EURUSD: BUY 1.1626, SL 1.1596, TP 1.1701
EUR/USD starts the session near 1.1626 amid a weakening dollar and market preparation for the ECB meeting. Acceleration of inflation in the eurozone to 3.3% has strengthened expectations of a 25 basis point increase in the deposit rate. Additional support for the euro comes from a noticeable improvement in investor sentiment, indicating increased confidence in the prospects for the regional economy.
A strong US employment report increased the probability of an interest rate hike by the Fed in September, but did not provide sustained growth for the American currency. Market participants are waiting for consumer inflation data, which will be the last important benchmark before the regulator’s meeting. Before their publication, already formed expectations regarding the Fed may limit the potential for recovery of the dollar.
As a result, short-term advantage remains on the side of the euro. Expected tightening of ECB policy is combined with improving economic expectations, while the positive factor of the US labor market is already partially reflected in quotes. If demand for the dollar remains restrained, EUR/USD may continue to rise within the current session.
Trading idea: BUY 1.1626, SL 1.1596, TP 1.1701
GBPUSD: BUY 1.3545, SL 1.3515, TP 1.3611
The pound is trading around 1.3545, maintaining stability against the US dollar. Statements from the British government regarding support for economic growth and adherence to fiscal discipline have not created a separate strong impulse but have helped curb concerns about public finances. At the same time, high borrowing costs limit the possibility of a quick easing of Bank of England policy.
The dollar’s position remains the main factor for GBP/USD. Although strong employment statistics have raised expectations for September Fed tightening, the market is in no hurry to increase purchases of the American currency ahead of inflation data release. The decline in the dollar index shows that participants need additional confirmation of sustained price pressure in the US.
Under current conditions, the pound can take advantage of weakening demand for the dollar, despite ongoing risks to the British economy. The absence of a new domestic factor capable of causing a sharp reassessment of Bank of England policy supports a moderate scenario for pair growth. As long as the dollar does not receive a new impulse, GBP/USD retains the potential for further recovery.
Trading idea: BUY 1.3545, SL 1.3515, TP 1.3611
USDJPY: SELL 153.27, SL 153.67, TP 152.31
USD/JPY fell to 153.27 as expectations of a faster rate hike by the Bank of Japan strengthened demand for the yen. The revision of prospects for Japanese monetary policy is accompanied by the closure of positions betting on weakness in the national currency. The possible return of capital from Japanese investors also creates an additional source of demand for the yen.
Support for the dollar from the US labor market remains, and the probability of a Fed rate hike in September has increased significantly. However, ahead of the release of inflation data, this factor does not provide the US currency with a sustainable advantage. Even relatively high yields on US bonds currently do not compensate for the change in expectations regarding the Bank of Japan’s policy.
The yen has already strengthened significantly, so the probability of a temporary correction remains. Nevertheless, several factors support the fundamental momentum: expectations of tightening the Bank of Japan’s policy, reduction of carry trade operations, and a coordinated stance of Japanese and American authorities on exchange rate stability. This maintains the advantage of the scenario for further USD/JPY decline.
Trading idea: SELL 153.27, SL 153.67, TP 152.31