End of the week currency markets review



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The European Central Bank kept the Interest Rates unchanged at 0% at its latest session and did not provide any surprises or a new piece of information. Christine Lagarde at the Press Conference mentioned that ECB will allow a temporary exceed of the 2% inflation threshold (a transitory period in which inflation is moderately above target) with no visible tightening of the Monetary Policy. The tone is dovish, Interest Rates may remain unchanged for even a longer period than planned and the loose Monetary Policy will continue with a relative tolerance to inflation. Christine Lagarde also noticed that the growth in the Eurozone is strong and she expressed some concerns regarding the Delta variation which is a factor that may put some risk on it.
EUR became weaker with this dovish policy and the USD has a bullish week. The USA did not have any significant economic news & announcements so far and the only factor that may affect USD is the PMI announcements, later today.
EURUSD (current price 1.1767) started the week bearishly and as it seems it will end it bearish as well. The temporary bullish reaction of the pair did not last and after the dovish approach of ECB, it moved lower. The PMIs results were encouraging in Germany & Eurozone but this fact did not help EURUSD to recover. As long as it does not break out above 1.1830, the major support of 1.17 remains the main target for the sellers. The USD is also favored by the risk-off mood that dominates the market in between the uncertainty that the Delta variation develops.
GBPUSD (current price 1.3755) managed to recover and it is currently very close to its weekly open price. Ben Broadbent (Bank of England) said that “A current spike in prices is unlikely to create longer-term inflation pressures but central bankers should keep a close eye on job market shortages after the coronavirus pandemic” and GBP was boosted beyond the dollar’s strength. The UK announcements (Retails Sales and PMI) were rather negative but GBPUSD is getting stronger, having surpassed the resistance of 1.3730. Below 1.3730 it may return to its bearish trend but above 1.3790, the bullish reaction may accelerate.
USDJPY (current price 110.56) is still very bullish, continuing the trend that took from Tuesday and on. The bond yields rose (US 10-year bond yield climbed above 1.30%) and in combination with the strong USD, gave the pair a performance of 50+ pips since the beginning of the week and a certain boost of 150 pips from Monday’s lower price of 109. Japan had nothing to offer with news/announcements so the strength of USD along with the bond yields run the pair. The resistance of 110.70 may stop the bulls for a while but above it, the next target is at 111.65.

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