EUR/USD gains limited while USD/CAD makes a reversal, and USD/JPY falls

EUR/USD gains limited at key resistance while USD/CAD makes a key reversal and USD/JPY fails at 200-day SMA.

US dollar price analysis and talking points

  • EUR/USD edges towards key resistance
  • USD/CAD makes a key reversal
  • USD/JPY fails at 200-day simple moving average (SMA)

Option markets point to muted session

Today’s session is likely to see major forex pairs trading in relatively narrow ranges with option implied volatility suggesting tame price action. Alongside this, sizeable vanilla option expiries may also curb volatility given that they can act as a draw in times subdued price action.

These expiries over the next two days are particularly evident in EUR/USD, GBP/USD and USD/JPY.

EUR/USD edges towards key resistance

The euro has made a notable turnaround following the Federal Reserve's (Fed) rate decision. Initially, the market had interpreted the decision as a hawkish cut, resulting in USD upside. However, this had quickly reversed after Chairman Jerome Powell stated that a rate hike would only take place if inflation rose significantly, thus setting a high bar for future rate hikes.

That said, EUR/USD is testing the 200-day SMA at $1.1171 and is trading at last weeks highs. Although, with risks still tilting to the downside in the eurozone and with trade war headlines dampening market sentiment, gains in the pair are somewhat limited above $1.12.

USD/CAD makes a key reversal

The Canadian dollar saw a notable drop following the dovish Bank of Canada (BoC) rate decision, in which the central bank removed its rhetoric that current rates remain appropriate, while also highlighting that Canada’s resilience is likely to be increasingly tested amid the global uncertainty.

Consequently, money markets made a sharp repricing of future easing from the BoC in 2020, prompting a key reversal in USD/CAD. As the pair made a close above $1.3145, risks are tilted towards further gains with the $1.32 handle in focus, particularly if risk sentiment deteriorates.

USD/JPY fails at 200-day SMA

Post the FOMC decision, USD/JPY traded above its 200-day SMA for the first time since the beginning of May. However, the pair had failed to make a close above this and subsequently proceeded to trend lower. Reports this morning that China do not see a long-term trade deal with President Trump has benefitted safe-havens, with USD/JPY back towards the ¥108.20-108.30 support.

Given the large option expiry at ¥108.00 further losses may be curbed in the near term, unless there is a further deterioration in risk appetite. As a reminder, the next key event is tomorrow’s Non-Farm Payroll (NFP) and ISM releases with the Fed outlook now increasingly data dependent.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.