EUR/USD slips, AUD/USD stalls but USD/JPY surges ahead

EUR/USD slips for a third day in a row

EUR/USD is heading back down towards last week’s low at $1.0628 for the third day in a row, having been rejected by the 55-day simple moving average (SMA) at $1.0743 as the US dollar continues to strengthen on the back of the Federal Reserve (Fed) hawkish stance.

Last week’s stronger than anticipated US Non-Farm Payrolls (NFP) data, which showed the US economy added 390,000 jobs in May, meant that the Fed will likely stick to its course of aggressive tightening to try to combat soaring inflation.

As long as last week’s low at $1.0628 underpins on a daily chart closing basis, however, overall upside pressure is expected to be maintained ahead of Thursday’s European Central Bank (ECB) policy meeting and Friday’s US consumer prince index (CPI) data with the currency pair’s one-month high at $1.0787 possibly being revisited.

First, though, EUR/USD needs to break through the March low and February-to-May downtrend line at $1.0760. Above $1.0787 sits the late April high at $1.0936.

A slip through $1.0628 would engage the 19 May high at $1.0607.

AUD/USD mixed post surprise RBA 50 basis point rate hike

AUD/USD is having a volatile session today as the Reserve Bank of Australia (RBA) surprised market players by raising its cash rate by 50 basis points to 0.85% during its June meeting, its first back-to-back rate hike in 12 years.

Analysts had expected a 25-basis point (bp) rate hike with even the more hawkish not pricing in more than a 40-basis point rise, leading to a volatile intraday session as the central bank pointed out that the Australian labour market is strong, and that huge monetary support is no longer needed amid the strength of the economy and in view of soaring inflationary pressures.

The cross briefly shot up to $0.7247 before dipping to $0.716 so far today, thus remaining within its recent confines of $0.7141 and $0.7283. A drop trough last week’s low at $0.7141 would most likely lead to the 23 May high at $0.7127 being touched and probably also the $0.7053 to $0.7036 support zone which contains the early May low, 11 May high and 25 May trough. Were a rise and daily chart close above the current one-month high at $0.7283 to unfold over the coming days, however, the early March and late April highs at $0.7441 to $0.7458 would be eyed.

USD/JPY trades in 20-year highs

USD/JPY continues its upward trajectory and trades in 20-year highs on the back of last week’s stronger than expected US employment data and dovish comments by the Bank of Japan’s (BoJ) Governor Kuroda which highlight diverging US and Japanese monetary policies.

Kuroda sticks to his dovish stance despite Japan’s increasing inflationary pressures as he believes that the bank must continue to support households by retaining an easy monetary policy and that the benefit of a weak Yen and the disadvantage of higher prices roughly cancel each other out.

The January 2002 high at ¥135.18 is within reach, a rise above which would put the June 1991 peak at ¥142.80 on the map. The practically uninterrupted June advance in USD/JPY is so far not showing any signs of slowing down but were a minor retracement to take place, the May peak at ¥131.34 is expected to offer support.