EUR/USD and EUR/GBP await ECB decision while GBP/JPY falters at April peak

EUR/USD side-lined ahead of ECB rate decision

EUR/USD has been capped by the 55-day simple moving average (SMA) at $1.0726 and this year’s downtrend line at $1.0744 for the past week while range trading ahead of Thursday’s European Central Bank (ECB) meeting and press conference. No rate hike is expected to be announced but talk of one in July is likely to be on the table.

As long as last week’s low at $1.0628 underpins on a daily chart closing basis, overall upside pressure is expected to be maintained ahead of Friday’s US consumer price index (CPI) release with the currency pair’s one-month high at $1.0787 possibly being revisited on a rise above the downtrend and yesterday’s high at $1.0748. Above $1.0787 sits the late-April high at $1.0936.

Good support continues to be found between the 25 May, 1 and 7 June lows at $1.0653 to $1.0628. A slip through $1.0628 would engage the 19 May high at $1.0607.

EUR/GBP has resumed its ascent ahead of ECB meeting

After briefly dipping to £0.8585 earlier in the week, EUR/GBP is seen heading back up towards the £0.8587 to £0.8589 on 24 May and early-June highs ahead of Thursday’s ECB meeting and press conference in which talk of a July rate hike is expected to feature.

Above £0.8589 beckons the £0.8618 May peak. Were it to be exceeded, the July and September 2021 highs at £0.8658 to £0.8669 would be next in line.

Minor support below the three-month uptrend line, late-May low and this week’s low at £0.85 to £0.8582 comes in between the 200- and 55-day SMA as well as the 23 May low at £0.8443 to £0.8433.

GBP/JPY falters around April peak

The May-to-June advance in the GBP/JPY from its May low at ¥155.61 has taken it back to its April peak at ¥168.43 before rapidly coming off today after 11 consecutive positive sessions.

The reason for this technical reversal probably has to do with profit taking ahead of today’s ECB meeting and possible fears by traders of some verbal intervention from the Bank of Japan (BoJ) which sticks to its ultra-easy monetary policy despite rising inflation.

From a technical point of view an Elliott Wave zig-zag correction, also called an a,b,c correction, ended at the mid-May ¥155.61 low and is being followed by a five wave advance to above the April high. Three of those five waves have so far been formed with a fourth wave correction probably upon us. If so, a final and fifth wave to the upside should finally unfold.

The current fourth wave is expected to be messy and not as short lived as corrective wave two which can be sub-divided into three clear waves a,b and c. Over the coming days the March peak and one-month uptrend line at ¥164.64 may be revisited. A currently unexpected rise above this morning’s intraday high at ¥168.73 would lead to the ¥170.00 mark being targeted.