USDCHF DROPS BELOW BEARISH PENNANT AMID A HAWKISH SNB

The Japanese yen went sideways against the US dollar after the latest inflation data from the country. According to Japanese statistics agency, consumer prices rose by 2.5% in May from a year earlier. This was the highest figure since 1991 and is higher than the Bank of Japan’s target of 2%. The surging inflation now puts pressure on the BOJ, which has embraced a more dovish tone unlike its global peers. The bank believes that inflation will subside since it has been caused by the soaring oil and gas prices. The BoJ has also intervened aggressively in the market to keep the 10-year Japanese government bond yield below its 0.25% target.

American stock futures rose as investors reflected on Jerome Powell’s two-day testimony in Washington. Dow Jones futures rose by 245 points while those tied to the S&P 500 and Nasdaq 100 indices rose by more than 0.40%. At the same time, the bond sell-off continued, pushing the 10-year and 30-year yield up to 3.11% and 3.22%, respectively. In his testimony in Congress, Powell noted that the bank was committed to use all its tools to lower inflation. This means that it will likely continue hiking interest rates and reducing its balance sheet. If stocks end in the green, it will be the first time in three weeks that they have risen.

Crude oil prices have been in a downward trend in the past few days. Brent has fallen from this month’s high of $124 to the current $107. There are two main reasons for this price action. First, analysts believe that the actions by the Fed may be contributing to this price action. By committing to hike interest rates, the Fed is attempting to slow the economy, which could lead to a recession. Historically, oil prices tend to underperform in a period of recession. Second, there are concerns about China’s demand as the country deals with the ongoing Covid wave. China is the biggest buyer of crude oil.

XBRUSD

The XBRUSD price has been in a strong bearish trend in the past few weeks. This week, the pair managed to move below the lower side of the ascending channel. It has dropped below the 25-day and 50-day moving averages while the MACD has moved below the neutral point. It has formed a bearish pennant pattern that is shown in green. Therefore, the pair will likely continue falling as bears target the key support at 103.

EURUSD

The EURUSD pair has been in a tight range in the past few days. It is trading at 1.0523, which is slightly below this week’s high of 1.0603. It has moved to the 25-day moving average and the ascending trendline shown in green. The Relative Strength Index has moved to the neutral point. Therefore, a move below the ascending trendline will mean that bears have prevailed. If this happens, the next key support will be at 1.0400.

USDCHF

The USDCHF pair has been in a strong bearish trend in the past few days after the hawkish interest rate decision by the Swiss National Bank (SNB). The pair has moved below the bearish pennant pattern that is shown in green. It has dropped below the 25-day and 50-day moving averages. Therefore, the pair will likely continue falling as bears target the key support at 0.9500.