EUR/USD flirts with parity, USD/JPY trades in fresh 24-year highs while AUD/USD holds
EUR/USD drops, AUD/USD remains under pressure while USD/JPY rallies on hot US inflation reading and even more aggressive Fed tightening policy.
EUR/USD oscillates around parity on rate hike bets
Having reached parity on Wednesday, a near 20-year low, EUR/USD is expected to continue to hover around this major psychological level after US inflation data came in higher than expected at 9.1% in June, its highest level since 1981 and exceeding expectations for an 8.8% increase.
According to the Chicago Mercantile Exchange's (CME) FedWatch there is now a 42% chance of a 100-basis point (bp) rate hike at the next Federal Reserve (Fed) meeting. Were a daily chart close below parity to be witnessed, the $0.9698 to $0.9593 support area would be targeted. It contains the June 2000 and February 2001 highs and the September 2002 low.
Beyond immediate resistance at Wednesday’s high at $1.0122, strong resistance can be found at $1.034 to $1.036 which consists of the December 2016 and January 2017 as well as the May and June 2022 lows.
AUD/USD recovers after Australia’s unemployment fell to a record low
AUD/USD is looking slightly stronger as Australia’s seasonally adjusted unemployment fell to a fresh record low of 3.5% in June versus an expected 3.8% and a reading of 3.9% in the prior three months as the country’s economy recovers further from the Covid-19 pandemic.
Positive divergence on the daily relative strength index (RSI) – where a series of lower lows on the cross isn’t replicated by the RSI which is showing a series of higher highs – may lead to a recovery in the AUD/USD currency pair over the coming days, provided that no drop below this week’s low at $0.6711 occurs.
If so, the downtrend should continue with the August and September 2019 lows and the March 2020 high at $0.6685 to $0.6671 being eyed. An advance above Wednesday’s high at $0.6803 is needed for the two-month downtrend line at similar levels to be exceeded and for the May and June lows at $0.6829 to $0.6851 to be reached.
USD/JPY trades in fresh 24-year highs
USD/JPY is trading in fresh 24-year highs and is gunning for its July 1998 peak at ¥147.63 as the US dollar continues to strongly appreciate, underpinned by expectations of an even more aggressive Fed policy tightening and safe haven flows spurred by recession fears.
En route lies the minor psychological ¥140.00 mark and the April 1991 high at ¥142.80.
Potential slips should find support at Monday’s ¥137.75 high as well as between the June peak and steep two-month uptrend line at ¥137 to ¥136.50.
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