EUR/USD and GBP/USD bounces stall, while USD/JPY retracement pauses
The counter-trend bounces in EUR/USD and GBP/USD have stalled as the dollar strengthens, while the pullback in USD/JPY has returned to the 50-day SMA.
EUR/USD bolstered by rate hike expectations
The European Central Bank (ECB) is a new convert to the world of higher rates, having held back due to the weakness of the eurozone economy. But comments this week from the ECB president suggested that a much faster pace of tightening would be the case. After falling sharply in recent months, the news was enough to push EUR/USD higher, hitting a one-month high as investors scrambled to move back into the euro.
The bounce has carried it back towards the 50-day simple moving average (SMA), the biggest bounce since the end of February. This could create a lower high, and reinforce the downward move, potentially bringing $1.04 and lower into play. Further gains target $1.08 and then $1.089.
GBP/USD stalls below $1.26
The weakening dollar has given GBP/USD space to bounce, and since mid-month the pair has been able to move back towards the early May highs at $1.26. But a weaker set of purchasing manager index (PMIs) yesterday meant that the pound ran into some selling pressure, and as a result, the pair has been unable to maintain upward progress, and is now at risk of turning lower.
Fresh declines would bring the May low back into view, down towards $1.22 and potentially lower, with $1.208 the next big level to watch.
USD/JPY retracement continues
The USD/JPY drop towards the 50-day SMA has continued, marking the most significant decline for the pair in months. A recovery above ¥128.00 would mark a more bullish development and could see a fresh move higher, targeting ¥131.00.
As yet the dollar has not begun to strengthen, but with the Federal Open Market Committee (FOMC) minutes on the calendar for today a possible bounce for the greenback is in play if the minutes reveal a continued hawkish caucus on the committee calling for 75 basis points (bps) rises at upcoming meetings
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