That was an interesting ECB meeting yesterday. On the one hand, Ms. Lagarde made it clear that the current cycle of interest rate hikes is not over. In view of the "high inflation pressures" (Statement), the question naturally arises as to why rates were only raised by 25 basis points. On the other hand, however, PEPP will largely be maintained until the end of 2024. These are mixed signals and the market is still trying to figure out what to do next.
Pre and post meeting volatility has been therefore rather muted. The dollar index (DXY) cannot make progress in any direction. The euro trades in a narrow range and the other major currency pairs show mixed signals either.
EURUSD -- 1.1031
There is not much to say at the moment. The former 1.1033 high has evolved to a kind of pivot line with the currency pair hovering above and below that treshold. However, a little upward bias cannot be denied. Regular readers know that I tend to look for Euro shorts towards the 1.1200 level. In this respect, the weak uptrend does not lure me into delta 1 euro longs. FX options still seem to me to be the better tool of choice.
GBPUSD -- 1.2606
The short-scenario is over for the time being. The 1.2500/25 zone has (unfortunately) offered no particular resistance, making the May 2022 high at 1.2667 the next target now. Only below the mid Bollinger Band (1.2475) or below the 1.2447 support are longs at risk again. However, I am not looking for a long entry.
USDJPY -- 134.17
The 200 dma (136.94) works as an entry point for shorts as from the textbook. Unfortunately, I am so irritated by the simplicity that I missed the trade again. I hope you do better than I did. At current spot level I would tend to take profit. The mid Bollinger band (134.30) and the 50 ema (133.80) could deliver some support now. However, lower spot level for the rest of the year are still my base scenario.
It’s NFP Friday!
Good luck,
Sebbo