USD remains in a tight rangebound motionusd-remains-in-a-tight-rangebound-motion

The USD Index tended to remain in a tight rangebound motion against its counterparts yet lost some ground against the JPY, yesterday and during today’s Asian session, as worries for a possible recession in the US economy are still very present in the market. The Fed seems to have a steep rate hiking path ahead of it and its characteristic that Fed Board Governor Bowman yesterday supported the idea of a 75 basis points rate hike in the banks next meeting in order to curb inflationary pressures. Also Fed Chairman Powell in his second testimony before the US Congress stated that the Fed’s commitment to fight the 40 year high inflation is “unconditional” also underscoring the bank’s decisiveness to curb in inflation pressures. Overall the Fed’s monetary policy stance seems to be united and hawkish yet the market seems to have priced it while at the same time the Fed’s stance is the one triggering the market worries for a possible recession in the US economy. Today we note the planned speeches from St. Louis Fed President Bullard and San Francisco Fed President Daly which could sway the market’s opinion to either direction depending on the content of the statements. As for financial releases we note the release of the final University of Michigan consumer sentiment for June as well as the new home sales figure for May which is expected to drop and if so, could weaken the USD as it would imply a slowdown of economic activity for the US construction sector.

USD/JPY dropped yesterday breaking the 135.20 (R1) support line now turned to resistance. As the pair has started to print lower troughs and lower peaks we tend to be biased for a bearish movement of the pair. The RSI indicator below our 4-hour chart is just below the reading of 50 implying a sideways movement yet should the indicator move even lower, we may see some bearish tendencies. Should the selling interest be continued we may see the pair aiming if not breaking the 133.50 (S1) support line. Should the pair find a substantial number of bids, we may see it breaking the 135.20 (R1) resistance line and aim for the 136.50 (R2) level.

EUR to keep an eye out for Germany’s Ifo indicators

The common currency took a hit yesterday yet was able to remain relatively stable against the USD as the preliminary PMI figures for June came out far lower than what was expected, especially the one for Germany’s manufacturing sector. Our worries for the economic outlook of the Eurozone are still present and actually were enhanced given also that Germany has been ringing the energy alarm as a substantial reduction of gas supplies from Russia, through the Nordstream 1 pipeline over the past few days has been reported. Today we note the release of Germany’s Ifo indicators for June and the current conditions indicator is expected to drop implying a worsening of the situation on the ground for the largest economy in Europe, while the expectations indicator is expected to rise which could imply some optimism. On the monetary front we note that ECB President de Guindos is scheduled to speak and could affect the markets. Comments made by ECB’s Lane on Tuesday were characteristic as he was reported stating that “I think it’s enough to say that the size of the September increment will reflect our ongoing or evolving assessment, rather than revisit the size of the increment in July,”. At the same time ECB President Lagarde defended the bank’s antifragmentation policy for EUR member’s borrowing costs as she was reported stating “You have to kill it in the bud,”.

EUR/USD dropped yesterday yet respected the 1.0480 (S1) support line and bounced higher. We tend to maintain out bias for a sideways motion of the pair between the 1.0625 (R1) resistance line and the 1.0480 (S1) support level given also that the RSI indicator seems to be revolving around the level of 50. Should the bears take charge of the pair’s direction we may see it breaking the 1.0480 (S1) and aim for the 1.0350 (S2) level. Should the bulls take over, we may see the pair breaking the 1.0625 (R1) resistance line and aim for the 1.0735 (R2) level.

USD/JPY 4時間チャート