More hikes appear to be on the menu for the ECB, FED and the BOE

During yesterday’s American session, we note that BoE Governor Bailey, Fed Chair Powell and ECB President Lagarde, all made the case that inflationary pressures persist in the economy and that given the current economic situation, the heads of the central banks hinted that more rate hikes are to come. In particular ECB President Lagarde stated that the bank is unlikely to claim that inflation has peaked. Yesterday’s stress test by the Fed on the 25 largest banks in the US, indicated that the banks were indeed “strong and resilient” in the event of a recession, yet during an extreme scenario the biggest banks could lose $541bn in a doomsday scenario, but would most likely be able to withstand the losses. Interestingly, U.S Bancorp and Citizens where of the few banks which had the lowest stressed capital levels in the “exam”. Yesterday’s EIA Crude Oil Inventories showed a significant drawdown of -9.603M barrels providing support for Oil’s price, as the higher-than-expected drawdown, hinted at higher demand for oil than what was anticipated. In today’s European session, Germany’s Preliminary HICP rates are anticipated by market analysts to continue increasing, despite the ECB’s aggressive interest rate policy. In the US Equities markets, we note that Apple’s share prices reached new record highs, with the company now eyeing a $3 trillion market cap valuation. Furthermore, we note the continuation in the case between the FTC and Microsoft to block, Microsoft’s deal to acquire Activision, worth approximately $69 billion.

EUR/USD appears to be moving in a sideways fashion for now. We maintain a neutral outlook for the pair as long as the price action remains confined between the support and resistance levels at 1.0855 (S1) and 1.1000 (R1) , respectively and supporting our case is the narrowing of the Bollinger bands, which imply low market volatility. However, we note that the RSI indicator below our 4-Hour chart is nearing the figure of 30, implying a bearish market sentiment. For a bullish outlook, we would like to see a clear break above resistance at 1.1000 (R1) with the next potential target for the bulls being the 1.1175 (R2) resistance ceiling. On the other hand, for a bearish outlook, we would like to see a clear break below support at the 1.0855 (S1) level, with the next possible target for the bears being the 1.0695 (S2) support base. Furthermore, we note that the release of Germany’s Preliminary HICP rates today, could heavily influence the pair’s movement in either direction.

USD/JPY appears to be moving in an upwards fashion and is currently testing resistance at 144.80 (R1). We maintain a bullish outlook for the pair, given the formation of the upwards moving channel formed on the 14^th of June, in addition to the RSI indicator below our 4-Hour chart hovering near the figure of 70, implying a strong bullish market sentiment. For our bullish outlook to continue, we would like to see a clear break above the 144.80 (R1) resistance level, with the next possible target for the bulls being the 146.10 (R2) resistance ceiling. On the other hand, for a bearish outlook we would like to see a clear break below the 141.90 (S1) support level, with the next potential target for the bears being the 141.55 (S2) support base.

Other highlights for the day:

Today in the European session, we note the release from Sweden of Riksbank’s interest rate decision, Eurozone’s economic sentiment and consumer sentiment indicators as well as Canada’s Business Barometer for June and highlight Germany’s preliminary HICP rate for June. In the American session, we get from the US the weekly initial jobless claims figure and we highlight the US final GDP rate for Q1. On the monetary front, we note that ECB’s McCaul, Atlanta Fed President Bostic and BoE MPC member Tenreyro are scheduled to speak. During tomorrow’s Asian session, we get from Japan Tokyo’s CPI rates for June and the preliminary industrial output for May while from China we highlight the release of the NBS manufacturing PMI figure for June.  

EUR/USD H4 Chart

Support: 1.0855 (S1), 1.0695 (S2), 1.0525 (S3)

Resistance: 1.1000 (R1), 1.1175 (R2), 1.1370 (R3)

USD/JPY H4 Chart

Support: 141.90 (S1), 141.55 (S2), 140.20 (S3)

Resistance: 144.80 (R1), 146.10 (R2), 147.30  (R3)

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