USD/JPY darts higher as BOJ retains easing policies

The euro was little changed today after the latest Eurozone consumer price index (CPI) data. The numbers showed that the headline CPI rose by 1.9% in June, a small decline from the previous 2.0%. On an MoM basis, the CPI remained intact at 0.3%. The core CPI rose by 0.9% in June after rising by 1.0% in May. These numbers show that the bloc’s inflation is easing even as companies face significant logistic challenges. The overall inflation rate is below the ECB’s new target of 2.0%. As such, there is a possibility that the bank will maintain low-interest rates longer than the Federal Reserve.

The Japanese yen weakened against the US dollar after the latest Bank of Japan interest rate decision. The bank left the interest rate unchanged as was widely accepted. It will also continue with the asset purchases that will see it expand its balance sheet. The BOJ also pledged to continue with its yield curve control in its attempt to lower its cost of borrowing. The dovish tone was supported by the fact that the country’s inflation remains below 1% even as its unemployment rate has dropped to 2.9%. Therefore, the USDJPY pair rose because of the overall perception that the Fed will move faster than the BOJ.

US futures retreated as the earning season takes shape and after infrastructure talks hit a barrier. The biggest issue is that the negotiating team of Republicans is opposed to an expanded mandate of the Internal Revenue Service (IRS). Democrats have argued that giving the agency more money will help it track and enforce tax issues. The biggest story in the market was a report that Intel was in talks to acquire GlobalFoundries from Mubadala. The suggested price tag for the acquisition will be worth more than $30 billion. Intel shares rose by 1% in premarket trading. In the past few years, the company has struggled after facing substantial competition from companies like AMD and Nvidia.

EUR/USD

The EURUSD pair rose slightly after the latest EU inflation data. The pair rose to a high of 1.1820, which was slightly above yesterday’s low of 1.1796. It is stuck between the descending channel shown in red. The pair has also moved below the 25-day moving average and is at the middle line of the Bollinger Bands indicator. Therefore, the pair will likely remain at this range during the American session.

USD/JPY

The USDJPY pair rose to an intraday high of 110.10 after the latest BOJ interest rate decision. On the three-hour chart, the pair is slightly below this week’s high of 110.70. It has also formed a head and shoulders pattern, which is usually a bearish sign. Also, the pair is trading at the 25-day moving average while the MACD has formed a bullish crossover pattern. The moving average of oscillator has moved above the neutral line. Therefore, the pair will likely end the week at this level and then drop in the coming week because of the head and shoulders pattern.

NZD/USD

The NZDUSD pair rose to an intraday high of 0.7025 after the relatively strong New Zealand inflation data. The numbers showed that the country’s consumer price index rose to 3.3% in the second quarter. The pair above this week’s low of 0.76917. It also declined below the descending trendline shown in orange. It also moved between the middle and upper lines of the Bollinger Bands. Therefore, the pair will likely keep rising after the latest inflation reinforced the RBNZ’s view of the economy.