EURUSD TILTS HIGHER AS THE ECB HIKES RATES BY 0.50%

The Japanese yen declined against the US dollar after the latest interest rate decision. The BoJ decided to leave interest rates unchanged at -0.1%. It also decided to continue with its asset purchases. This is a major divergence from what other central banks have done in the past few months. For example, the Fed and RBA have hiked interest rates by 150 and 135 basis points this year. They have also signaled that they will continue hiking this year. Data by the government showed that Japan’s imports rose by 46.1% in June while exports rose by 19.4%. Therefore, the weaker yen is hurting the country’s importers.

The euro rose slightly after the latest interest rate decision by the European Central Bank (ECB). The bank decided to deliver its first rate hike in 11 years. The committee decided to increase rates by 0.50% in line with what analysts were expecting. The bank also hinted that it would continue hiking interest rates in the coming meetings. Also, it decided to downgrade the economic outlook citing the strong inflation. The euro also reacted to the resignation of Mario Draghi, the respected Italian prime minister. Therefore, the president will decide on whether to ask party leaders if they can form a new government. Alternatively, the country will go to an election in September.

The Mexican peso moved sideways after the relatively stronger Mexican retail sales data. According to the country’s statistics agency, retail sales rose from 0.4% in April to 0.5% in May. This increase was better than the median estimate of 0.4%. Sales rose by 5.2% on a year-on-year basis. These numbers increased even as the country’s inflation rose to the highest level in years. Therefore, there is a likelihood that the country’s central bank will keep hiking interest rates. Elsewhere, in the United States, data by the Philadelphia Fed said that the index dropped from -3.3 to -12.3. Initial jobless claims rose from 244k to 251.

EURJPY

The EURJPY price rose to a high of 141.91 after the divergence between the ECB and the BoJ. This price was significantly higher than this month’s high 136.10. It has moved above the 25-day and 50-day moving averages. The pair’s Relative Strength Index (RSI) has moved above the overbought level while the Average Directional Index (ADX) has declined slightly. Therefore, the pair will likely keep rising as bulls target the key resistance at 143.

EURUSD

The EURUSD pair rose to a high of 1.0257, which was highest level since July 5th. The pair has moved above the 25-day and 50-day moving averages. At the same time, the Average Directional Index (ADX) has dropped to the lowest point since July 6. The RSI has moved slightly below the overbought level. Therefore, the pair will likely keep rising as sellers target the key resistance at 1.0250.

USDMXN

The USDMXN pair moved sideways after the latest Mexican retail sales data. It is trading at 20.53, which was slightly below the intraday high of 20.55. On the four-hour chart, the pair has formed a bearish flag pattern, which is usually a bearish sign. The MACD has formed a bearish divergence pattern. The pair will likely have a bearish breakout during the American session.