EUR/USD stabilises ahead of German IFO, USD/JPY slips on policy pivot talks
Outlook on EUR/USD and USD/JPY post Fed, ECB and BoE meetings but ahead of BoJ.
EUR/USD stabilises ahead of German IFO Business Climate
Last week EUR/USD surged to a six-month high at $1.0736 as the US Federal Reserve (Fed) slowed its pace of rate hikes by raising the fed funds rate by a widely anticipated 50 basis points (bp) to 4.25%-4.5% and the European Central Bank (ECB) hiked by the same amount to 2.5%.
Since then, the cross gave back some of its recent gains on recession fears and flight-to-safety flows into the greenback but on Monday morning it seems to be heading back up again ahead of December German IFO Business Climate data which is expected to rise to 87.6 versus 86.3 in the previous month.
Provided that Friday’s $1.0582 low underpins, an upside bias is expected to be maintained with the $1.07 region being back in sight. Support can be found between the $1.0595 early December high and Friday’s low at $1.0582. Above last week’s high at $1.0736 lies the $1.0774 to $1.0787 zone, made up of the May and June highs.
USD/JPY slips back to the 200-day simple moving average on policy pivot talks
USD/JPY slid back to its 200-day simple moving average (SMA) at ¥135.66 following reports that Prime Minister (PM) Fumio Kishida was planning to change a decade-old agreement with the Bank of Japan (BoJ) which states that the central bank will achieve the 2% inflation target at the earliest possible time. Instead talk is now of making the price goal more flexible which would allow the BoJ’s policy to adjust to economic developments.
While the early December and last week’s lows at ¥134.52 to ¥133.63 continue to hold, however, a recovery back towards the ¥137.68 to ¥138.17 mid-November low and last week’s high may ensue as the yen remains under pressure as the US Fed offered a more hawkish outlook last week than originally anticipated.
While the cross remains below the late November ¥139.89 high, the October-to-December downtrend remains intact, though. A fall through ¥133.63 would lead to the ¥131.74 mid-August low being targeted.
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