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Trading ideas for EUR/USD, USD/JPY and XAU/USD

July 22, 2022

EUR/USD: The European currency rose against the US dollar on Thursday after the European Central Bank raised its interest rate for the first time in over 11 years. Policymakers noted that further rate rises will be appropriate with borrowing costs set to be decided on a meeting-by-meeting approach. Meanwhile, a new financial tool called Transmission Protection Instrument was approved to prevent a blowout in yields on sovereign debt between stronger northern European economies and their weaker counterparts in the south of the continent. The ECB said the tool would allow it and other national central banks to make secondary market purchases of securities issued by countries in the currency bloc. As for macroeconomic data today, we expect the S&P Global Purchasing Managers’ Index on Germany, Eurozone and the US. The local support level can be seen at 1.0155. A breakout below could take the pair to an immediate target of 1.0060.

SELL 1.0155/TP 1.0060/SL 1.0186

 

USD/JPY: The US dollar fell against the Japanese yen on Thursday. The Bank of Japan decided to hold rates without any changes and saved its ultra-loose monetary policy framework, keeping its yield cap on 10-year Japanese government bonds. Also, the Bank of Japan increased its inflation forecast to 2.3%. Core inflation rose in May from a year ago, as well as the core CPI forecast for next year excluding energy. However, prices are expected to remain below target as supply chains normalize. Japan’s consumers have seen their wages drop in real terms as prices outpace nominal wage growth. Yesterday, Japan also posted a trade deficit for June. Japan’s trade book will likely remain in deficit because the global economy cools, tempering the demand for Japanese goods and keeping pressure on the yen. The local resistance level is located at 137.80. A breakout to the upside can trigger growth to 138.60.

BUY 137.85/TP 138.60/SL 137.60

 

XAU/USD: Gold bounced off a one-year low on Thursday due to the dollar easing and Treasuries surging. Fears of a recession are mounting as data Thursday showed US jobless claims at an eight-month high and a slump in one regional factory outlook. One index of leading economic indicators is pointing to a contraction. Investors will closely watch the Federal Reserve’s July meeting next week for clues on its monetary policy stance. The local support level can be seen at $1705. A breakout below could take the metal to an immediate target of $1675.

SELL $1705/TP $1675/SL $1715