USD Slides as Moody’s Downgrade Adds to Pressure: EUR, JPY and Gold Test Key Levels

• EUR/USD holds 1.1200 as bulls eye descending channel resistance
• USD/JPY hovers above key 145.00 support with risks skewed lower
• Gold bounces again from support, but $3270 needs to break to excite bulls
• Moody’s downgrade may spark renewed USD weakness

Summary

The U.S. dollar has opened the new week under pressure after Moody’s cut the nation’s Aaa credit rating late Friday, with EUR and JPY testing familiar levels in early Asian trade. U.S. stock index futures are softer, while gold is pushing higher. While the downgrade comes as no real surprise—especially with S&P and Fitch having already stripped the United States of its top rating in 2011 and 2023 respectively—the key difference this time is the dollar was already on the defensive, suggesting recent weakness could be exacerbated by the Moody’s decision.

With Chinese activity data for April the only major economic release of note in Asia, traders should stay alert for market-moving headlines, including any updates on trade negotiations or progress of the U.S. “big, beautiful” tax bill through the House. It’ll also be worth watching whether the wave of U.S. dollar selling often seen around the Chinese market open last week persists again today.

EUR/USD: Bears Defend 1.1200

Source: TradingView

Bulls and bears continue to slug it out around the key 1.1200 level, with that area again holding as we begin the week. Long topside wicks on daily candles late last week suggest bears won’t go down without a fight—even with the Moody’s downgrade in play.

Zooming out, EUR/USD remains within a descending channel, inching closer to a potential test of downtrend resistance from the April highs. With RSI (14) and MACD showing signs of waning bullish momentum, it may pay to focus on price action for now. A clean break above both 1.1200 and channel resistance would put 1.1276, 1.1380 and 1.1500 on the radar for bulls. On the downside, the 50DMA remains relevant after the strong bounce last week, and a break below appears unlikely for now.

USD/JPY Bears Eye Trend Break

Source: TradingView

USD/JPY is also in familiar territory early Monday, perched just above support at 145.00. That’s the key battleground today. A break would increase the probability of a retest of the uptrend from the April 22 lows. If that were to give way, 144.00 and 141.65 are the next levels to watch. If bulls hold 145.00, look for a move back towards the 50DMA, which capped gains on Friday.

While the broader trend remains higher, momentum signals such as RSI (14) and MACD have faltered, hinting a shift towards renewed selling pressure. The overall momentum picture looks neutral, but near-term risks are tilting to the downside.

Gold Bounces Hard Again

Source: TradingView

Gold posted another strong bounce on Friday from the confluence of the 50DMA and horizontal support at $3168, reinforcing the view that bullion remains a buy-on-dips story in the near-term—particularly with early signs that waning topside momentum may be starting to reverse. 

To get excited about an extended push higher, a break above $3270 resistance is needed. That level capped price action throughout last week. If bulls clear it, a retest of the April record highs comes into play, with resistance levels at $3367 and $3434 in focus. On the downside, unless we see a decisive break of the December 2024 uptrend, the zone between it and the 50DMA should continue to attract buyers. A break would shift risks to the downside, opening the door for a run towards support at $3057.50—though that looks unlikely for now.

-- Written by David Scutt

Follow David on Twitter @scutty