End of the week currency markets review

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The FOMC Meeting Minutes that were released on Wednesday did not add something significant to the equation of the Monetary Policy in the USA. There were three major aspects: the progress of the US economy after the COVID-19 era recovery, the Monetary Policy that will not change until the major goals are achieved and the concerns regarding the high inflation. More or less, it’s the same picture as it was in the previous meeting so the financial markets and especially the FX markets did not have any severe impact.
In Europe, things are very different. The European Central Bank (ECB) announced that there is a new allowed inflation target which is higher than the previous 2%, in order not to risk the growth and the competitiveness of the European economy. Later today, Christine Lagarde will speak ahead of the ECB Monetary Policy Meeting Accounts and this may cause serious turbulence to EUR.
The Delta variant is of course the big issue of our days, threatening the return to normalcy as many countries have increased new cases and some others have already applied lockdowns.
EURUSD (current price 1.1856) is mildly bearish so far this week, following the strength of the USD. Besides the expected announcements regarding the Monetary Policy in the Eurozone, there was no other important economic news. Germany released Imports/Exports/Trade Balance with no big surprises. EURUSD managed to remain above 1.18 and this fact distorts the bearish trend but in case of dropping, the next important support is at 1.17. Lagarde’s speech and the ECB Monetary Policy Meeting Accounts can help in this direction, especially if there will be notes for higher inflation allowed.
GBPUSD (current price 1.3797) is also bearish as GBP has no serious reasons to rise. The risk-off mood that dominates the markets (mostly due to the Delta variation) favors the USD in any case. The UK GDP and the Industrial Production in May were disappointing as the results were significantly lower than the expectations. Nevertheless, GBPUSD is trying a bullish reaction today which is most likely a technical reaction but as long as it cannot surpass the price level of 1.38, the recovery is under serious doubt. The trend is still bearish and the next support is at 1.3730.
USDJPY (current price 110.01) is very bearish this week as the bond yields fell very much. The current price of the US10-year bond yield is 1.34%, which is very low but 4% higher than yesterday, that is why USDJPY performs +30 pips today so far. Japanese news was minor and had nothing to add to this so the two major factors that influence the pair are the strength/weakness of the USD and the bond yields. It is important that USDJPY managed to recover the milestone price of 110, otherwise there was a possible case of a bearish trend. If USDJPY can solidly exceed the zone of 110.35, the case of returning to its bullish trend that has started since the beginning of the year and the price area of 102.50.


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