American stocks pared earlier losses on Tuesday as investors continued worrying about inflation and margins among companies. The rising cost of doing business and the logistics challenges have left many companies in a challenging situation. For example, Target, one of the biggest American retailers warned that it will make less money because it will either discount or cancel products like furniture and clothing. Another worry is the strong US dollar and its impact on American companies. Last week, Microsoft lowered its guidance because of falling currencies like euro and the Japanese yen.
The Japanese yen continued falling against the US dollar after the latest Japanese GDP numbers. The data revealed that the country’s economy contracted in the first quarter as external demand weakened. The country is expected to be the worst performer among G7 countries. The BOJ has committed to maintaining an easy-money policy in the foreseeable future. At the same time, the current government is committed to continuing with is debt-fueled spending. Still, the impacts of the plummeting yen on the economy are dire since it has contributed to the rising inflation.
The economic calendar will have several important events. In Switzerland, the statistics office will publish the latest unemployment numbers. As always, the numbers are expected to show that the country’s unemployment rate remained at 2.2% in May. The other important data to watch will be the upcoming UK house price data by Halifax. Analysts, based on the previous reading by Nationwide, expect the data to show that prices moderated in May. Meanwhile, Eurostat will publish the latest GDP data while the EIA will release the latest oil inventory data.
USDJPY
The USDJPY pair has been in a strong bullish trend in the past few months. In June, it has managed to move above the resistance level at 131.37, which was the highest level on May 11. The pair’s bullish trend is still being supported by the 25-day moving average while the Relative Strength Index is approaching the overbought level. By moving above the resistance at 131.37, the pair has invalidated the double-top pattern. Therefore, the bullish trend will likely continue unless the BOJ intervenes.
EURUSD
The EURUSD pair moved sideways ahead of the upcoming EU GDP numbers. It is trading at 1.0700, which is slightly above this week’s low at 1.0620. The pair is also along the 25-day moving average and slightly below the important resistance at 1.0765. The Relative Strength Index (RSI) has moved downwards while the Stochastic Oscillator has risen above the oversold level. Therefore, the pair will likely keep falling ahead of the ECB decision.
XNGUSD
The XNGUSD pair continued its bullish trend as demand for natural gas continued. It is trading at 9.32, which is slightly below the highest point this year. The MACD has moved slightly above the neutral point while the DeMarker indicator has moved to the overbought level. Therefore, the pair will likely keep rising as bulls target the key resistance at 9.60.
