahead, economic data including employment and ISM manufacturing PMI will be drivers traders should monitor to assist in navigating the forex landscape of EUR/USD.
USD/JPY
USD/JPY Daily Chart
USD/JPY continues to be driven by uncertainty surrounding federal reserve policy. Further, the Bank of Japan has maintained its loose monetary policy stance, leading to the pair to pressure its lowest level since September 2024. The May 2025 FOMC meeting on will be crucial for the pair and determine direction moving forward.
Key levels to keep a close eye on the daily chart are: 148, 149.50, and 151, which are the 38.2%, 50.0%,, and 61.8% Fibonacci retracements on the daily chart. At the same time, the pair appears to be forming a triangle on the daily chart. If so, we may not see a breakout until the latter half of 2025 or beginning of 2026.
GBP/USD
GBP/USD Daily Chart
GBP/USD has recently tested its highest level since September 2024, largely due to continued tariff concerns and in the wake of U.S. reporting GDP contraction. From a fundamental perspective, U.K. economy showed no grown in the first quarter of 2025 – a sign of stagnation; however, may stand better as the U.S. faces likely pullbacks. Inflation in the U.K. remains high at 2.5% and may potentially influence monetary policy from the Bank of England.
With full U.S. economic docket on the horizon, traders will look for pullbacks as a potential buying opportunity with target of multiyear highs. Indeed, the U.K’s calendar remains sparse and as a result, we will see the sterling move on the base broader market sentiment. Key pullback levels are back towards 1.27084 and 1.21. Not to overlook is trend line support located at 1.30.
Written by, Sigmanomics Team
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Rerences:
Forex.com – Forex Trading Online – No. 1 Forex Broker in the US* – FX Markets – FOREX.com US
FX Street – Forex Analysis – FXStreet
