JAPANESE YEN SELL-OFF ACCELERATES AS BOJ EASING CONTINUES

Global stocks are staring at their worst performing weeks in over two years as central banks embrace a more hawkish tone in their battle against inflation. On Wednesday, the Fed decided to hike interest rates by 0.75%. On Thursday, the Swiss National Bank caught most investors by surprise when it hiked interest rates by a whopping 50 basis points. It was the first rate hike in over 15 years. The Bank of England (BOE) decided to hike by 0.25% for the fifth straight time. Stocks are falling as investors anticipate a potential recession. For example, data published last week showed that housing starts and building permits declined in May.

The Japanese yen continued weakening after the relatively dovish statement by the Bank of Japan (BOJ). In a statement, the BOJ decided to leave interest rates unchanged. It also hinted that it would intervene in a bid to stimulate the economy. Still, analysts believe that the bank will soon join global peers in tightening since inflation in Japan has started rising. Consumer prices in Japan are significantly lower than in other countries like the US and the UK. Inflation remains below 2% even as the Japanese yen has crashed to the lowest level in more than two decades.

The euro retreated slightly after the latest official consumer inflation data. According to Eurostat, the bloc’s inflation rose from 0.6% in April to 0.8% in May of this year. This pushed it to a year-on-year increase of 8.1%. At the same time, core CPI rose by 3.8% on a YoY basis. This trend will likely continue as the energy crisis in the bloc continues. For example, in a statement, GRTgaz, a company that operates gas pipelines said that flows from Russia had halted. This is notable since gas from Russia accounts for about 20% of all its gas suppliers. Russia has also reduced gas deliveries to other European countries like Spain and Italy.

EURUSD

The EURUSD pared earlier gains and is trading at 1.0521, which is slightly below the intraday high of 1.060. It moved along the 61.8% Fibonacci retracement level and is above the 25-day and 50-day moving averages. The pair has also formed a small hammer pattern, which is usually a bullish sign. The Relative Strength Index (RSI) has been rising. Therefore, the pair will likely continue rising as bulls target the key resistance at 1.0575.

USDCHF

The USDCHF has been in a strong sell-off as investors reacted to the latest interest rate by the Swiss National Bank. It is trading at 0.9642, which is lower than the intraweek high of over 1.00. The pair moved below the 25-day and 50-day moving averages. The RSI has moved to the oversold level of 30. It has also formed a bearish pennant pattern. Therefore, the pair will likely keep falling as bears target the key support at 0.9600.

USDCAD

The USDCAD rose to 1.2974, which is the highest it has been since June 15th. The pair moved above the 25-day moving average while the Stochastic Oscillator has moved slightly above the overbought level. A move above the key resistance at 1.300 at 1.300 will invalidate the double-top pattern and push it higher during the American session.