• USD/JPY pares gains on the day as risk flows weigh
• French stocks near the next key technical juncture amid a further drop today
• The Fed’s preferred measure of inflation is expected to ease further
• BOJ governor Ueda: It is important to reduce JGB purchases in a predictable manner
• BOJ governor Ueda says will begin tapering bond purchases immediately after July meeting
• BOJ governor Ueda: The pre-announcement today is an exceptional measure
• BOJ governor Ueda: Will adjust rates if underlying inflation rises towards 2% target
• Japan’s Hayashi says will continue to closely monitor FX market
• ECB’s Vasle: rate cutting is likely to be slower than hiking was
• ECB’s Kazāks: Market expectations on rates are ‚reasonable‘
• ECB’s Centeno: Disinflation process to resume after August
• France May final CPI +2.3% vs +2.2% y/y prelim
• Eurozone April trade balance €15.0 billion vs €20.0 billion expected
• China May M2 money supply +7.0% vs +7.2% y/y expected

Markets:

• CHF leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.4%
• US 10-year yields down 3.5 bps to 4.205%
• Gold up 1.2% to $2,331.17
• WTI crude up 0.1% to $78.68
• Bitcoin up 0.5% to $67,030

The session started with a focus on the Japanese yen, with markets taking to the more dovish decision by the BOJ to only pre-announce the tapering of their JGB purchases. The central bank said that they will only go into more detail on that in July, disappointing those expecting the decision to have come today instead.

USD/JPY was holding higher near 158.00, before extending gains to a high of 158.25 ahead of Ueda’s press conference. The pair lingered around 157.80-00 in the aftermath, before heavier risk flows weighed on market sentiment.

Equities sank while bond yields dropped as safety flows came into play and that dragged USD/JPY down to 157.00.

The dollar though, maintained a modest advance elsewhere with EUR/USD falling from 1.0720 to 1.0670. GBP/USD also fell from 1.2740 to 1.2695 before a mild bounce now to 1.2715 on the day.

The commodity currencies are the laggards as such, with AUD/USD down 0.2% to 0.6620 and NZD/USD down 0.5% to 0.6135 currently. The franc is the standout, with USD/CHF itself down 0.2% to 0.8920 on the day.

It looks like the unhealthy balance in the equities space is finally catching up to tech stocks. And that could spell for an ugly day to wrap up the week. In the bigger picture, this is very much a repeat of the runback from last month’s CPI report as well.

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

The USD was sold across the
board on Wednesday following the soft US CPI report. The data made the market to price back
in two cuts for this year. Later in the day though we got a bit more hawkish
than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this
year despite the soft US CPI report.

This gave the greenback a
boost although Fed Chair Powell backpedalled on the projections making them a
bit less worrying as the central bank remains very data dependent. Moreover,
the US Dollar found further support yesterday as the market went into risk-off
mode for unclear reasons.

The GBP, on the other hand,
got under pressure mainly because of the risk-off sentiment and the US Dollar
strength. If we go back into risk-on, we should see the greenback losing ground
against the Pound again.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD spiked above the 1.28 handle following the soft US CPI release
but eventually gave back everything following the more hawkish than expected
FOMC decision and the risk-off sentiment.

The price is now trading around
a key support
zone at the 1.27 handle. A breakdown should open the door for new lows with the
first target coming around the 1.26 handle.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have the 38.2% Fibonacci retracement level of the entire rally since
April standing around the 1.2634 level which is going to be the first target
for the sellers in case the price breaks decisively below the 1.27 support zone.

The buyers, on the other
hand, will likely step in here at the 1.27 support zone with a defined risk
below it to position for a rally into new highs.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is near the lower level of the average daily range. This is where we might see a
bounce as the price generally doesn’t extend beyond the level without a strong catalyst.

In case we get a pullback,
the sellers will likely lean on the minor downward trendline
and the 38.2% Fibonacci retracement level at 1.2740. The buyers, on the other
hand, will want to see the price breaking higher to gain even more confidence
and increase the bullish bets into new highs.

Upcoming
Catalysts

Today we conclude the week with the University of Michigan Consumer Sentiment
survey where the data is expected to show an increase to 72.0 vs. 69.1 prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Some recovery in real wages is inevitable
• We should continue to be data-dependent

Despite the headline remark, he isn’t as confident to suggest when exactly the ECB can resume cutting rates. For now, July is definitely out of the question. But they’re not pre-committing to a September move for the time being at least.

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