EUR/USD: downtrend is expected to intensify
During the Asian session, the EUR/USD exchange rate was fixed near 1.0700, partly due to the easing of the policy of the European Central Bank (ECB) and weak economic statistics from the eurozone countries.
The ECB lowered interest rates by 25 basis points to 4.25%, while the US Federal Reserve maintained the rate at 5.50%, which contributed to the EUR/USD pair breaking down the 1.0737 mark. The April decline in industrial production in the European Union to -0.1% monthly, contrary to analysts' expectations of 0.1% growth, and revised data from the previous month from 0.6% to 0.5% confirmed the weakness of economic activity. At the same time, inflation in France decreased slightly: the monthly figure decreased from 0.2% to 0.1%, and the annual figure decreased from 2.7% to 2.6%, without providing the euro with significant support for strengthening. These factors suggest that the pressure on the euro may continue in the medium term.
- Resistance levels: 1.0760, 1.0890, 1.0976.
- Support levels: 1.0613, 1.0460, 1.0290.
GBP/USD: at Bank of America Corp. it's expected that the British rate will not change and will amount to 5.25%
The GBP/USD pair is showing a slight drop, continuing the downward strengthening trend that began at the end of last week after updating the lows for May 17. The currency instrument is approaching the level of 1.2680, where a breakdown down is possible, but traders refrain from active actions ahead of new data on the state of the UK economy.
Inflation data for May is expected next Wednesday: the consumer price index is expected to fall from 2.3% to 2.0%, and the main inflation indicator will decrease from 3.9% to 3.5%. It is also predicted that the producer purchase price index will decrease by 0.3% after an increase of 0.6% in April, and the producer selling price index will decrease from 0.2% to 0.1%, while the retail price index should decrease from 3.3% to 3.1%.
The published inflation figures will be available on the eve of the Bank of England meeting, at which a rate cut of 25 basis points is possible. Analysts from Bank of America Corp. It is believed that the regulator will leave the rate at 5.25%, fearing the consequences of too early monetary policy easing. After April's data on inflation and wages, which showed insufficient improvement to change the course to a softer one, the authorities are looking for additional evidence that the risks of price increases in the service sector have been minimized.
- Resistance levels: 1.2700, 1.2734, 1.2771, 1.2800.
- Support levels: 1.2650, 1.2600, 1.2568, 1.2539.
USD/CHF: adapting to long-term growth
The USD/CHF pair is observing a correction, approaching the value of 0.8878 due to disappointing American macroeconomic statistics, which allows it to return to long-term growth.
In the United States, the producer price index fell by 0.2% in May compared with a month earlier, falling short of the projected 0.1% after rising by 0.5% a month earlier. The base value of the index remained unchanged, contrary to analysts' expectations of 0.3% and the previous indicator of 0.5%. There was also an increase in the number of applications for unemployment benefits to 242.0 thousand, while 225.0 thousand were predicted. At the same time, it is possible that the decline in the dollar will be offset by data from Switzerland, where the producer price index decreased from the expected 0.5% to -0.3% after the previous increase of 0.6%.
- Resistance levels: 0.9005, 0.9150.
- Support levels: 0.8880, 0.8715.
USD/JPY: Central Bank of Japan is preparing to cut purchases of government bonds
The USD/JPY pair stabilized its positions at the level of 157.62, approaching April highs caused by the bullish surge of the yen in response to currency interventions by the Bank of Japan.
At the last meeting on Friday, the members of the Bank of Japan left the rate at the level of 0.00% to 0.10% and announced plans to reduce the volume of purchases of government bonds, the details of which will be worked out by the next meetings on July 30 and 31. This decision was supported by eight of the nine board members. After the meeting, the regulator will present concrete steps to reduce its unprecedentedly large balance sheet, which will be part of a strategy to end the period of aggressive economic stimulus aimed at freer formation of long-term interest rates in the financial market. According to analysts from Goldman Sachs Group Inc., the bank will gradually reduce bond purchases from 6 trillion yen to 5 trillion yen per month, predicting that the yield on ten-year bonds will reach 2.0% by the end of 2026, and the key interest rate will range from 1.25% to 1.50% by 2027. While the head of the Bank of Japan, Kazuo Ueda, did not rule out a rate hike in July due to the pressure caused by the rise in import prices and the weakening of the yen, the regulator stressed that all decisions will be made on the basis of up-to-date economic information.
- Support levels: 156.70, 154.70.
- Resistance levels: 158.30, 160.20.