EURUSD RETREATS AS FOCUS SHIFTS TO THE ECB DECISION

The US dollar moved slightly lower even after the strong housing data. According to the National Association of Realtors, the median existing home price jumped to $416,000 in June. This happened even as sales declined for the fifth straight month. Sales declined by 5.4% in June to an adjusted annual rate of 5.12 million. Still, homes are selling at a faster pace with the average home staying in the market for about 14 days. Data published on Tuesday revealed that the country’s new housing starts and building permits declined sharply in June. The US dollar will react to the latest Philadelphia Fed manufacturing index and initial jobless claims data.

The euro moved sideways against the US dollar and sterling as traders waited for the upcoming interest rate decision by the European Central Bank (ECB). Economists expect that the bank will hike rates by either 0.25% or 0.50%. In its June meeting, Christine Lagarde signaled that it will start with a 25 basis point hike followed by a bigger one in September. The bank will also provide its economic forecast for the region. In June, the committee estimated that the bloc’s economy would grow by 2.8% in 2022 followed by 2.1% in 2023. The ECB will also talk more about the weaker euro and its impact on inflation.

The Japanese yen declined against the US dollar after the latest interest rate decision by the Bank of Japan. The BoJ decided to maintain status quo on rates and its asset purchase program. It left interest rates unchanged at -0.10% and signaled that it will likely continue easing in a bid to stimulate the economy. Elsewhere, the Australian government launched a review of the Reserve Bank of Australia (RBA). In a statement, Jim Chalmers, the country’s treasurer, said that the review was necessary after the bank was criticized for delaying rate hikes. Throughout 2021, the bank insisted that it will only hike rates in 2023 or 2024.

AUDUSD

The AUDUSD pair retreated to a low of 0.6877 as the RBA review started. The pair is still slightly above the important support at 0.6847, which was the lowest level on June 15. It moved above the 25-day moving average. The Relative Strength Index (RSI) has moved below the overbought level. Therefore, the pair will likely continue falling as sellers target the support at 0.6847.

EURUSD

The EURUSD pair dropped to 1.0170, lower than this week’s high of 1.0265. It moved below the psychological level of 1.0200. The Average Directional Index (ADX) and the Relative Strength Index (RSI) have continued dropping. It has formed a small double-top pattern. Therefore, the pair will likely show some volatility ahead and after the ECB decision.

USDCAD

The USDCAD pair moved sideways after the strong Canadian consumer inflation data. It is trading at 1.2885, slightly above this week’s low of 1.2840. It is between the middle and lower lines of the Bollinger Bands. The Relative Strength Index (RSI) has moved above the oversold level while the Stochastic Oscillator is pointing higher. Therefore, the pair will likely continue falling as sellers target the key support at 1.2785.