Pre-BoJ Positioning Lifts Yen, Dollar Holds Top Spot – Action Forex

Yen recovered broadly in Asian session, likely helped by short-covering ahead of Thursday’s BoJ policy decision. Traders may be bracing for surprises in the central bank’s updated economic projections, particularly after last week’s US-Japan trade deal lifted some trade-related uncertainty. Although no rate hike is expected, any forward-leaning language suggesting rate hikes in the near term could jolt markets and catch Yen bears off guard.

Across the broader currency markets, Euro remains the worst underperformer for the week after retracing sharply from recent highs. Nevertheless, yesterday’s post-deal drop was not a collapse but rather a technical correction of gains built over the past month. Swiss Franc and Kiwi are also soft, while Dollar continues to lead the majors. Loonie and Yen are gaining ground, while Sterling and Aussie hover in the middle.

On the trade front, US President Donald Trump announced on Monday that countries lacking bilateral deals will soon face a flat tariff of 15–20% when exporting to the US The move aims to simplify trade enforcement and boost U.S. leverage in negotiations. “We’re going to be setting a tariff for essentially the rest of the world,” Trump declared, making clear the US won’t wait on a patchwork of slow-moving talks.

South Korea, meanwhile, is still rushing to avoid the looming 25% tariff threat. Finance Minister Koo Yun-cheol said today he will travel to Washington to pursue a mutually beneficial trade agreement. Koo joins a delegation of senior officials in last-ditch talks with UScounterparts, including Treasury Secretary Bessent and Commerce Secretary Lutnick.

Meanwhile, top US and Chinese trade officials met in Stockholm on Monday for more than five hours of negotiations. While no breakthroughs were announced, both sides signaled that talks would continue Tuesday. Expectations are rather low, as US Trade Representative Jamieson Greer said the goal was to ensure proper implementation of existing deals and improve access to key materials.

Technically, Gold weakened this week following Dollar’s rally. Immediate focus is now on 3039.64 support. Firm break there will suggest that rebound from 3248.21 has completed at 3438.89. Deeper decline should then be seen to 3248.21 and possibly below. After all, Gold is extending the corrective pattern from 3499.79 high, which would likely continue for a while.

In Asia, at the time of writing, Nikkei is down -1.04%. Hong Kong HSI is down -1.02%. China Shanghai SSE is flat. Singapore Strait Times is down -0.59%. Japan 10-year JGB yield is down -0.004 at 1.566. Overnight, DOW fell -0.14%. S&P 500 rose 0.02%. NASDAQ rose 0.33%. 10-year yield rose 0.034 to 4.420.

Ranges hold in EUR/USD and stocks even as US-EU deal slammed

Investor sentiment cooled overnight as markets reassessed the US–EU trade agreement more critically. While initially welcomed for averting harsher tariff scenarios, the deal is now being viewed by many as a near-term drag on European growth. What once seemed like a “good deal” in absolute terms is now being interpreted as a relative setback for the EU economy.

Political backlash within Europe has intensified. French Prime Minister Francois Bayrou called the framework a “dark day” for Europe, accusing the bloc of capitulating to US demands. German Chancellor Friedrich Merz also warned that the tariffs embedded in the deal would inflict “significant” damage on Germany’s export-driven economy.

Despite the rhetoric, equity market reactions remained contained. Germany’s DAX lost -1.02% and France’s CAC fell -0.43%, but both indexes remain within tight sideways trading ranges. In the US, DOW dipped slightly by -0.14% while S&P 500 eked out a small gain of 0.02%, signaling that investors don’t see the agreement as overwhelmingly skewed toward American interests either.

EUR/USD came under strong selling pressure yesterday. However, the move is seen as part of the corrective pattern from 1.1829 short term top. Larger up trend is still expected to resume later. This view will hold as long as 55 D EMA (now at 1.1538) holds.

That said, technical headwinds are clearly building. The pair already touching the long term rising channel resistance, and nearing a long-term Fibonacci projection level at 1.1916, 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Bearish divergence on D MACD suggests fading momentum, recent up trend is clearly running out of steam. Sustained break of 55 D EMA will argue that it’s already in a larger scale correction after rejection by 1.1916.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 171.52; (P) 172.71; (R1) 173.36; More…

Intraday bias in EUR/JPY is turned neutral first with current steep retreat. Further rise could still be seen as long as 171.35 support holds. Break of 173.87 should pave the way to retest 175.41 high. However, considering bearish divergence condition in 4H MACD, decisive break of 171.35 will confirm short term topping, after rejection by 138.2% projection of 154.77 to 164.16 from 161.06 at 174.03. Deeper pullback should then be seen towards 55 D EMA (now at 168.62).

In the bigger picture, considering current strong momentum as seen in the rally from 154.77, corrective pattern from 175.41 could have already completed. Decisive break there will confirm long term up trend resumption. Next target is 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. However, rejection by 175.41, followed by firm break of 55 D EMA (now at 168.62) will delay this bullish case.