EUR/USD stalls despite tailwinds as intervention fears cap EUR/JPY upside

• EUR/USD correlations with yields, equities and crude remain near extreme levels
• WSJ report on Gulf military access sparks sharp reversal in oil prices
• Payrolls consensus looks modest following the strong ADP print
• EUR/USD keeps printing topside rejection wicks above 1.1747
• Suspected Japanese intervention caps EUR/JPY upside at 184.80

Bulls hesitate despite supportive conditions

EUR/USD price action has looked increasingly unconvincing over the past week, repeatedly rejected on probes towards 1.1800 despite a macro backdrop that should, in theory, be supportive for gains against the dollar.

Lower crude prices, easing volatility, firmer equities and declining US yields have typically aligned with EUR/USD strength recently, yet the pair has struggled to capitalise.

That hesitation stands out even more when viewed against the incredibly tight grip crude oil continues to hold over broader asset classes. Over the past five days, EUR/USD has posted near perfect inverse correlations with US two-year yields at -0.99 and US 10-year yields at -0.97. The pair has also tracked S&P 500 futures closely at 0.95, global equities at 0.93 and Brent crude futures inversely at -0.87.

That grip was again on display overnight after the Wall Street Journal reported Saudi Arabia and Kuwait had lifted restrictions on the US military’s use of airspace and bases, potentially allowing Washington to restart escort operations through the Strait of Hormuz as early as this week. Crude prices rallied on the report before adding to gains on news of explosions near Bandar Abbas in Iran, reinforcing how sensitive markets remain to developments in the Gulf.

Payrolls risk looms for the dollar

The inability of EUR/USD to build upon the supportive backdrop may reflect caution ahead of US nonfarm payrolls later today where an increase of 62,000 is expected alongside an unchanged unemployment rate of 4.3%.

The payrolls forecast also looks skinny relative to other labour market indicators received this week, including ADP private payrolls which printed at 109,000 in April, the strongest increase since January 2025. ADP has also not had a bad recent track record leading the private payrolls component within the establishment survey, leaving open the possibility markets may be underestimating upside risks in the official release.

As ever, the direction and magnitude of the deviation from consensus is what markets tend to initially react to, with stronger payrolls generally supporting the dollar, and vice versa. If accompanied by complementary movement in the unemployment rate, which is what the Fed cares most about, the reaction in the greenback can often become far more meaningful.

A combination of a sizeable payrolls beat alongside a lower unemployment rate would likely boost the dollar, with the opposite if the results disappoint. While developments in the Gulf continue to dictate broader market direction for now, payrolls still carries the capacity to generate sizeable short-term volatility in this environment and should not be underestimated by traders.

EUR/USD struggles to sustain upside breaks

Source: TradingView

While the overall bias for EUR/USD has been higher over the past week, the price action has been anything but convincing for the bulls. It's been a slog rather than a gallop, with the string of long topside wicks above the 50% retracement of the February-March bear move delivering an increasingly bearish message even though we haven't seen a classical topping pattern emerge as yet.

Above 1.1747 up to 1.1800, bears are lining up to sell, casting doubt on how much longer bulls will be willing to defend the 200DMA given the repeated inability to break higher. That's the immediate range for traders to focus on as we head towards payrolls and the weekend.

Beneath the 200DMA, we also have the 38.2% Fibonacci retracement of the February-March move along with the 50DMA, creating a support zone that may deter bears from becoming overly aggressive without a meaningful catalyst, be it another escalation in the Gulf or a much stronger-than-expected payrolls report.

However, with little significant technical support evident beneath that zone, if it gives way, focus would shift towards a potential retest of the March lows with only the 23.6% retracement level and the 1.1500 handle of note in between.

Above the resistance zone from 1.1747 up to 1.1800, the levels to watch include 1.1850, which has already acted as both support and resistance this year, along with 1.1918, the swing high set in September last year.

While RSI (14) and MACD continue to marginally favour the bulls, both are flatlining near neutral levels, signalling momentum is not with either side right now. That places greater emphasis on the price action when assessing trade setups as they emerge.

EUR/JPY trapped between intervention and momentum

Source: TradingView

Whereas crude fluctuations resulting from Gulf headlines remain the dominant driver of EUR/USD movements, for EUR/JPY the largest force over the past week has been suspected intervention from the Bank of Japan on behalf of the Japanese government, using thin market conditions in the Asian session with Chinese and Japanese markets offline to sell into strength.

Of which there has been plenty.

One look at the daily chart tells the opposite story to EUR/USD, with a string of long downside wicks from support at 182.00 the obvious feature.

Overhead, the confluence of resistance near 184.80 with the 50DMA has been capping gains, providing traders with a clear range to work with today.

With four suspected rounds of intervention already under the belt, Japanese officials may be reluctant to continue fighting the broader bearish yen trend until macro conditions become more suitable, so don't for one second believe the BOJ will be asked to step in again should the price break and hold above 184.80.

If that does eventuate, 186.23 has acted as both support and resistance recently, making it the next level overhead to watch before the April swing high near 188 comes into view.

Beneath 182.00, 180.82 and the confluence of the 200DMA with 180.00 would be on the radar should we see a more sustained push lower.

Unless backed by fundamentals supportive of yen strength, further dips towards 182.00 that fail to be sustained would make for decent long entries, allowing for stops to be placed beneath the zone while targeting 184.80 initially.