The US currency is gearing up for the most important trading session of the week, and possibly the month. Today, US Consumer Price Index (CPI) data for May will be released. In addition, the Federal Reserve is scheduled to meet today to announce its benchmark interest rate and the regulator’s dot plot forecast for the remainder of the year. Given that last Friday’s employment data came in better than expected, many investors and experts (according to an FT-Chicago Booth survey) are confident that:
- The Federal Reserve is set to cut interest rates by just 0.25 percentage points this year.
- Economists and traders are pricing in up to two rate cuts by the end of the year, rather than three.
Naturally, these hawkish market expectations will support a stronger USD, but it should be noted that the dollar is currently in mid- to long-term high ranges and a pullback or reversal pattern formation is quite likely.
US Dollar/Japanese Yen
Below is the technical analysis of the USD/JPY pair:
- There is a high possibility that it will test this year’s May high of 157.70.
- Consolidation above the 157.70 level could contribute to a renewed upswing towards the psychological level of 160.00.
- A bounce or false breakout at 157.70 could lead to a move back to 155.60-154.80.
EUR/USD
The EUR/USD currency pair is under double pressure. On the one hand, the dollar is rising due to positive US labor market data, and on the other hand, political uncertainty after the European Parliament elections, the results of which were announced earlier in the week. Where will the pair head in the upcoming trading sessions?
- In the event of weak data for the dollar, the price may try to fill Monday’s “price gap” at 1.0800.
- A break below the critical support level at 1.0710 could resume the decline towards 1.0600.
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