Higher core inflation would support a more aggressive rate hike. Inflation could also signal a larger cut to JGB purchases. Barring a Fed U-Turn on plans to cut interest rates, BoJ policy moves could send the USD/JPY below 150.
Conversely, a modest cut to JGB purchases and no rate hike could disappoint and fuel a pre-Fed USD/JPY return to 160.
For the BoJ, the issue extends beyond price stability. Household spending trends have reflected the effects of the weak Yen on import costs and consumer prices. After multiple interventions since April, the BoJ could face extra pressure to address price stability and the Yen’s weakness.
Broader Considerations for the Japanese Economy
Bank of Japan Deputy Governor Ryozo Himino recently commented on the effects of the Yen’s weakness on the economy, stating,
“Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices.”
S&P Global Market Intelligence Associate Director Jinyi Pan also observed the effects of the weak Yen on the private sector, saying,
“More concerning, however, is the pressure on margins for Japanese firms. Average input costs rose at the fastest pace in over a year while output price inflation softened in June, particularly in the service sector. Anecdotal evidence suggested that the effects of a weak Yen and rising labor costs brought up cost inflation.”
Notably, narrowing profit margins may affect the labor market and wage growth. Softer wage growth could reduce household spending. In Q1 2024, private consumption fell by 0.7%, impacting the economy.
After considering the inflation numbers from Japan, FOMC Member speeches could also influence near-term USD/JPY trends.
Fed Forward Guidance
FOMC Members John Williams and Raphael Bostic are on the calendar to speak on Friday.
Investors should consider reactions to recent US inflation and labor market data. Support for a September Fed rate cut may fuel speculation about a December interest rate cut.
On Wednesday, NY Fed President John Williams poured cold water on a July rate cut but indicated a possible September cut. A more decisive stance toward September could reduce buyer demand for the US dollar.
However, comments from Raphael Bostic may have more impact on sentiment toward the Fed rate path. The Atlanta Fed President has not spoken since Fed Chair Powell sent September Fed rate cut signals during testimony on Capitol Hill.
Short-term Forecast: Bearish
USD/JPY trends could hinge on July services PMI numbers on July 24 and the US Personal Income and Outlays Report on July 26. A pickup in Japan’s services sector may raise investor expectations of a July 31 BoJ interest rate hike and cut to JGB purchases
Conversely, weaker US services sector activity and softer US inflation could greenlight September and December Fed rate cuts.
The USD/JPY could drop below 150 on a narrowing to interest rate differentials in favor of the Yen.
Investors should remain alert. Monitor real-time data, central bank commentary, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.
USD/JPY Price Action
Daily Chart
The USD/JPY remained below the 50-day EMA while sitting comfortably above the 200-day EMA. The EMAs affirmed the bearish near-term but bullish longer-term price signals.
A USD/JPY move above the 50-day EMA could signal a return to 160. A break above 160 could support a move to the July 3 high of 161.951.
Bank of Japan and Fed commentary require consideration on Friday.
Conversely, a drop below the 155 handle could give the bears a run at the 200-day EMA and the 151.685 support level.
The 14-day RSI at 41.89 suggests a USD/JPY break below 155 before entering oversold territory.
U.S. crude oil fell on Friday, but still booked a fourth straight weekly gain as falling inventories show an uptick in demand.
West Texas Intermediate hit a session high of $84.52 per barrel, the highest level since late April, before pulling back. The U.S. benchmark gained about 2% this week, while global benchmark Brent was up 0.15%.
Here are Friday’s closing energy prices:
West Texas Intermediate August contract: $83.16 per barrel, down 72 cents, or 0.86%. Year to date, U.S. crude oil has gained 16.1%.
Brent September contract: $86.54 per barrel, down 89 cents, or 1.02%. Year to date, the global benchmark is ahead by 12.3%.
RBOB Gasoline August contract: $2.56 per gallon, down 3 cents, or 1.31%. Year to date, gasoline is ahead by 22.1%.
Natural Gas August contract: $2.32 per thousand cubic feet, down 9 cents, or 3.85%. Year to date, gas is lower by 7.5%.
Oil market analysts have been forecasting a tighter market in the third quarter as summer fuel demand picks up. U.S. inventory data appeared to confirm those forecasts, with crude stocks declining by 12.2 million barrels and gasoline falling by 2.2 million barrels last week.
“With oil inventories beginning to decline as a result of solid demand and constrained supply growth, investors have started to build oil exposure again,” Giovanni Staunovo, commodity analyst at UBS, told clients in a note on Thursday.
See Chart…
WTI vs. Brent
UBS is forecasting that global oil demand will grow by 1.5 million barrels per day, or bpd, this year, above the long-term growth rate of 1.2 million bpd. The bank is forecasting bigger inventory declines in the coming weeks as OPEC+ keeps production cuts in place through September.
“As such, we still believe Brent will likely reach the USD $90/bbl mark this quarter,” Staunovo said. JPMorgan has also forecast that Brent will hit $90 per barrel in August or September.
The ECB kept its policy rates unchanged, as expected.
ECB’s Lagarde sees inflation hitting the target in H2 2025.
The US Dollar (USD) regained momentum on Thursday, lifting the USD Index (DXY) back above the 104.00 barrier, helped by the decent bounce in US yields across various maturity periods.
Against that, EUR/USD set aside two consecutive sessions of gains and challenged the 1.0900 region, also following the dovish hold by the ECB at its meeting on Thursday and a marginal uptick in German 10-year bund yields.
Back to the ECB event, during her press conference, President Christine Lagarde argued that she expects the recovery to be supported by consumption, highlighting the resilience of the labour market. She also noted that domestic inflation remains high and that wages are rising at an elevated rate. Additionally, she projected that the Harmonized Index of Consumer Prices (HICP) would decline to the bank’s target in the second half of 2025. Furthermore, Lagarde also identified wages, profits, and geopolitical factors as potential upside risks to inflation.
Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.
The CME Group’s FedWatch Tool indicates a nearly 98% probability of lower rates at the September 18 meeting, with another rate cut fully anticipated in December.
Supporting this outlook, Austan Goolsbee, President of the Chicago Federal Reserve Bank, expressed that the US economy seems to be reverting to a 2% inflation target following an earlier increase this year. His observations indicate growing confidence that the opportunity to reduce interest rates may be approaching.
Meanwhile, the economic recovery prospects in the Eurozone and signs of cooling in key US economic indicators may mitigate the ongoing disparity in monetary policy between the Fed and the ECB, occasionally supporting the EUR/USD pair in the near future. This perspective has gained traction pari passu rising expectations of Fed interest rate cuts.
Looking ahead, upcoming Fedspeak should dictate the pair’s price action as the trading week draws to a close.
EUR/USD daily chart
EUR/USD short-term technical outlook
EUR/USD is expected to face the next upward resistance at 1.0948 (July 17), followed by the March high of 1.0981 (March 8) and the psychological 1.1000 level.
If bears retake control, the pair may target the 200-day SMA of 1.0810 before sliding to the June low of 1.0666 (June 26). The loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).
Looking at the larger picture, it looks that further gains are on the way if the important 200-day SMA is surpassed on a convincing fashion.
So far, the 4-hour chart shows some loss of upside momentum for the time being. However, the initial resistance is 1.0948, before 1.0981 and 1.1000. On the other hand, the 55-SMA at 1.0872 comes first, followed by the 200-SMA at 1.0793, and then 1.0709. The relative strength index (RSI) dropped to about 47.
EUR/USD reversed part of the recent strong gains.
The ECB kept its policy rates unchanged, as expected.
ECB’s Lagarde sees inflation hitting the target in H2 2025.
The US Dollar (USD) regained momentum on Thursday, lifting the USD Index (DXY) back above the 104.00 barrier, helped by the decent bounce in US yields across various maturity periods.
Against that, EUR/USD set aside two consecutive sessions of gains and challenged the 1.0900 region, also following the dovish hold by the ECB at its meeting on Thursday and a marginal uptick in German 10-year bund yields.
Back to the ECB event, during her press conference, President Christine Lagarde argued that she expects the recovery to be supported by consumption, highlighting the resilience of the labour market. She also noted that domestic inflation remains high and that wages are rising at an elevated rate. Additionally, she projected that the Harmonized Index of Consumer Prices (HICP) would decline to the bank’s target in the second half of 2025. Furthermore, Lagarde also identified wages, profits, and geopolitical factors as potential upside risks to inflation.
Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.
The CME Group’s FedWatch Tool indicates a nearly 98% probability of lower rates at the September 18 meeting, with another rate cut fully anticipated in December.
Supporting this outlook, Austan Goolsbee, President of the Chicago Federal Reserve Bank, expressed that the US economy seems to be reverting to a 2% inflation target following an earlier increase this year. His observations indicate growing confidence that the opportunity to reduce interest rates may be approaching.
Meanwhile, the economic recovery prospects in the Eurozone and signs of cooling in key US economic indicators may mitigate the ongoing disparity in monetary policy between the Fed and the ECB, occasionally supporting the EUR/USD pair in the near future. This perspective has gained traction pari passu rising expectations of Fed interest rate cuts.
Looking ahead, upcoming Fedspeak should dictate the pair’s price action as the trading week draws to a close.
EUR/USD daily chart
EUR/USD short-term technical outlook
EUR/USD is expected to face the next upward resistance at 1.0948 (July 17), followed by the March high of 1.0981 (March 8) and the psychological 1.1000 level.
If bears retake control, the pair may target the 200-day SMA of 1.0810 before sliding to the June low of 1.0666 (June 26). The loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).
Looking at the larger picture, it looks that further gains are on the way if the important 200-day SMA is surpassed on a convincing fashion.
So far, the 4-hour chart shows some loss of upside momentum for the time being. However, the initial resistance is 1.0948, before 1.0981 and 1.1000. On the other hand, the 55-SMA at 1.0872 comes first, followed by the 200-SMA at 1.0793, and then 1.0709. The relative strength index (RSI) dropped to about 47.
The internal downtrend line marks dynamic resistance for the current bear trend (retracement) as a rally above it will provide the first sign of strength that could lead to additional confirmation of strength. However, once today is complete, a rally above today’s high provides a short-term bullish indication. Upside follow through would then be key. Yesterday’s high was 2.21. It is fair to say that a sustainable bullish signal is not likely until natural gas rallies back above that high. That is as it stands now.
Initial Upside Target from 2.44 to 2.47
If a rally can get moving, an initial upside target for natural gas looks to be around 2.44. That begins a potential resistance zone up to 2.47, marked by several indicators. Both the 200-Day MA and 20-Day MA are at 2.44. A prior swing low support level, now potential resistance, lies around 2.47. Further, the downtrend line converges with this price area. But it doesn’t end there. The 38.6% Fibonacci retracement of the decline is within the zone at 2.45. Finally, notice that the most recent minor internal upswing caught resistance on July 9 at 2.45.
Below 2.00 Targets 1.92
Although there are reasons to suspect that the 2.02 to 2.00 price zone may continue to act as support, followed by a rally, the 61.8% Fibonacci retracement was exceeded to the downside on Monday. That opens the door to the 78.6% Fibonacci retracement at 1.92. The 2.02 to 2.00 price zone is derived from the completion of a descending ABCD pattern extended by the 161.8% golden ratio. It is anchored by a prior swing high from early-March at 2.00, which is also the top of a bottom symmetrical triangle pattern.
For a look at all of today’s economic events, check out our economic calendar.
GBP/USD broke through the psychological resistance level of 1.3000, extending gains to 1.3044 and remaining close to its highest level in a year.
Obviously, this rise followed the UK’s June inflation rate holding at 2%, contrary to expectations of a slowdown to 1.9%.
Also, service inflation failed to decrease, remaining at 5.7%, above the Bank of England’s forecast of 5.1%.
Overall, bets on a Bank of England rate cut in August fell to around 33% from around 49% before the CPI release. Last week, BoE Chief Economist Hugh Bell confirmed that service price inflation and wage growth remain strong. Now, traders are awaiting further data including wage growth and retail sales due this week to assess the timing of the first cut in borrowing costs.
On another note, the yield on the British 10-year government bond rose after the CPI data. According to trading platforms, the yield on the British 10-year government bond rose to 4.08% from a three-week low on Tuesday, as traders reduced their bets on a Bank of England rate cut in August after higher-than-expected inflation data in Britain. Furthermore, the consumer price index remained at the Bank of England’s target of 2% for the second month in a row in June, but inflation in the services sector remained high at 5.7%. Likewise, economists had expected a decline to 1.9%, while the Bank of England expected services inflation to reach 5.1%. The results raised concerns that inflation, although currently at the target level, may not stay there, which could delay the Bank of England’s plans to cut interest rates.
As a result, traders reduced the probability of a rate cut on August 1 to around 30%, down from more than 40% the previous day.
In the United States, the Federal Reserve is expected to start cutting interest rates in September, with two more cuts expected before the end of the year. Recently, Fed Chairman Jerome Powell has indicated that recent data has increased confidence that inflation will return to target and suggested that the central bank should cut rates before inflation reaches 2%.
On the stock trading platforms front, British stocks fall for a third session after inflation printing. According to online trading platforms, the FTSE 100 index fell slightly on Wednesday, recording a third consecutive session of losses as traders revised their expectations for an August interest rate cut by the Bank of England. Clearly, the revision came on the heels of UK inflation data that beat economists’ expectations. Also, the consumer price index (CPI) held steady at the Bank of England’s 2% target for a second month in June, but highlighted ongoing price pressures in the services sector, which held steady at 5.7%. Again, Economists had expected the headline rate to fall to 1.9%, while the Bank of England had forecast services inflation to reach 5.1%. Decisively, these figures suggest that although inflation is currently at target, it may not stay there, which could delay the Bank of England’s plans to cut interest rates. As a result, traders have reduced the probability of a rate cut on August 1 to around 30%, down from more than 40% the day before.
In corporate news, copper miner Antofagasta fell more than 2.5% after forecasting annual production at the lower end of its guidance.
Technical forecasts for the GPB/USD pair today:
As we mentioned before, the GBP/USD exchange rate broke the 1.3000 psychological resistance level, confirming the bulls’ strong control over the trend. Based on the performance on the daily chart above, technical indicators will move towards strong overbought levels if bulls move towards the 1.3065 and 1.3120 resistance levels respectively. Today’s GBP/USD gains will be influenced by the announcement of UK jobs and wages figures, followed by the announcement of the US weekly jobless claims number. On the other hand, and in the same time frame, moving towards support 1.2880 threatens to rebound to the current high.
Crude oil prices edged higher on Tuesday, June 11, after the Organisation of Petroleum Exporting Countries and its allies (OPEC+) stuck to its forecast for a relatively strong growth in global oil demand in 2024. Investors also waited for the outcome of the US Federal Reserve’s policy decision, which was due on Wednesday, June 12, as it may impact the global oil demand outlook.
Brent crude futures rose 49 cents, or 0.6 per cent, to $82.11 a barrel, continuing a sharp recovery since closing at a four-month low of $77.52 last week. That closing level was the lowest since February amid concerns of oversupply and low demand through the rest of 2024.
US West Texas Intermediate (WTI) crude futures gained 41 cents, or 0.6 per cent, to $78.15. Coming to domestic prices, crude oil futures last traded 0.76 per cent higher at ₹6,535 per barrel on the multi-commodity exchange (MCX).
What’s working for crude oil prices?
-OPEC maintained its 2024 forecast for relatively strong growth in global oil demand despite lower-than-expected use in the first quarter. It said travel and tourism would support consumption in the second half of the year. OPEC+ agreed to extend most of its deep oil output cuts well into 2025.
-Analysts noted that they are now at least considering the idea that maybe oil demand will pick up in the second half, and the market may actually need some additional OPEC supply after the OPEC’s demand outlook released today.
-The World Bank said on Tuesday that US economy’s stronger-than-expected performance has prompted it to lift its 2024 global growth outlook, but warned that overall output would remain well below pre-pandemic levels through 2026.
-Strong US economic data and inflation still higher than the Fed’s target have pushed financial markets to limit rate cut expectations to only two 25-basis points rate reductions this year, likely starting in September. Economists have said there was a considerable risk of only one or no rate cuts in 2024.
-The release of US consumer prices data for May and the conclusion of the Fed’s two-day policy meeting are both scheduled for Wednesday. The European Central Bank (ECB) should persist in restraining economic growth given the inflationary pressures and wait with its next rate cut until uncertainty recedes, said chief economist Philip Lane.
-If China’s producer price index (PPI) falls by two per cent or more year on year it would suggest that the deflationary risk spiral remains entrenched in China, which could result in lower demand for oil, according to analysts.
-Deflation can stifle spending as businesses and consumers delay purchases with the expectation that prices will fall, hitting economic activity and dampening oil demand. Saudi crude exports to China fell for a third straight month, pressuring prices further. US crude oil stockpiles were expected to have fallen by 1.8 million barrels in the week to June 7.
WTI crude oil futures rose more than three per cent at the start of week, on expectations of higher demand. US Energy Secretary Jennifer Granholm told Reuters that US could hasten the replenishment rate of Strategic Petroleum Reserve as maintenance on the stockpile is completed by the end of the year. The expectations of rising fuel demand this summer also aids the prices, according to Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.
Analysts noted that Goldman Sachs predicts that crude oil demand will surge in the third quarter due to the peak summer driving season, with Brent prices potentially testing $86 a barrel. Additionally, they foresee a global oil market deficit of 1.3 million barrels per day in the third quarter.
‘’Crude oil prices are being supported by upbeat demand estimates from Goldman Sachs. However, strength in the dollar index could limit gains. We expect crude oil prices to remain volatile. Crude oil has support at $76.70–76.10 and resistance at $77.90–78.50. In INR, crude oil has support at ₹6,410–6,360 and resistance at ₹6,560–6,620,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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The European Central Bank left interest rates unchanged, failed to trigger action.
Mixed United States data and an uptick in Treasury yields helped the US Dollar.
XAU/USD eases for a second consecutive day, the bearish potential is well limited.
Spot Gold trades with a soft tone on Thursday, hovering around its daily opening just below the $2,460 mark. The US Dollar found some demand as government bond yields pared losses and posted a modest rebound, while stock markets turned south amid a worsening market mood. Discouraging American data coupled with an uneventfull European Central Bank (ECB) monetary policy announcement, pushing investors into safety.
The ECB left interest rates unchanged as widely anticipated, while the accompanying statement showed policymakers would remain data-dependant and take decisions meeting by meeting. European officials are considering that only one more rate cut this year could be possible, as inflation remains above the central bank’s goal.
United States (US) data was mixed, as Initial Jobless Claims for the week ended July 12 unexpectedly jumped to 243K, much worse than the 230K anticipated by market players. On the other hand, the July Philadelphia Fed Manufacturing Survey improved to 13.9 after printing at 1.3 in June and beating the expected 2.9.
It is worth adding, however, that the US Dollar shows limited strength, suggesting the current advance will remain corrective.
XAU/USD short-term technical outlook
The XAU/USD pair is under mild selling pressure for a second consecutive day, albeit barely retreating from record highs. Technical readings in the daily chart are far from suggesting a stepper decline, as indicators have barely retreated from overbought territory while lacking clear directional strength. At the same time, the pair keeps developing well above bullish moving averages, with the 20 Simple Moving Average (SMA) providing dynamic support at around $2,370.
In the near term, and according to the 4-hour chart, the technical picture is pretty much the same. XAU/USD is developing just above a firmly bullish 20 SMA, while the 100 and 200 SMAs also head higher, well below the shorter one. Technical indicators, in the meantime, pulled back from overbought readings but turned flat within positive levels, suggesting limited selling interest at the time.
Support levels: 2,448.90 2,435.50 2,422.65
Resistance levels: 2,465.00 2,483.70 2,495.00
XAU/USD Current price: $2,453.23
The European Central Bank left interest rates unchanged, failed to trigger action.
Mixed United States data and an uptick in Treasury yields helped the US Dollar.
XAU/USD eases for a second consecutive day, the bearish potential is well limited.
Spot Gold trades with a soft tone on Thursday, hovering around its daily opening just below the $2,460 mark. The US Dollar found some demand as government bond yields pared losses and posted a modest rebound, while stock markets turned south amid a worsening market mood. Discouraging American data coupled with an uneventfull European Central Bank (ECB) monetary policy announcement, pushing investors into safety.
The ECB left interest rates unchanged as widely anticipated, while the accompanying statement showed policymakers would remain data-dependant and take decisions meeting by meeting. European officials are considering that only one more rate cut this year could be possible, as inflation remains above the central bank’s goal.
United States (US) data was mixed, as Initial Jobless Claims for the week ended July 12 unexpectedly jumped to 243K, much worse than the 230K anticipated by market players. On the other hand, the July Philadelphia Fed Manufacturing Survey improved to 13.9 after printing at 1.3 in June and beating the expected 2.9.
It is worth adding, however, that the US Dollar shows limited strength, suggesting the current advance will remain corrective.
XAU/USD short-term technical outlook
The XAU/USD pair is under mild selling pressure for a second consecutive day, albeit barely retreating from record highs. Technical readings in the daily chart are far from suggesting a stepper decline, as indicators have barely retreated from overbought territory while lacking clear directional strength. At the same time, the pair keeps developing well above bullish moving averages, with the 20 Simple Moving Average (SMA) providing dynamic support at around $2,370.
In the near term, and according to the 4-hour chart, the technical picture is pretty much the same. XAU/USD is developing just above a firmly bullish 20 SMA, while the 100 and 200 SMAs also head higher, well below the shorter one. Technical indicators, in the meantime, pulled back from overbought readings but turned flat within positive levels, suggesting limited selling interest at the time.
The European Central Bank left interest rates unchanged, as widely anticipated.
United States unemployment figures resulted worse than expected.
EUR/USD holds on to higher ground but lacks directional strength.
The EUR/USD pair spent the first half of the day trading uneventfully at around 1.0930, retaining recent gains but static ahead of the European Central Bank (ECB) monetary policy decision. The central bank left rates unchanged, as widely anticipated, with the pair not reacting to the news.
The ECB’s accompanying statement showed policymakers are not pre-committed to any particular rate path and will remain data-dependant. Furthermore, they note some measures of underlying inflation ticked up in May, a mildly dovish comment that hints at no action in the next meeting, although market participants are still betting for a rate cut coming in September, alongside a Federal Reserve (Fed) one. Nevertheless, President Christine Lagarde is about to give a press conference, and her words can trigger some additional action across the board.
Meanwhile, the United States (US) released Initial Jobless Claims for the week ended July 12, which unexpectedly jumped to 243K, much worse than anticipated. On the other hand, the July Philadelphia Fed Manufacturing Survey improved much more than anticipated, hitting 13.9 after printing at 1.3 in June.
EUR/USD short-term technical outlook
The EUR/USD pair consolidates in a tight range near its recent multi-month high at 1.0947, and technical readings in the daily chart show buyers paused. Technical indicators are neutral to mildly bearish but around overbought readings, without signs of bearish strength. At the same time, the pair keeps developing above all its moving averages. The 20 Simple Moving Average (SMA) heads firmly south and is currently crossing converging 100 and 200 SMAs, usually reflecting bulls’ dominance.
According to the 4-hour chart, EUR/USD is neutral in the near term, albeit with the risk skew to the upside. The pair develops above all its moving averages, with the 20 SMA maintaining its upward slope far above the longer ones while providing dynamic support at around 1.0910. Technical indicators, however, have lost their directional strength but hold well above their midlines, suggesting absent selling interest.
Support levels: 1.0910 1.0865 1.0820
Resistance levels: 1.0945 1.0990 1.1020
EUR/USD Current price: 1.0928
The European Central Bank left interest rates unchanged, as widely anticipated.
United States unemployment figures resulted worse than expected.
EUR/USD holds on to higher ground but lacks directional strength.
The EUR/USD pair spent the first half of the day trading uneventfully at around 1.0930, retaining recent gains but static ahead of the European Central Bank (ECB) monetary policy decision. The central bank left rates unchanged, as widely anticipated, with the pair not reacting to the news.
The ECB’s accompanying statement showed policymakers are not pre-committed to any particular rate path and will remain data-dependant. Furthermore, they note some measures of underlying inflation ticked up in May, a mildly dovish comment that hints at no action in the next meeting, although market participants are still betting for a rate cut coming in September, alongside a Federal Reserve (Fed) one. Nevertheless, President Christine Lagarde is about to give a press conference, and her words can trigger some additional action across the board.
Meanwhile, the United States (US) released Initial Jobless Claims for the week ended July 12, which unexpectedly jumped to 243K, much worse than anticipated. On the other hand, the July Philadelphia Fed Manufacturing Survey improved much more than anticipated, hitting 13.9 after printing at 1.3 in June.
EUR/USD short-term technical outlook
The EUR/USD pair consolidates in a tight range near its recent multi-month high at 1.0947, and technical readings in the daily chart show buyers paused. Technical indicators are neutral to mildly bearish but around overbought readings, without signs of bearish strength. At the same time, the pair keeps developing above all its moving averages. The 20 Simple Moving Average (SMA) heads firmly south and is currently crossing converging 100 and 200 SMAs, usually reflecting bulls’ dominance.
According to the 4-hour chart, EUR/USD is neutral in the near term, albeit with the risk skew to the upside. The pair develops above all its moving averages, with the 20 SMA maintaining its upward slope far above the longer ones while providing dynamic support at around 1.0910. Technical indicators, however, have lost their directional strength but hold well above their midlines, suggesting absent selling interest.
The British pound has rallied a bit during the trading session on Tuesday.
I continue to monitor the ¥205 level as a potential support barrier, as it has held true for some time.
Furthermore, we have also seen the market try to push back against any selling, and it’s probably worth noting that the bank of Japan continues to see a lot of resistance against its interventions.
Central BankThe central bank will continue to drive this market in one direction or the other, and it’s obvious at this point in time that the Bank of Japan can do nothing to stem the flow. After all, the market is likely to continue to see the interest rate differential and was the reason to hang on to this pair, and the fact that we ended up forming a couple of hammers in a row does suggest that people are becoming more and more comfortable with buying this market. This asset will continue to pay off at the end of every day, and therefore I think you’ve got a situation where eventually we will try to get back to the highs.Top Forex Brokers
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Underneath, the 200 for yen level is a support barrier as well, and if we were to break down below there, then we could see this market go looking to the 50-Day EMA, which is sitting just above the ¥200 level. The ¥200 level is for me the bottom of the overall trend, and as long as we can stay above there, the market is likely to continue to go much higher. In fact, I would love to see a pullback to that area so I could buy“cheap British pound.”That being said, it certainly looks like this is a market that is not afraid anymore, and the Bank of Japan probably understands that there is only so much you can do. At this point, it is probably more or less all about the idea of trying to slow down the destruction of its own currency as it cannot raise interest rates.Ready to trade our daily analysis & predictions ? Here are the best brokers for beginners to choose from.MENAFN18072024000131011023ID1108453229
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