EURUSD FORMS ASCENDING TRIANGLE AS LAGARDE WARNS OF HIKES

Global stocks rose on Tuesday after China changed its quarantine policies as the country starts reopening. In a statement, the government said that it will reduce the quarantine times for inbound travelers by half. This is its biggest shift since the pandemic started. As a result, travelers will need to quarantine for 7 days. The announcement came as Beijing and Shanghai announced that they had no new locally-transmitted Covid infections on Monday. That was the first time since February that the cities have had no infections. In a similar statement, Hong Kong said that it will also start winding down its restrictions.

The euro moved sideways even after Christine Lagarde hardened her message on inflation. Speaking at an ECB forum in Portugal, the chair said that the bank would act in a determined and sustained manner to tackle record inflation. She added that this will be determined by inflation expectations among businesses and consumers. In the statement, she said that the ECB expects inflation to remain at elevated levels for a few more months due to the rising wages and energy prices. The bank expects to start hiking interest rates by 0.25% in July. Like other central banks, the ECB is facing a difficult balancing act of fighting inflation without causing a recession.

The US dollar retreated slightly as investors waited for the upcoming consumer confidence data. The Conference Board will publish the latest data during the American session. With consumer and producer inflation surging, analysts expect the data to show that confidence dropped from 106 to 100 in June. The data will come a day after a survey by JP Morgan found that most small businesses had an unfavorable view of the economy. The dollar will also react to the latest house price index data and the country’s goods trade balance data.

EURUSD

The EURUSD pair remained in a consolidation phase after the hawkish statement by Christine Lagarde. On the four-hour chart, the pair has formed an ascending triangle pattern, which is nearing its confluence level. It has moved slightly above the 25-day moving average while the Relative Vigor Index (RVI) remained at elevated levels. Therefore, the pair will likely have a bullish breakout in the next few days.

USDCHF

The USDCHF pair continued the bearish trend because of the hawkish decision by the Swiss National Bank. On the four-hour chart, it has formed a descending channel that is shown in green. It is trading at 0.9540, which is along the lower side of the channel. It has also dropped below the 25-day moving average while the DeMarker indicator has moved close to the oversold level. Therefore, the pair will likely continue falling as bears target the key support at 0.9500.

XNGUSD

The XNGUSD pair rose slightly as the G7 concluded its meeting. The pair rose to a high of 6.56, which was the highest level since Friday. On the four-hour chart, the pair remained below the 25-day moving average while the MACD and the momentum indicator have tilted upwards. The pair will likely resume the bearish trend as bears target the key support at 5.90.