Top 4 High-Conviction FX Trades to Watch
As macro headwinds evolve and geopolitical tensions ebb and flow, FX markets continue to offer tactical opportunities driven by central bank divergence, technical levels, and cross-asset sentiment. Friday’s session saw a pickup in USD strength as durable goods orders beat expectations, reinforcing the idea that the Fed may delay rate cuts further—even amid tariff-induced inflation concerns. Meanwhile, Tokyo CPI surprised to the upside, nudging the BoJ closer to a rate hike, but markets are unconvinced. The yen continued its slide as risk sentiment remained firm and U.S. yields ticked up.
Below, we break down the top trade setups heading into the Friday London–New York overlap, complete with entry levels, stops, targets, and the reasons backing each trade idea.
| Pair | Direction | Entry | Stop | Target(s) | Confidence | Rationale |
| USD/JPY | Long | 143.10–143.40 | 142.25 | 144.40 / 145.20 | ★★★★☆ | JPY weakness persists on risk-on tone, while Tokyo CPI > 3.4% YoY suggests future BoJ hikes. Fed easing bets cap USD upside, but BoJ-Fed divergence and break of 143.80 favors long setups.
BoJ-Fed divergence is widening again with Tokyo CPI surprising to the upside and the Fed pivoting more dovish on tariffs. USD/JPY broke above key resistance at 143.80, confirming bullish momentum. |
| EUR/JPY | Long | 153.8 | 152.9 | 155.50 / 156.30 | ★★★☆☆ | JPY underperforms broadly on fading safe-haven demand. EUR still soft, but BoJ divergence + risk-on keeps JPY pressured.
JPY weakness is the main driver; EUR stable-to-soft, but broad JPY underperformance on risk-on sentiment supports long bias. Holding above 153.50 confirms continuation. |
| EUR/GBP | Short | 0.8550–0.8560 | 0.859 | 0.8485 / 0.8450 | ★★★★☆ | Strong UK retail sales vs. dovish ECB comments fuel downside in EUR/GBP. Watching 0.8530–0.8550 area for exhaustion.
UK data surprised positively while ECB remains dovish. Momentum is with GBP, and technical rejection at 0.8560 adds confluence. EUR is also weak cross-board. |
| USD/CHF | Long | 0.8280–0.8300 | 0.823 | 0.8370 / 0.8420 | ★★★☆☆ | USD supported by durable goods and China tariff optimism. SNB may prefer FX intervention over cuts. Long bias while >0.8280.
USD strength on risk appetite + durable goods; CHF soft as SNB sits on sidelines. Breakout from multi-day range above 0.8300 gives momentum edge. |
Our Top Trade Setup
USD/JPY – Bullish Continuation Above 143.80 on BoJ-Fed Divergence
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Bias: Long
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Entry: 143.90–144.10
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Target: 145.20
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Invalidation: Sustained break below 143.20
Rationale:
USD/JPY has resumed its bullish trajectory following a clean break above the critical resistance zone at 143.80, a level that had capped price action for several weeks. This breakout is technically significant—it marks the completion of a multi-session consolidation phase and reaffirms upward momentum within the broader trend.
Fundamentally, the macro backdrop supports further USD/JPY gains. April’s Tokyo CPI surprised to the upside, printing above 3.4% YoY, stoking speculation of future rate hikes by the Bank of Japan. However, the BoJ remains cautious and is signaling a very gradual normalization path, reinforcing that any tightening will likely be slow and measured. This starkly contrasts with the U.S. Federal Reserve, which—despite sticky inflation and strong labor market data—is now showing signs of pivoting more dovish in response to tariff-related uncertainties and slowing global trade.
This BoJ-Fed policy divergence is widening, with Japanese real yields remaining deeply negative while U.S. Treasury yields resume their ascent. Rising 10-year U.S. yields, anchored by resilient core inflation and reduced Fed rate cut expectations, are providing further tailwinds to USD/JPY. In short, the interest rate differential continues to favor the dollar.
At the same time, a risk-on market tone, fueled by easing tensions in U.S.-China trade rhetoric, is helping suppress JPY’s safe-haven demand. Typically, such an environment keeps funding currencies like the yen under pressure.
The breakout above 143.80 not only clears a key horizontal level but also confirms a bullish continuation pattern, unlocking the next upside target at 145.20, a former short-term top. Momentum indicators are aligned with the move, and positioning remains supportive of further upside with limited speculative overextension.
While Fed easing bets still hover in the background and may cap aggressive dollar upside, the path of least resistance for USD/JPY remains higher in the near term due to this persistent divergence in central bank trajectories.
Summary:
USD/JPY’s technical breakout above 143.80 confirms bullish continuation, supported by a widening BoJ-Fed policy divergence, strong U.S. data, and rising Treasury yields. Upside risks are further reinforced by a risk-on tone that continues to suppress JPY demand. A move toward 145.20 appears likely unless a clear reversal below 143.20 emerges.
JPY crosses remain the clearest directional plays into Friday, with broad yen softness supported by yield differentials and improving risk sentiment. USD strength is reasserting itself on the back of firm U.S. data and tariff-related positioning, keeping pairs like USD/JPY and USD/CHF well bid. EUR remains a preferred funding short, while GBP stands firm—particularly versus the euro. As always, monitor headlines for any escalation in U.S.-China trade rhetoric or BoJ verbal intervention, which could inject volatility into JPY pairs.
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