EUR/USD and GBP/USD fall back while USD/JPY holds steady
After making headway earlier in the week, EUR/USD and GBP/USD have dropped back in opening trading.
EUR/USD bounce stalls
The broader rebound in global risk appetite carried EUR/USD back above $1.04 over the past three sessions and then pushed it on above $1.05. However, the bounce has run into some selling already, as the US dollar begins to strengthen once again. Comments from Dutch European Central Bank (ECB) member Klaas Knot lifted the pair as he suggested that the bank might look to boost rates by more than 25 basis points (bp) at upcoming meetings.
As a result, the pair looks for additional upside, although within the broader context of the steady downtrend that has been in place for over a year. Further gains target $1.0637, the highs of early May, and then on towards the 50-day simple moving average (SMA) at $1.0796.
A fresh turn to the downside brings the lows of the month into play, around $1.036, and would also revive the downtrend, suggesting a further push towards parity for the pair.
GBP/USD drops back following CPI data
Despite the highest level of consumer price index (CPI) in forty years, the pound has fallen back, surrendering some of the gains made yesterday when GBP/USD rebounded and recovered $1.24.
The overall outlook for the UK economy remains gloomy, and while the Bank of England (BoE) is expected to keep raising rates at its upcoming meetings, a pause is likely further down the line as the bank assesses the impact on the UK economy.
If the move lower in early trading is not reversed, then a move back towards $1.22 comes into view, and then on below the mid-month lows, as the downtrend continues. Alternatively, if the price can move above $1.25 then a push towards $1.2635 comes into view.
USD/JPY edges higher
The dollar remains relatively muted against the yen in USD/JPY, after it edged higher over the previous three sessions. Gains have slowed since mid-April, despite the ongoing push by the Federal Reserve (Fed) to keep raising rates, as policymakers rein in the idea that a 75 bp rise is possible.
Short-term, the price remains relatively bullish as it holds above ¥128.00, and could set it up for a move back towards ¥131.00, particularly if US economic data begins to strengthen anew.
A further move to the downside would result if the price is unable to hold above ¥128, and could see the price head back to the 50-day SMA.
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