Dollar technicals:

• EUR/USD extends gains as the dollar resigns to its next leg lower
• USD/JPY drop looks set to continue, key downside levels come into focus
• GBP/USD looks to solidify breakout move on the week
• USD/CHF falls through the floor, what’s next?
• AUD/USD eyes June high next on dollar breakdown
• NZD/USD takes aim at April and May highs on latest jump higher

Headlines:

• ECB accounts: Members generally concurred interest rates had reached restrictive territory
• ECB’s Visco: We are not very far from the peak in interest rates
• Japan top currency diplomat Kanda says closely watching FX market moves
• UK May monthly GDP -0.1% vs -0.3% m/m expected
• Eurozone May industrial production +0.2% vs +0.3% m/m expected
• France June final CPI +4.5% vs +4.5% y/y prelim

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields down 3.7 bps to 3.824%
• Gold up 0.1% to $1,959.73
• WTI crude up 0.2% to $75.86
• Bitcoin up 0.7% to $30,558

We are getting a continuation of the dollar slide from yesterday, as the greenback is seen falling apart across multiple charts following the softer US CPI data yesterday.

Traders were already testing waters in the run up and the inflation numbers gave reason to stick with the selling conviction this week, which is continuing now.

EUR/USD is up another 0.4% to 1.1170 while GBP/USD is up 0.6% to test waters above the 1.3000 handle, seen at 1.3060 at the moment.

USD/CHF has also broken down to its lowest levels since January 2015, falling another 0.5% to 0.8630, while the antipodeans are pushing forward with strong gains amid the better risk mood as well. AUD/USD is up 1% to 0.6860 on the day, keeping in the hunt of its June high near 0.6900 next.

Treasury yields continue to fall further and that is helping with general equities sentiment, which is also bolstered by tech stocks after Elon Musk unveiled a new AI company to rival OpenAI’s ChatGPT.

This article was written by Justin Low at www.forexlive.com.

• Members considered that there were both upside and downside risks to the inflation outlook
• It was argued that market participants would be surprised by the upward revision of inflation
• This could trigger a repricing of the forward curve
• Members broadly concurred that inflation was still projected to remain too high for too long
• It was argued that policymakers should not put too much emphasis on the behaviour of core inflation, as its mandate related to headline inflation
• Maintaining a gradual tightening path would allow the ECB to monitor and assess the impact of past monetary policy decisions and ensure that financial conditions were adjusting in a way that was consistent with inflation moving back to the 2% medium-term target
• Members generally agreed that the data-dependent approach to monetary policymaking
• Policymakers should stress that fiscal policy needed to be tightened in order to dampen demand and support the disinflation process
• Full accounts

There isn’t anything that we don’t already know from the ECB but it just reaffirms that policymakers are sticking to what was discussed so as to not give anything away for September just yet. We’ll see after July if and how that will change.

This article was written by Justin Low at www.forexlive.com.

Yesterday, the US CPI report missed expectations across the board
and led to a big selloff in the US Dollar. The market pricing for a 25 bps hike
at the July meeting hasn’t change though as the labour market tightness and no
hints of a skip or pause from the Fed speakers probably contributed to such
expectation.

On the other hand, the BoJ
maintains its dovish stance keeping rates at -0.10 and the YCC at the usual
settings. Core inflation in Japan keeps on rising and there are only slightly
tentative signs of a possible exit from the current policy. The BoJ board
members keep on sounding dovish and dismissing any change at the upcoming
meeting. Nevertheless, the market still sees the risk of a surprising change to
the YCC policy.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that the price is now reacting to a strong support level at
137.95 where we can also find the 61.8% Fibonacci retracement level.
The huge selloff since the miss in the NFP report is a bit overstretched though
as we can see from the price distance from the blue 8 moving average.
Generally, we can see some consolidation or a pullback into the moving average
before the next move.

USDJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price is
already bouncing from the support zone and if we do get a pullback, the price
should rise into the black downward trendline where it
crosses with the broken blue trendline and the red 21 moving average.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see the
resistance zone highlighted by the blue box. That’s where the sellers should
step in with a defined risk above the black trendline and target a break below
the support zone and new lows towards the 130.00 handle. The buyers, on the
other hand, will want to see the price breaking above the resistance zone and
the black trendline to pile in and start positioning for new highs towards the
142.00 handle.

Upcoming Events

Today the market is
likely to focus on the US Jobless Claims as the labour market remains tight and
it may keep inflation high or even lead to another inflationary wave in the
future. The market should react only to a big miss or a big beat. If the data
beats expectations, we should see a pullback in USDJPY. On the other hand, if
the data misses, we should see another wave of selling. Tomorrow, we wrap up
the week with the University of Michigan Consumer Sentiment report.

This article was written by FL Contributors at www.forexlive.com.

The US CPI report
yesterday missed expectations across the board with unrounded figures being
even lower. This has led to a big rally in the EURUSD pair as the USD got
offered across the board. Curiously, the market is still fully pricing a 25 bps
hike at the next FOMC meeting, probably because of labour market tightness and
the Fed speakers not hinting to a skip or pause after the CPI release.

The ECB has already committed to a rate hike in
July, while there is a stronger debate on what will happen in September. In
fact, the ECB members keep repeating that the September hike will depend on the
data.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD has
rallied strongly since the bounce from the red 21 moving average. The
price is now at the top trendline of the
big rising wedge pattern.
We can also see that there’s a big divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. The price is also overstretched as we can see by the distance from
the blue 8 moving average. Generally, we can see some consolidation or a
pullback into the moving average before the next move.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we had the
ascending triangle pattern near the 1.0850 level and the breakout to the upside
led to a strong rally into the 1.1150 level. Here is where the sellers are
likely to step in with a defined risk above the top trendline and target the
bottom trendline somewhere near the 1.0750 level. The buyers, on the other
hand, will need to break above the top trendline with conviction to keep
bidding to new highs.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is breaking above the top trendline of the wedge pattern, but after such
a strong run to the upside there’s a high risk of a fakeout, especially if the
data in the next days goes against the trend. If we get a pullback, the buyers
are likely to lean on the blue trendline to try another breakout. The sellers,
on the other hand, should extend the selloff if the price breaks below the
trendline.

Upcoming Events

Today the market will
focus on the US Jobless Claims to see if the labour market remains healthy or
there are signs of cracking. At this point it looks like only very strong data
or very weak numbers can give the USD support. Tomorrow, we conclude the week
with the University of Michigan Consumer Sentiment report.

This article was written by FL Contributors at www.forexlive.com.

• The government strategy deployed is ‚completely inadequate‘
• There is too much focus on short-term economics rather than long-term risks
• Beijing has taken advantage of that, targeting the UK and its interest ‚prolifically and aggressively‘
• China has successfully penetrated every sector of the UK economy

We’ll see if that will evolve into any policy changes in how the UK will deal with China on trade, geopolitics, and general business investments. But considering the fragility of the UK economy at the moment, I doubt we will see any major changes any time soon.

This article was written by Justin Low at www.forexlive.com.