• The bullish retracement path of the USD/JPY currency pair this week was capped by testing the resistance level 135.50 before settling around the 135.10 level in the beginning of trading today, Thursday.
• The dollar yen gained further after the release of the minutes of the latest meeting of the US Federal Reserve. and US retail sales figures.
• US central bank officials saw signs of weakness in the US economy at their last meeting, but still described inflation as “unacceptably high” before raising the benchmark interest rate by a significant three-quarters of a point in their quest to slow price increases.

The pace of sales at US retailers was reported unchanged last month as persistently high inflation and rising interest rates forced many Americans to spend more cautiously. Retail purchases were flat after rising 0.8% in June, the Commerce Department reported, and economists had been expecting a slight increase.

However, yesterday’s report contained some positive signs: Excluding autos and auto parts, retail sales rose 0.4% in July. Lower gas prices will likely free up money for people to spend elsewhere. Gasoline sales fell 1.8%, reflecting lower pump prices. Sales of building supplies and garden equipment were halted, as were sales in electronics and hardware stores. Meanwhile, consumers remained wary of spending too much on non-essentials: sales fell 0.5% in supermarkets and 0.6% in clothing stores.

Compared to the previous 12 months, total US retail sales rose 10.3% in July.

Inflation Affecting US Economic Activity

American consumers, whose spending accounts for nearly 70% of US economic activity, remained mostly resilient even as year-round inflation neared four-decade highs, growing economic uncertainty and rising costs for mortgages and money borrowing. However, public spending has weakened, increasingly turning towards things like groceries, and away from less important things like electronics, furniture, and new clothes. The government’s monthly report on retail sales covers about a third of all consumer purchases and does not include spending on most services, from plane prices and apartment rentals to movie tickets and doctor visits. In recent months, Americans have shifted their purchases away from physical goods and more toward travel, hotel accommodations and plane rides.

Inflation continues to be a severe struggle for many families. Although gasoline prices have fallen from their highs, food, rent, used cars and other necessities are becoming much more expensive, exceeding any wage increases that most workers have achieved. Despite the US labor market, which remains strong, the US economy contracted in the first half of 2022, raising fears of a possible recession. Growth has been weakening largely as a result of higher interest rates by the Federal Reserve, which are intended to calm the economy and tame high inflation.

US Dollar Against Japanese Yen Forecast

On the daily chart, technical indicators are heading higher, which provides the momentum for the USD/JPY currency pair. Besides, the momentum factors for the stronger US dollar, which is still a safe haven, and the economic performance of the United States supports the path of tightening the Fed’s policy, and we do not forget that the dollar pair Yen headed towards its highest in 25 years and was the closest to testing the psychological peak of 140.00. Technical indicators have not yet reached overbought levels, so no profit-taking is expected.

On the downside, the closest support levels for the dollar pair are 134.20 and 133.00, respectively. The US dollar will be affected today by the announcement of the Philadelphia manufacturing index, the number of jobless claims, and then the US existing home sales.

Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers to choose from.

The GBP/USD exchange rate attempted to extend its month-long recovery last week, but was unable to reach a new high. It could now head into a period of neutrality with a bearish bias unless the action-packed economic calendar provides catalyst for new progress. The GBP/USD pair fell to the 1.2050 support level at the beginning of this week’s trading, and the rebound gains last week brought it to the 1.2277 resistance level.

There were multiple signs last week that a significant moderation in US inflation was approaching, albeit not enough to dissuade the Federal Reserve (Fed) from its hawkish policy stance, leading to continued interest rate risks that also limit the factors for the sterling. “The weak inflation reports have caused some understandable relief to risky assets and downward pressure on the dollar,” Michael Cahill, FX analyst at Goldman Sachs, wrote in a research briefing on Friday. “That is likely to extend a bit given the light calendar going forward and the possibility that this week’s FOMC meeting minutes will include some discussion about the FOMC’s apparent desire to slow the pace of advances soon.” But we don’t expect that to be a lasting relief.”

Data last week indicated that every official measure of US inflation was either slowing or declining in July, while separate measures of producer prices and import costs also surprised to see declines in the recent period.

Meanwhile, a New York Fed survey showed expectations of future inflation falling on all horizons last month, and a significant University of Michigan survey indicated that expectations fell on all but the longer horizons.

The problem for sterling and the dollar lies in things like staffing costs per capita, which rose 10.8% annually in the second quarter after a 12.6% increase previously and in a result that wage growth rates have slowed to a decline from their highest levels in recent decades. Taken together with the rise in long-term expectations combined with the recent reduction in market expectations for the Fed funds rate, these factors keep US inflation and interest rate risks to the upside while limiting the pound-dollar rate in its ability to recover.

“Wednesday’s retail sales report is the most popular data in this week’s calendar,” says Kevin Cummins, chief US economist at Natwest Markets. Thursday’s weekly jobless claims also require more attention, in light of the recent improvement. “We expect the minutes to confirm the additional price hike to a restrictive position that remains in place for this year,” he added. Accordingly, “we doubt that the FOMC will send any clear message whether the expectations for a rate hike in September are 50 basis points or 75 basis points.”

What’s next for GBP/USD?

A lot about how the GBP/USD price will move in the coming days is likely to be determined by a busy economic calendar that includes several very important dates for both the Pound and the Dollar. Accordingly, Juan Manuel Herrera, an expert at Scotiabank, says: “The energy crisis and the cost of living crisis indicate that there are economic headwinds awaiting the British economy, and this will limit the ability of the pound to advance.”

“The top of the range this week coincided with a test of the major resistance at 1.2275 and failure here indicates the risks of the cable returning to the 1.20 region. We notice a major support at 1.2080 in the short term.”

The UK economic outlook remains weak. The Bank of England still expects a recession to start in the fourth quarter of 2022, although the risk is closer. Employment figures will be closely scrutinized on Tuesday for clues about labor market resilience and for insight into the trend in wage growth, both of which are influential when it comes to the matter is the outlook for the Bank of England (BoE) interest rate policy. Wednesday’s UK inflation numbers are the most important for the BOE and GBP monetary policy in the short term, and this time there is uncertainty about how the market is likely to respond to upside or downside surprises.

Sterling dollar forecast:

• The GBP/USD currency pair is closest to testing the psychological support 1.2000.
• It may increase the bears’ control over the trend.
• It will prepare to test stronger support levels, the closest to them are currently 1.1975 and 1.1880, respectively.

On the other hand, and over the same time period, moving towards the resistance levels 1.2145 and 1.2300 will be important for the bulls, and in general, I still prefer to sell the GBP/USD from every bullish level.

Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex brokers in the industry for you.

The demand for the US dollar was strong at the beginning of this week’s trading, amid a decline in global stock markets linked to renewed fears of more Chinese economic problems as a new outbreak of Covid-19 was reported in Shanghai. Accordingly, the price of the USD/JPY currency pair moved for more bullish breaches, as it jumped to the resistance level of 137.75, the highest for the currency pair in 24 years, before settling around the level of 137.50 at the time of writing the analysis, waiting for any news.

Investors had hoped China was on its way to easing its Covid-free approach to the virus, but news that areas of Shanghai are undergoing mass testing has led to fears of severe restrictions being imposed again. According to market performance, the dollar was the strongest against a basket of currencies due to global growth concerns. Those concerns were exacerbated by fears of more lockdowns in China after Shanghai reported its first case of the highly contagious BA.5 omicron subtype.

Shanghai reported its first case of variant BA.5 on Sunday and authorities say mass testing for Covid will be conducted twice between July 12 and July 14 in nine regions. Commenting on this, Susanna Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdowne, said: “The uncertain outlook keeps stock markets volatile with growing fears of severe inflation and a global slowdown, while Covid concerns are back again.” And “signs that the story of The Covid horror is not over yet on our nerves.”

Asian and European markets were trading in the red while US stock futures pointed to a softer open. These dynamics reflect an investor environment that tends to favor the dollar and other “safe havens” currencies.

The DXY dollar index – a measure of the dollar’s broader performance based on exchange rates specific to the US dollar – was near its highest level since 2002 at 107.47.

Commenting on this, Mark Heffel, chief investment officer at UBS Global Wealth Management, says: “In the current climate of risk aversion in the markets, the US dollar’s ​​rally is likely to continue in the near term.” But looking to the future, the analyst says, this strength is unlikely to last in the long term. UBS said in a note Monday that the dollar’s rally will be constrained by peak rate hike expectations by the US Federal Reserve as investors begin pricing in a physical economic slowdown in 2023.

This could prompt the Fed to cut interest rates. Accordingly, some analysts advise investors not to take a position in order to continue the rise of the US dollar. Instead, our favorite safe haven currency is the Swiss franc. We also favor commodity currencies, which we expect to benefit as commodity prices recover from the recent decline.

Overall, the selling of the Japanese yen accelerates after Japan’s ruling coalition expanded its majority in Sunday’s upper house elections, as investors interpreted the result as a near-referendum on the country’s ultra-easy monetary policy. Accordingly, the Japanese currency fell 0.8% against the dollar, surpassing the closely watched 137 level. Bank of Japan Governor Haruhiko Kuroda reiterated on Monday that he would not hesitate to add monetary stimulus if needed to bolster the faltering economy.

Rising Treasury yields and strong US employment data on Friday also gave an additional boost to the dollar, which rose against most of the major currencies. Commenting on the performance, Tsutomu Soma, a bond trader at Monex Inc said: “The environment is vulnerable to dollar buying and yen selling given the sense of security that there will be no turmoil in Japan for a while and amid expectations of a Fed rate hike to combat inflation.” . in Tokyo. “It wouldn’t be surprising if USD/JPY tested 147 or 150 in that direction.”

With the Bank of Japan keeping interest rates on the floor even as foreign interest rates rise, the yen has fallen to a 24-year low, down more than 16% against the dollar this year. The coin is a very short distance from its worst decline ever, according to data compiled by Bloomberg. Japan’s elections came two days after the assassination of former Prime Minister Shinzo Abe, who was seen as a major supporter of the Bank of Japan.

USDJPY Technical Outlook

The general trend of the USD/JPY currency pair is getting stronger towards the upside and stabilizing above the resistance 137.50, which does not rule out moving towards the next psychological resistance level 140.00. The factors of the strength of the US dollar continue, and the Japanese yen did not even benefit from the attempts of investors to buy safe havens. On the downside, if there is profit taking selling, which is expected at any time, the currency pair may move towards the support levels 136.80 and 135.00, respectively.

Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex brokers to check out.

With the beginning of this week’s trading, the performance of gold prices varied despite the weakness of the US dollar and the recent sharp drop in US Treasury yields. The price of gold continued to move in narrow ranges, coinciding with the American holiday, which affected the liquidity of the markets, and the price of the yellow metal moved in narrow terms between the level of 1814 dollars and the level of 1804 dollars for an ounce, and it settled around the level of 1808 dollars an ounce at the time of writing the analysis, waiting for any new developments. The dollar fell but hovered near record levels on fears of slowing global growth.

Eurozone government bond yields rose today, but trading is weak due to the US Independence Day holiday. Yields on the benchmark 10-year US Treasury fell to a one-month low on Friday after weak manufacturing and construction data helped raise expectations that the Federal Reserve may choose a less aggressive pace to raise US interest rates in the coming months.

After a long weekend, the Labor Department’s monthly jobs report is likely to be in the spotlight this week. Investors are also likely to watch reports of factory orders, US trade deficit and service sector activity. Employment in the US is expected to slow in June while the June Fed minutes are almost certain to be hawkish.

Global stock indices rose mostly while US futures fell before the July 4th holiday in the US, so indices rose in London, Paris, Frankfurt and Tokyo but fell in Hong Kong and Seoul. Last week was the fourth losing week in the past five weeks for Wall Street markets as investors fear rising inflation and the possibility that higher interest rates could trigger a recession.

Economic data over the past few weeks has shown that inflation remains high and the economy is slowing. The latter has raised hopes on Wall Street that the Fed will eventually ease its push to raise interest rates, which has been affecting stocks, especially higher-priced sectors such as technology stocks.

Analysts don’t expect a big rally in stocks until there are strong signs that inflation is abating, and recent data has yet to show that. Friday’s report said inflation in countries that use the euro hit another record high, driven by a massive increase in energy costs fueled in part by the Russian war in Ukraine. In general, Wall Street markets remain concerned about the risks of a recession as economic growth slows and the Federal Reserve aggressively raises US interest rates. The Fed is raising interest rates to slow economic growth on purpose to help cool inflation, but it will likely go too far and lead to a recession.

XAU/USD Gold Price Forecast

The gold price stuck to the level of 1800 dollars an ounce, which still gives the bulls the last opportunity to launch higher or continue the selling operations, and therefore the gold price moved in the coming days towards the support levels of 1785 and 1770 dollars, respectively, which are important levels to enable the bears to control the trend and at the same time stimulate gold investors In the return of thinking about buying gold again.

I still prefer buying XAU/USD from every bearish level. The strong bulls will return to the gold market if the prices move towards the resistance levels of 1835 and 1860 dollars, respectively. Technical indicators are in a neutral position with a bearish bias awaiting strong moves in one direction in reaction to the announcement of the minutes of the last meeting of the Federal Reserve and the US jobs numbers.

The British pound incurred broad losses earlier this week and there were strong indications, that the breadth and depth of its declines resulted from an apparently successful attempt by the Swiss National Bank to defend the Swiss Franc from a strong US dollar. In the case of the GBP/USD pair, it fell to the support level of 1.2105 from the gains of the beginning of the week’s trading around the 1.2331 level, from which we recommended our valued clients to sell the currency pair.

The price of the US dollar rebounded from last week’s losses, and in the midst of this price action, the British Pound and the New Zealand Dollar were seen jostling with each other for the bottom of the major currency group during the latter half of the day. During this period, there has been near-consistency between the performance of the GBP/USD and GBP/CHF as well as for some other currencies when measured against the Swiss franc, including the New Zealand dollar, which is illustrated in the various images throughout this analysis.

This matching match is called joint movement and has previously been found to indicate a common theme or factor driving the exchange rates at which it is observed, according to this research from the Bank of England (BoE). This joint move is also a strong indication of what was going on on Tuesday given that it took place in and around Swiss exchange rates and came shortly after the SNB indicated it would sell currency reserves in order to keep the franc from accumulating inflationary losses.

If there is an excessive appreciation of the Swiss franc, we will be willing to buy foreign currencies. For his part, Thomas Jordan, president of the Swiss National Bank, said on June 16, “If the Swiss franc weakens, we will also consider selling foreign currencies.” He also said after the Swiss central bank’s surprise decision to raise the interest rate by 0.50% to -0.25: “We will monitor developments closely and are ready to take the necessary measures in every situation to ensure price stability in Switzerland in the medium term.” The combined move this week was the strongest and most consistent in terms of the British pound, but it was also remarkably clear with respect to the Japanese yen, the euro, the Canadian dollar, and a whole host of other currencies that are not themselves listed as official reserve holdings of the Swiss Central Bank.

The SNB’s official currency reserves are significant, valued at 1.01 billion Swiss francs (£871 billion) by the end of last year, while around 93% were held in US dollars, euros, Japanese yen, British pounds, and Canadian dollars at the end of the quarter. The first of 2022. Sterling’s share of reserves was 6% and equals an estimated £52.2 billion of today’s money and about 11% of the total $575 billion in reserve assets held in Sterling known to the IMF at the end of 2021. However, the SNB also held just over that amount of the total portfolio, valued at about 7% in the first quarter of the year, in smaller currencies that were collectively listed under “others” in the bank’s disclosures.

It was previously unknown outside the SNB exactly what currencies make up those “other” assets but Tuesday’s price action and joint movements across the CHF exchange rate complex provided solid clues as to which of these currencies might be. There has been a very strong and persistent cross movement in the relevant New Zealand dollar exchange rates, albeit to a lesser degree, also in the relevant Australian dollar and Swedish krona exchange rates. While the British pound, yen and euro are unlikely to avoid giving up ground in favor of the US dollar in circumstances where they are broadly consolidating, it was unusual for them to underperform “high beta” currencies such as those with commodity links, especially those in emerging markets.

The fact that the Sterling, the yen, the Euro, and others like the New Zealand dollar outperformed those other currencies is likely evidence of the breadth and extent of the impact of the SNB’s reserve sale on the market as it sought to keep the USD/CHF rate from rising. If anything can be inferred from this, there could be a risk of further underperformance by the likes of the pound, yen and euro in the short term and as long as the dollar continues to put other currencies under pressure.

This is at the same time, however, on a par with reserve currencies, which act as national savings assets of the countries of the world with their own central banks and all of them are obligated to provide liquidity in the necessary amounts, sometimes demanded especially during periods. from financial pressures.

GBP/USD analysis today:

The general bearish trend of the GBP/USD currency pair is getting stronger. As I mentioned a lot before that the bears move towards the support level 1.2175 will support the next stronger bearish move the psychological support level 1.2000 at the earliest. This support is sufficient to move the technical indicators towards strong oversold levels. So far, any attempts to rebound the sterling-dollar pair will remain subject to selling as long as the factors of sterling’s weakness exist and are increasing.

The closest resistance levels for Sterling are $1.2230 and 1.2450, respectively.

RBA hikes by 0.50%, not the expected 0.25%

My previous signal on 31st May was not triggered, as the low of that day was well below the support level I gave at 0.7162.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be entered prior to 5pm Tokyo time Wednesday.

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 0.7213, 0.7248, or 0.7275.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.7143 or 0.7125.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote in my previous forecast on 31^st May that the technical picture had become more bullish, but that it remained prone to a reversal. I thought that the best approach for the day was to look for long trades.

My key support levels were off as entry points, but I was correct that the best trade for the day would be a long.

The broad technical picture in this currency pair now is one of a choppy, wide range, making trading unpredictable except when fading price extremes. This would point to a long trade from a bullish bounce at 0.7143 or a short trade from a bearish reversal at 0.7275. Technically, the support level at 0.7143 looks likely to be strong as it is so well-defined, as can be seen within the price chart below.

There is an important new fundamental factor affecting the AUD today: the Reserve Bank of Australia surprised the market a few hours ago by hiking its interest rate by 0.50% when a hike of only 0.25% was expected. This could be expected to boost the price, but although we saw an initial spike as high as 0.7245 immediately following the hike, the price quickly returned to where it started. However, the price is rising slowly again.

I think the smart thing to do will be to wait for two consecutive higher hourly closes above the resistance level at 0.7213, and then enter a cautious long trade if you want to trade this currency pair today.

There is nothing of high importance scheduled today regarding either the AUD or the USD.

Fed policy and the financial conditions affecting it have shifted in a tighter direction at a brisk pace since June of last year, but several influential members of the Federal Open Market Committee (FOMC) recently suggested that markets may have to move. Amidst the path of a strong tightening of the US interest policy, the price of the USD/JPY currency pair moved in a strong upward path. The bulls in the currency pair jumped to the resistance 130.89 at the beginning of this week’s strongest trading for the currency pair in 20 years.

Overall, financial markets are already expecting the Fed to raise the US interest rate by 0.50% after the FOMC meetings in June and July, which would raise the Fed funds rate close to 2%, the highest level since 2019. In addition to However, the rates or prices in the overnight index swap market were suggesting expectations among investors and traders that the bank could raise the benchmark index further up to 2.75% by the end of the year.

Notes from several FOMC members recently published suggested that even those expectations could be too low if the Fed were to succeed in its efforts to bring inflation down to the bank’s average target of 2%, from 8.5% in April. “In my view, with inflation rising as it is, it is likely that the money rate will need to surpass its long-term neutral level to rein in inflation,” said Loretta Meester, president of the Federal Reserve Bank of Cleveland. But we can’t make that call today because it will depend on how much demand is moderate and what happens on the supply side of the economy and “therefore, we need to continue to closely monitor economic and financial developments.”

Meester has described these US inflation rates as reflecting an imbalance between “strong aggregate demand” resulting from the economy emerging from the hibernation caused by the coronavirus and “constrained aggregate supply” resulting from a variety of factors including the implementation of a start-up of restrictions elsewhere in the world.

She added: “Some of our business contacts described the situation as akin to Whac-A-Mole. Once they figure out how to solve a problem in one part of their supply chain, a problem arises in another.” “This means that the supply chain disruptions have lasted much longer than the companies expected,” she added.

Elsewhere in the Fed’s speech, Vice Chairman Lyle Brainard noted that the current market pricing of US interest rates is the least to expect, while fellow Board member Christopher Waller has been as hawkish as St. Louis Fed President James Pollard. “We will certainly do what is necessary to bring down inflation again,” he said. We start from a position of strength. The economy has a lot of momentum. The other factor that I think is very positive, he added, is that corporate balance sheets, family budgets, start this process from a very healthy position.

“On inflation, I’ll look forward to seeing a consistent series of decelerating monthly prints of core inflation before I feel more confident that we’re hitting the kind of inflation trajectory that will bring us back to the two percent target,” she said in an interview with CNBC News. In terms of our tools, they are very effective in cooling aggregate demand.”

Previously, St. Louis Fed President James Bullard said US inflation was comparable to levels seen in the 1970s and warned that US inflation expectations could become unconstrained without credible Fed action. James Bullard’s worry is that without that the Fed may risk inviting a new regime of high inflation and volatile economic outcomes. “This situation threatens the Fed’s credibility with regard to the inflation target and its associated mandate to provide stable rates in the United States,” he added. “Advance guidance on these dimensions helps the Fed move policy more quickly to the degree necessary to keep inflation in check,” he added.

According to the technical analysis of the pair: The above narrative confirms our view that the USD/JPY currency pair will remain in an upward trend. Any retracement of the currency pair will be an opportunity to buy, as Japan is still suffering from the consequences of the pandemic. The continuation of the Russian-Ukrainian war and the Central Bank of Japan is completely far away in the issue of tightening his policy as do the rest of the global central banks led by the Federal Reserve. Stability above the psychological resistance 130.00 will continue to support the bulls in further movement to the upside. The closest goals to them are currently 131.20 and 132.00, respectively.

On the daily chart below, the dollar-yen pair is moving steadily within its ascending channel, and no new occurrence for that channel will occur without moving below the support 128.30.

As I mentioned before, any gains for the EUR/USD price rebound upwards will be a target for selling, as the factors of weakness are still present. Indeed, after attempts to rebound higher with gains to the level of 1.0564, it returned to decline in its broader path down to the level of 1.0460 at the time of writing the analysis. The US dollar is still the strongest with expectations of raising US interest rates strongly during 2022, and the euro lacks this most important factor for investors in the financial markets and the currency market in particular.

In addition to the bleak outlook for the future growth of the Eurozone economy due to the Russian-Ukrainian war crisis, which particularly affects the energy sector, threatening to paralyze the European economy. So Europe is trying to cut off Russian natural gas because of the war in Ukraine, but is still finding enough fuel to keep lights on and homes warm before it gets cold again.

That has prompted officials and utilities to race to fill the underground storage with scarce supplies of natural gas from other producers — competition that is driving up already high prices as utility bills and business costs soar. Italy has announced new supplies from Algeria, while Germany has identified an energy partnership with Qatar, the main supplier of ship-delivered LNG.

And while these deals offer a long-term boost, they will likely have little impact on critical winter supplies that will be determined over the next several months. Currently, the scramble in Europe is a zero-sum game: there is little or no spare gas available to grab, and any supply any country can obtain comes at the expense of someone else in Europe or Asia.

Eurozone inflation remained unchanged in April, according to the final estimate from Eurostat, and the harmonized consumer price index rose 7.4 percent year on year, the same as in March, but lower than the initial estimate of 7.5 percent. Despite the downward revision, inflation was the highest ever.

On a monthly basis, the HICP index rose 0.6 percent, in line with estimates published on April 29. Core inflation, which excludes energy, food, alcohol and tobacco, accelerated sharply to 3.5 percent, as expected, from 3.0 percent in March. Energy continued to achieve its highest annual rate, 37.5 percent in April versus 44.3 percent in March. Food, alcohol and tobacco prices rose 6.3 percent after a 5.0 percent increase in March.

Prices of non-energy industrial goods rose 3.8 percent after a 3.4 percent increase in March. Service costs grew 3.3 percent after a 2.7 percent increase the previous month.

There is no change in my technical view of the performance of the EUR/USD currency pair. The general trend is still bearish, and any gains for the pair may remain subject to selling again. Weakness factors still exist, most notably the discrepancy in economic performance and the future of monetary policy tightening between the Eurozone and the United States, as well as the continuation of the Russian-Ukrainian war, which has a stronger negative impact on the Eurozone in particular. The closest targets for attempts to recover are the resistance levels 1.0520, 1.0600 and 1.0685, respectively. On the other hand, according to the performance on the daily chart, a break of the 1.0400 support will be important for the bears to move down strongly.

The EUR has a medium-term bullish potential, which indicates that a long streak of losses will fade soon.

Despite the recent stability of the EUR/USD currency pair’s performance, the US dollar continued its strength. The bears found an opportunity to launch lower again, and the currency pair retreated towards the support level 10501 and settled around it at the beginning of trading today, Thursday. The US currency is still the strongest with expectations of a strong interest rate hike during 2022 by the US Federal Reserve.

The peak of the dollar’s strength has passed, and the euro will show bullish traits in the medium term. New research from French banking giant BNP Paribas shows in a regular monthly briefing on the currency’s future, analysts with the bank say the dollar “may be near its peak” and is now trading “too rich” relative to its long-term fair value as reported by the BNP Paribas FEER model.

“We expect this assessment gap to narrow as central banks outside the US start their tightening cycles while the Fed tightening cycle matures,” says Alexander Zhikov, forex analyst at BNP Paribas in London. Further analysis from BNP Paribas has found that the dollar tends to peak around the start of the Fed’s walking cycle. The results come in the same week as the dollar soared to new multi-year highs, spurred by the promise of a 50 basis point interest rate hike at the Federal Reserve and a downturn in global stock markets.

Meanwhile, fears of slowing global growth provide the traditionally supportive backdrop as the counter-cyclical dollar tends to rise. Accordingly, the EUR/USD exchange rate fell as low as 1.0475 and now appears to be stabilizing at levels between 1.05 and 1.06. But these could be lower levels if BNP Paribas is right.

“We expect a significant decline in the US dollar with EUR/USD and AUD/USD rising to 1.14 and 0.80 respectively by the end of the year and USD/JPY dropping to 120,” the bank’s analysts add.

The EUR has a medium-term bullish potential, which indicates that a long streak of losses will fade soon.

Meanwhile, BNP Paribas’ custom STEER model found the largest understatement in the EUR/USD spot rate since the model’s inception. Economists are also now in tune with the possibility of an upcoming rate hike from the European Central Bank, with signs that the move in July is becoming increasingly clear.

The European Central Bank has long favored ultra-low interest rates, but rising inflation has forced a rethink and increasingly Governing Council members are of the view that interest rates should return to above 0%. This normalization would provide some support to the interest rate for the euro, which it has been lacking for a long time. BNP Paribas, for its part, now expects the ECB to raise rates earlier than previously envisaged and see the first increase in September, although the move in July was a close call.

They now expect a cumulative tightening of 175bps through the end of 2023 (50bps more than they previously thought).

With the ECB on course for policy normalization, ultra-cheap valuations and extended short positions in EURUSD (tactically and structurally in our view), we continue to look at the medium-term trend in terms of the upside. We expect the EUR/USD to rise to 1.14 by the end of 2022 and 1.20 by the end of 2023.

According to the technical analysis of the pair: There is no change in my technical view of the performance of the EUR/USD currency pair, as the general trend is still bearish. Breaking the 1.0500 support will increase the chance of further collapse, despite the technical indicators, after the recent losses, reaching oversold levels. Currently, the nearest trend targets are 1.0455 and 1.0300, respectively. On the other hand, according to the performance on the daily chart, the bulls must launch towards the resistance levels 1.0790 and 1.1000 to confirm the change in the current bearish outlook. The euro is not awaiting any important economic data, and the US dollar will be on a date with the announcement of the US producer price index, one of the tools for measuring US inflation. This is also in addition to announcing the number of weekly unemployed claims.

Amid continuing weakness factors (a strong future for raising US interest rates – the Russian / Ukrainian war – an uncertain future for raising interest rates from the European Central Bank – the strong performance of the US economy compared to the Eurozone economy) the downward trend of the EUR/USD currency pair continues. We said before that the euro might be exposed to more selling once it crossed the 1.0800 psychological support, and it has already happened, as the losses of the most popular currency pair in the Forex market reached the 1.0635 support level, the lowest in two years. It stabilized around it at the beginning of trading Wednesday.

FX analysts at DNB Markets say the euro breakout below $1.08 won’t last long and they expect a steady recovery through the end of the year. So the Scandinavian lender and investment bank says that the EUR is traditionally and structurally not susceptible to the current lows we are currently seeing and that the ECB could soon provide some support via the yield channel.

There is no doubt that DNB Markets is acknowledging the pressures in the near term and is not yet inclined to call for an imminent recovery. In this regard, analyst at DNB Engfield Burgen says that the expected higher interest rates in the United States compared to other major economies, along with its status as a safe haven in times of market turmoil, is the reason behind the strength of the US dollar against other G10 currencies recently.

“This is also evident in the euro against the US dollar, which fell back below 1.08, despite the relief of Emmanuel Macron’s strong victory in the French presidential election on Sunday,” Borgen adds.

To be sure, DNB Markets has identified some investor nervousness embedded in the Eurodollar: they believe that some of the drop in the EUR/USD pair, from 1.11 in mid-March to 1.08 in mid-April, was due to a small “Le”. The pen risk premium is priced in the euro, as Macron’s lead over Le Pen in the polls has narrowed somewhat in this time period. But “the fact that EUR/USD did not recover any of this but fell further after Macron’s victory is in our view emblematic of how sensitive the EUR/USD is currently to the volatility of risk appetite.”

The drop in global stock markets linked to China’s growth concerns with the introduction of Covid lockdowns appears to be a major concern for investors at the moment. These concerns came along with the dollar’s rise to a two-year high.

But DNB Markets maintains the view that EUR/USD will be trading well below 1.08 for an extended period. Accordingly, the analyst adds, “The main reason for this is that the euro against the dollar EUR/USD has never traded, since 2002, at such low levels except for short periods in which monetary policy in the United States and the eurozone moved in two completely opposite directions.”

Moreover, “while the Fed is preparing to tighten policy faster than the ECB, we believe the ECB is ready to start raising interest rates and end quantitative easing later this year, and that this will change investor sentiment toward the euro.” She says that this will further strengthen the euro against the US dollar in the long run. In a 12-month period, DNB Markets has forecast EUR/USD to trade at 1.10.

The general trend of the EUR/USD is still bearish, taking into account that the recent losses were enough to push the technical indicators towards oversold levels, as is evident on the daily chart. The current path, therefore, may be subject to further testing of stronger support levels, the closest of which are currently 1.0580 and 1.0400.

On the other hand, and as I mentioned before, the EUR/USD has to break through the psychological resistance 1.1000 to have an opportunity to break the current descending channel.