JAPANESE YEN AND EURO FALL AS THE BOJ AND ECB ISSUE DOVISH STATEMENTS
The Japanese Yen fell today after the Bank of Japan released its interest rates decision. As expected, the central bank left interest rates unchanged. What moved the market was the decision by the bank to continue with the negative interest rates and the quantitative easing program. Also, there were concerns from officials on the slow pace of inflation growth. The BOJ will be an outlier if it continues with the post-crisis easy money policies. The Fed exited QE more than three years ago and started hiking rates. Yesterday, the ECB said that it would end QE in December and start raising interest rates in summer next year.
The euro continued to slide after the dovish statement by the ECB. Initially, the ECB had pointed to a September exit of the QE and possibly a rate in December. Yesterday, the ECB extended this timeline by announcing that it would slash the size of the QE in half by December and then raise interest rates in summer. Today, the EU released the inflation data, which was in line with expectations. The CPI for May was unchanged at an annual rate of 1.9%, while the core CPI was also unchanged at 1.1%.
There was uncertainty in the markets today after reports from the United States suggested that Donald Trump would sign on Chinese tariffs. The list of 800 products will be released later today. The new tariffs are likely to attract retaliatory tariffs from China. The retaliatory tariffs will possibly be for specific agricultural products like corn and soybeans, which are produced mostly in states won by Donald Trump.
The EUR/USD slid to the lowest level since May 30. The pair is now trading at 1.1585, which is significantly lower than the medium and short-term moving averages. The slight gains from the 1.1585 level came as short traders exited their short positions after the pair got oversold. There is a likelihood that the downward momentum will continue until the pair tests the 1.1509 level as shown below.
The USD/JPY pair continued the upward trend after the dovish decision by the Bank of Japan. The pair is now trading at the important support level of 110.66, which is in line with the 30-day moving average and higher than the 60-day average. The RSI for the pair is currently at 55. This means that the pair could continue moving up, potentially to test the important 110.88 level.
The EUR/GBP pair slid to 0.8717, which is the lowest level since May 30. It is now trading at 0.8727, which is an important support. The current price is slightly lower than the 30 and 60-day moving average. The RSI is currently at 41 and heading lower. This means that the pair could continue moving lower potentially to test the 0.8696 level as shown below.