USD begins the week on the front foot

The USD began the week on the front foot as it edged higher against its counterparts yesterday. We note that Fed policymakers continue to hesitate to start cutting rates, which tends to contradict market expectations for two rate cuts by the bank within the year and may provide support for the USD. In the coming days, we highlight two market-moving events, the one being the release of the Fed’s June meeting minutes on Wednesday and should the document verify that Fed policymakers are prepared to keep rates high for longer, we may see the USD getting some support. On Friday we get the US employment data for June and should the data imply the presence of a slack in the US employment market we may see the USD losing some ground as the pressure on the Fed to start cutting rates is to increase. In the land of the rising sun, JPY continues to weaken, especially against the USD, reaching practically record high levels. Despite Japan’s finance minister Suzuki expressing vigilance for the matter yet refraining from warning for a possible market intervention, we still see the possibility of BoJ coming to JPY’s rescue as high. Across the Atlantic, the uncertainty caused by the result of the first round of the French legislative elections tends to create a wide degree of uncertainty for the EUR on a political level, as a possible dominance of Marine Le Pen’s far right party in the French Parliament could enhance centrifuge forces. At the same time, the ECB seems set to continue cutting rates as inflation tends to ease. Overall, the signals on a fundamental and macroeconomic level, seem to weigh on the EUR. In the UK Thursday’s elections, are set to provide a shift of power in Government, as the Labour party leads the polls by a wide margin. Overall, there is uncertainty on a political level for pound traders which could weigh on the sterling in the coming days.

USD/JPY appears to be moving in an upwards fashion. We opt for a bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure above 70, implying a bullish market sentiment, in addition to the upwards moving channel and upwards moving trendline which were incepted on the 2nd of January and the 12th of June respectively. For our bullish outlook, to continue, we would require a clear break above the 163.00 (S1) support with the next possible target for the bulls being the 166.00 (R2) resistance line. On the flip side for a bearish outlook, we would require a break below the 160.35 (S1) support line with the next possible target for the bears being the 157.75 (S2) support line. Lastly, for a sideways bias we would require the index to remain confined between the 160.35 (S1) support line and the 163.00 (R1) resistance level.

EUR/USD appears to be hovering near our 1.0740 (R1) resistance level. We opt for a neutral outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to continue, we would require the pair to remain confined within the 1.0615 (S1) support level and the 1.0740 (R1) resistance line. On the flip side for a bullish outlook, we would require the pair to make a clear break above the 1.0740 (R1) resistance line with the next possible target for the bulls being the 1.0890 (R2) resistance level. Lastly, for a bearish outlook, we would require the pair to make a clear break below the 1.0615 (S1) support level, with the next possible target for the bears being the 1.0450 (S2) support base.

Other highlights for the day

Today we get Eurozone’s preliminary HICP rates for June, New Zealand’s milk auctions figure and from the US Mays’ JOLTS job openings figure as well as the API weekly crude oil inventories figure. On the monetary front, we note that ECB President Lagarde as well as Fed Chairman Powell speak. During tomorrow’s Asian session, we note the release of the PMI figures for June of China, Japan and Australia, while from Australia we also get May’s retail sales and building approvals growth rates.