London 17/06/2022
A very volatile week comes to an end with a series of news, events, and economic announcements. Four major central banks had interest rate decisions: Fed on Wednesday had a 0.75% hike from 1% to 1.75%, the Bank of England on Thursday had a 0.25% hike from 1% to 1.25%, the Swiss National Bank had a 0.50% (surprisingly) from -0.75% to -0.25% and finally, the Bank of Japan left the interest rates unchanged at 0.1%.
Other important developments and announcements of the week: the inflation in the Eurozone was announced at 8.1% in May, as expected, the retail sales in the US were announced at a disappointing -0.3%, and the unemployment rate in the UK increased in April by 0.1% and rose to 3.8%. Finally, Christine Lagarde on Wednesday announced a series of measures to calm down the rising bond yields in many European countries and mostly in southern Europe.
All the above, aggregated a very volatile week in the currency markets with many ups and downs and many trends during the week. The winner of the week seems to be the US dollar although it performed at much higher prices until Tuesday. The euro, the pound, and the Australian dollar are in small losses, the Japanese yen had important losses, and finally, the Swiss franc performed significant profits through the unexpected interest rate hike.
Regarding the other markets, the stock indices in US & Europe performed high losses while gold and oil had corrections as well. Finally, the bond yields eased their rally during the last three days with the US 10-year bond yield dropping to 3.22% from its highest weekly price on Tuesday at 3.50%.
Important is the speech of Jerome Powell (head of Fed) later today and the Fed monetary policy report.
EURUSD (current price at 1.0495) managed to partially recover but it’s still bearish this week. The US dollar had ups and downs, especially after the FOMC on Wednesday but the shared currency found support in Christine Lagarde’s speech. Both US and Eurozone had negative and disappointing economic results this week but the major influence in the currency markets came from central banks and bond yield rates. The high inflation in the Eurozone may ensure the upcoming interest rates hike by the ECB next month, giving the euro an extra reason to recover. There is strong support at 1.0350 and the pair needs more fuel to break it out while a further recovery will be more established in case we see prices above 1.0640.
GBPUSD (current price at 1.2282) is bearish this week but on Tuesday we saw the lowest price for the pair (1.1933) since the March of 2020. From Wednesday onwards though, there’s a strong attempt for recovery, based mostly on the weakness of the US dollar. The interest rate hikes from the Fed and Bank of England were more or less expected but the press conference that followed the FOMC gave a dovish impression to the audience, causing a dollar’s correction. As the pair approaches 1.20, the bearish scenario dominates. It takes a bullish break out above 1.24 for the bulls to take over.
USDJPY (current price at 134.59) is mildly bullish this week as three major factors fight. First of all, the US dollar is similarly mildly bullish, the bond yields performed a big correction after the weekly highs and the Japanese currency keeps on weakening. Earlier today, the Bank of Japan left the interest rates unchanged and underlined that the ultra-loose monetary policy will carry on and as a result, the yen had important losses. Some analysts say that Japan is the last liquidity source of the world economic system as all the other central banks tighten monetary policy. The weekly high price of 135.57 which is also the highest price of the last two decades is the next obvious resistance for the pair. Below 131.50, bears may come back.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

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