The USD/JPY hit levels not seen since 2002 and then pulled back only modestly. Analysts at MUFG Bank point out that the USD/JPY move higher may slow down on an increased risk of intervention to curb yen’s weakness. They see short-term risks in USD/JPY to the upside.
“The risks over the short-term is for USD/JPY to drift further higher. The CPI data and the Fed meeting next week will provide support for US yields, underlining the lack of change to the policy divergence driver, especially given Governor Kuroda’s speech this week. The threat of intervention is certainly now much higher following the statement today expressing concern, which may result in increased reluctance for speculative yen selling and result in non-dollar yen strength in circumstances of broader US dollar strength into the FOMC and BoJ meetings next week.”
Yesterday’s European Central Bank (ECB) rate decision and press conference (although more hawkish) sent the euro tumbling post-announcement. Leading up to the announcement, markets were pricing in a more aggressive stance but the ECB quelled these projections by opening up the potential for a 50bps rate hike in September and not July as many expected. In addition, growth forecasts were revised lower thus weighing on euro upside despite the possibility of the aforementioned 50bps jump. GDP growth revisions read as follows:
2.8% in 2022, 2.1% in 2023, and 2.1% in 2024
Trendline resistance on the daily EUR/USD chart has held once again emphasizing its importance since early February 2022. Price action is skewed to the downside and I would not be surprised if we see bears break below 1.0600 towards the 1.0500 psychological zone.
Trendline resistance (black)
50-day EMA (blue)
20-day EMA (purple)
The NZDUSD rallied in the Asian session, and moved back up toward a topside trend line.
Recall from yesterday, the price did move briefly above that trend line but quickly reversed to the downside. That move to the downside extended to a swing area between 0.63749 and 0.63792 toward the end of trading yesterday and into the earlier Asian session. Buyers lean against that level pushing the price toward the aforementioned topside trend line.
The low price briefly move below the 61.8% retracement at 0.6353. That came near a swing area between 0.63447 and 0.63479 and the lower channel trendline at 0.6336 currently (and moving lower).
Silver (XAG/USD) advances after seesawing earlier in the day, reaching a three-week low at $21.27, but staged a recovery after the University of Michigan Consumer Sentiment slumped the most in 5 decades. At the time of writing, XAG/USD is trading at $21.82, erasing earlier losses and now gaining 0.57%.
In the meantime, the US Dollar is rallying to fresh three-week highs, at 104.174, gaining 1.96%. At the same time, the US 10-year Treasury yield is rallying to new four-week highs at 3.14%, up by twenty basis points.
US consumer sentiment plunges, and US inflation rose to 4-decades highs
US consumer sentiment plummeted the most in 5-decades, following an inflation report that in the previous two months before May reading fell though rebounded to 8.6% YoY.