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

June 17, 2022

EUR/USD: The euro strengthened against the dollar as the single currency garnered support from the European Central Bank’s decision mid-week on fresh support to contain borrowing costs among southern nations. The SNB hike helped put fresh pressure on European bond prices as investors ramped up bets for ECB rate hikes. Germany’s 10-year yield, the benchmark for the bloc, jumped as much as 26 basis points at one point. Investors are likely to find the stable inflation rate quite cheerful as various economies are reporting their price pressures beyond their prior prints. But still, this will compel the European Central Bank (ECB) to sound extremely hawkish in its monetary policy dictation in July. The DXY is attempting to regain its mojo ahead of the speech from Fed chair Jerome Powell. Fed Powell is expected to dictate the ideology behind announcing a 75 basis point rate hike.

BUY LIMIT 1.0502/TP 1.0580/SL 1.0463

 

USD/JPY: The dollar dipped against the Japanese yen on Thursday, but rose after the Bank of Japan rate decision. Bank of Japan matched wide market expectations of announcing no change to its monetary policies on Friday. In doing so, the USD/JPY pair extended the early Asian session rebound from the weekly low to reverse the week’s losses.

BOJ kept its benchmark rate near -0.10% while also holding the 0.0% target for the Japanese Government Bond at the end of two-day monetary policy meeting. While the inaction was widely anticipated, a mention of the FX in the Bank of Japan statement teased the yen sellers on announcement. “Need to watch the impact of fx on economy, prices,” the BOJ statement mentioned. This could be the first such hint from the BOJ in a long time that directly connects to the FX intervention.

BUY LIMIT 133.10/TP 135.15/SL 132.10

 

XAU/USD: Gold Price remains at the mercy of the USD and Treasury yields. Risk sentiment and end of the week flows could also affect XAU/USD. The path of least resistance appears to the upside for the yellow metal. Global central banks showcased their resolve to tackle the inflation monster this week, with the Fed and SNB going in for bigger rate hikes, re-kindling recession fears. Risk-sensitive assets were heavily thrashed while the safe haven also failed to capitalize on the sour market mood, as long-dated US Treasury yields fell sharply. The sell-off in the dollar helped gold prices extend the post-Fed turnaround. The same underlying narrative is likely to remain in play going forward, as the precious metal’s fate hinges on the dynamics of the dollar, as well as, the yields.

BUY STOP 1850.30/TP 1861.50/SL 1845.00