EUR/USD approaches channel support ahead of US consumer confidence data
The Japanese yen declined slightly after the latest interest rate decision by the Bank of Japan (BOJ). The bank left interest rates unchanged and warned that inflation will struggle to move to its 2% target. It expects that the economy will expand by 4.0% in the year ending March 2022. This was a small increase from its previous forecast of 3.9%. It also expects the economy to rise by 2.4% for the year ending March 2023. In its decision today, the bank made some tweaks to its current monetary policy, including removing targets for its annual purchases of stock funds. The decision came a few days after the Japanese government announced a state of emergency in Tokyo and Osaka due to the rising number of covid-19 cases.
European equities declined today while US index futures were mixed as traders focused on the upcoming earnings season. In the UK, the FTSE 100 index declined by 0.20% even after strong earnings by BP and HSBC. BP’s earnings grew because of its trading business and higher oil prices, while HSBC profits rose by more than 70% as it moved some of last year’s provisions into profits. In Germany, the DAX index fell by 0.45% while in France, the CAC 40 index fell by 0.20%. In the United States, the main indices are unchanged as the market waits for earnings by companies like Microsoft and Alphabet.
The US dollar index rose as the market waited for the Fed decision scheduled for tomorrow and US bond yields rose. The 10-year Treasury yields rose by 0.70% to 1.580% while the 30-year bond rose by 0.53% to 2.25%. Later today, the currency will react to the latest consumer confidence data by the Conference Board. Analysts expect the data to show that the confidence rose from 109.7 to 113 in April. The currency will also react to the latest house price index data from the US.
The USD/JPY pair rose to an intraday high of 108.40 after the BOJ decision. On the hourly chart, the pair also managed to move above the 25-day and 15-day exponential moving averages (EMA). Similarly, the MACD and the Awesome Oscillator have also risen above the neutral level. Most importantly, the pair has formed an inverted head and shoulders pattern, which is usually a bullish signal. Therefore, the pair may be about to have a bullish breakout, at least in the near term.
The EUR/USD pair shows that the pair rose to 1.2118 yesterday. This price was along the upper side of the ascending channel that is shown in pink. Since then, the pair has declined as bears target the lower side of this channel. At the same time, the pair has moved below the 25-day moving average while the money flow index (MFI) has moved to the oversold level of 26. It has also moved below the alligator indicator. Therefore, the pair may keep falling as bears target the lower side of the channel at 1.2050.
The USD/CHF pair declined to a low of 0.9140 ahead of the latest US consumer confidence data. It is trading at 0.9140, which is slightly below this week’s high of 0.9175. The pair has moved below the 50% Fibonacci retracement level. The pair has also formed a small descending triangle consolidation pattern that is shown in pink. Therefore, the USD/CHF will likely have a bearish breakout soon,