Daily market analysis

Jerome Powell committed to preventing long-term US inflation

June 30, 2022

US shares were mixed, fluctuating on Wednesday after the major US indices failed to attempt a bounce in the previous trading session. The market prepared to finish to close out the worst first half of the year since 1970. The Dow Jones Industrial Average closed 0.27% higher. The S&P 500 dropped 0.07% while the Nasdaq Composite edged lower by 0.03%. Investors and markets continue to look for the bottom as the first half of 2022 comes to an end on Thursday. Worry about a slowing economy and aggressive interest rate hikes have mostly consumed much of the first half of 2022, and fears and concerns of an economic recession are rising and happening.

At an ECB forum, the Fed Chairman, Jerome Powell, vowed to prevent inflation from taking a hold of the US economy in the long run. Jerome Powell reiterated that central banks would not allow a transition from a low inflation environment into a high inflation environment. Since the Fed started raising interest rates in March, the expectation of inflation has fallen relatively; the inflation-indexed government bonds to standard Treasurys dropped from 3.6% in March to 2.73% in June. Though the road to tackling inflation is painful, the Fed is responsible and is charged with bringing down those inflations.

Main Pairs Movement

EUR/USD was down 0.74%, to 1.04386 on Wednesday. The euro-dollar was comparably weak against the dollar as the inflation rates in Europe seemed disoriented. For instance, some Mediterranean countries have pushed their annual inflations to double figures; however, Europe’s largest country has not experienced this kind of high figure.

GBP/USD edged lower by 0.54 at the end of the day. The British pound was sniped by the fact that the Bank of England acknowledges the possibility that the British economy tips into a recession in 2023; on the contrary, Jerome Powell remains confident that the US can avoid a recession.

USD/JPY reached as much as 137, and was up 0.34% on Wednesday, gaining follow-through traction for the fourth consecutive day. The US dollar pick up a fresh bid tone following Jerome Powell’s restated bets for a more aggressive monetary policy.

Gold oscillated in a tight range, down 0.12%. Investors remained cautious and looked for a fresh clue about the next monetary policy move by the Fed.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD lost 0.74% over the previous trading day. The pair extended its previous losing day as inflation data from the EU came in mixed. Spain’s inflation rose by 10%, year over year, and up 8.5% over the previous month; on the other hand, Germany’s CPI came in at 7.6%, lower than the 7.9% consensus. The mixed inflation data acted as a headwind for the Euro and a roadblock to more aggressive rate hikes by the ECB. The Dollar continues its upward movement as markets remain risk-averse.

On the technical side, EURUSD has fallen through our previously estimated support level of 1.0494 and is heading lower towards our next estimated support level of 1.0382. RSI of EURUSD sits at 40.66, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.05754, 1.06315

Support: 1.0382

GBPUSD (4-Hour Chart)

GBPUSD lost 0.54% over the previous trading day. The British Pound continues to be held back as members of parliament continue their efforts of overturning a keystone Brexit agreement. Furthermore, hawkish remarks from Fed Chair Jerome Powell have provided a boost to the safe-haven Dollar. Risk-off sentiment across markets has attracted further demand for the U.S. Greenback. On the economic docket, the British GDP is set to release during today’s European trading session.

On the technical side, GBPUSD is consolidating around our previously estimated support level of around the 1.2123 price region. The next level of support for Cable sits at around the 1.20824 price region. RSI for GBPUSD sits at 38.25, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.2381

Support: 1.2123, 1.20824

USDJPY (4-Hour Chart)

USDJPY gained 0.34% over the previous trading day. Hawkish remarks from Fed Chair Jerome Powell have attracted fresh demand for the U.S. Greenback. On top of an already risk-off environment, market participants have continued to bid up the U.S. Dollar as aggressive rate hikes are now expected during the next FOMC meeting. On the economic docket, U.S. PCE and initial jobless claims data will both be released during the American trading session.

On the technical side, USDJPY has once again touched above the 136 level and is consolidating around our previously estimated resistance level of 136.57. Support levels at 134.6 remain firmly intact. RSI for the pair has heated up and sits at 66.14, as of writing. On the four-hour chart, USDJPY currently trades above its 50, 100, and 200-day SMA.

Resistance: 136.57
Support: 134.6

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CNYManufacturing PMI (Jun)09:3050.5
GBPGDP (Q1)14:008.7%
EURGerman Unemployment Change (Jun)15:55-6K
USDCore PCE Price Index (May)20:300.4%
USDInitial Jobless Claims20:30228K
CADGDP (Apr)20:300.3%
EURECB President Lagarde Speaks21:30