US GDP rates eyed

The USD edged higher against its counterparts yesterday, in another sign of Dollar strength. Speculation among market participants for the Fed to break with other central banks by keeping rates high for longer seems to be intensifying supporting the greenback. The rise of the USD was particularly evident against the JPY as it rose to practically new record high levels, risking a possible market intervention by the BoJ to JPY’s rescue. Central bank interest rate differentials tend to weigh on JPY, as BoJ currently still has a loose monetary policy. JPY traders may focus on the release of Tokyo’s CPI Rates for June tomorrow during the Asian session, given that the density of population of the Japanese megacity qualifies the indicator to serve as a prelude for inflationary pressures nationwide. Should the rates accelerate we may see JPY getting some support as it could align with BoJ’s narrative of persistent inflationary pressures in the Japanese economy and support the idea of another rate hike.

USD/JPY rose yesterday breaking for the time being the 160.35 (S1) resistance line, now turned to support. We maintain our bullish outlook for the pair given also that the RSI indicator continues to run along the reading of 70, implying a strong bullish sentiment on behalf of market participants for the pair. At the same time though, the movement of the RSI indicator tends to issue a warning that the pair has reached overbought levels and may be ripe for a correction lower. Similar signals are also being send the fact that the pair’s price action flirts with the upper Bollinger band. Should the bulls maintain control over USD/JPY as expected we may see the pair using the 160.35 (S1) support line as a jumping platform and start aiming for the 163.00 (R1) resistance line. Should on the other hand the bears take over, we may see the pair breaking the 160.35 (S1) support line and aim for the 157.75 (S2) support level.

In the European theatre, the climate tends to be a bit heavy given the uncertainty being posed primarily on a fundamental level. We note that there is wide uncertainty about the elections in France this weekend, which could intensify centrifuge forces within the EU while on a trading level the tensions with China remain high. On a monetary level, ECB seems predisposed for further cuts, which also tends to weigh on the EUR and we note that EUR traders are to have busy session today, given the financial releases for June and the number of ECB policymakers scheduled to speak. Any further dovish comments could weigh on EUR as they could intensify market expectations for two more rate cuts to come within the year and vice versa.

EUR/USD edged lower yesterday remaining below the 1.0740 (R1) resistance line. We note the weakness of the pair to form lower lows over the past few days and at the same time, the pair’s price action seems to escape the influence of the downward trendline which was guiding the pair’s price action in the past week. Hence we tend to maintain a bias for a sideways motion for the time being. Yet we also note that the RSI indicator remains below the reading of 50, implying a bearish predisposition on behalf of the market for the pair. For a bearish outlook we would require the pair to break the 1.0615 (S1) support line and take aim of the 1.0450 (S2) support level, while should the bulls take over we may see EUR/USD breaking the 1.0740 (R1) resistance line and aim for the 1.0890 (R2) resistance barrier.

Other highlights for the day

Today in the European session we get the interest rate decision of Sweden’s Riksbank, Turkey’s CBT and Czech Republic’s CNB, while ECB Policymaker Kazimir, RBA Deputy Governor Hauser and ECB Board Member Elderson are scheduled to speak. Also we note Eurozone’s data for Junes. In the American session, we get from the US May’s durable goods rate, the weekly initial jobless claims figure and the final GDP rate for Q1. In tomorrow’s Asian session, from Japan we get Tokyo’s CPI rates for June, while in the US there’s going to be the first Biden-Trump debate for the US November Presidential elections.