3 Conviction Forex Trade Ideas to Watch

As global markets brace for critical monetary policy decisions from the Federal Reserve and the Bank of England, major FX pairs are navigating heightened volatility driven by trade uncertainty, shifting rate expectations, and geopolitical stress. The US Dollar remains subdued ahead of tonight’s FOMC outcome, where no rate change is expected, but forward guidance will steer near-term sentiment. Meanwhile, the Euro and Pound are responding to political developments in Europe and expectations for further easing from the ECB and BoE. Amid these shifting dynamics, select currency pairs are offering high-conviction setups with favorable risk-reward profiles supported by macro catalysts and strong technical structure.

1. USD/JPY – Bearish Setup (High Conviction)

• Entry: 143.35–143.55 (retest of 100-period EMA and minor resistance)

• Stop Loss: 144.30

• Target 1: 142.00

• Target 2: 141.00

• Rationale:
  USD/JPY remains under heavy pressure following rejection at 144.28 and multiple failures to reclaim the 200-period SMA. With safe-haven flows into the Yen supported by intensifying geopolitical risk (Israel-Gaza, Ukraine-Russia) and Fed policy uncertainty, downside risk persists. The US’s tariff rebuff to Japan adds bilateral friction just as Treasury yields diverge from FX pricing, suggesting a dislocation.

• Reason for Conviction:
  Pre-FOMC volatility and global risk aversion support Yen strength; weak USD positioning could accelerate on dovish Powell commentary.

2. EUR/USD – Bullish Setup (Medium-High Conviction)

• Entry: 1.1340–1.1360 (near EMA support and ascending trendline base)

• Stop Loss: 1.1285

• Target 1: 1.1500

• Target 2: 1.1575 (April highs)

• Rationale:
  EUR/USD has held the 20-day EMA and shows a well-defined ascending channel structure, with RSI above 50 confirming positive momentum. A soft Fed tone and stable Merz-led German coalition reduce political risk in the Eurozone, while ECB dovishness is mostly priced in. A weaker USD trend amid the US-China talks and lower growth expectations supports bullish continuation.

• Reason for Conviction:
  Strong technical structure intact with immediate support holding; scope for breakout on dovish Fed tone.

3. GBP/USD – Bullish Rebound Setup (Medium-High Conviction)

• Entry: 1.3300–1.3330 (retest of 100-period EMA on 4H and psychological round number)

• Stop Loss: 1.3245

• Target 1: 1.3445

• Target 2: 1.3570

• Rationale:
  GBP/USD remains bid despite expected BoE rate cut due to stronger-than-expected GBP flows, political stability, and risk sentiment improvement. Near-term dips into 1.33 should attract demand if the Fed leans dovish. Technical indicators remain supportive, and key structural levels near 1.3250 continue to hold.

• Reason for Conviction:
  Strong pre-BoE bid tone suggests any rate cut is largely priced; dovish Fed and firm GBP flows support upside.

Summary of Trade Setups:

The highest conviction trade remains EUR/USD long, as the pair holds above key support near 1.1320 amid resilient Eurozone sentiment and a softer USD backdrop. The bullish structure remains intact unless the Fed delivers an unexpectedly hawkish message. Meanwhile, USD/JPY short continues to look attractive with the pair capped below 144.00, facing pressure from a resurgent Yen supported by trade tensions, geopolitical risk, and BoJ policy divergence. Lastly, GBP/USD long presents a medium-confidence opportunity; while the BoE is expected to cut rates, the Pound remains resilient near 1.3300, with recent pullbacks likely offering dip-buying opportunities if support holds post-BoE.

These setups reflect positioning into pivotal event risks, where clarity from Powell and Bailey will determine follow-through momentum in the coming sessions.

Check out moreForex Trade Setups on our forex page.

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