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The dollar index held steady and moved within a narrow range following advance in past three days, as traders await announcement from Fed.

The dollar benefited from safe-haven demand on the most recent escalation of conflict in the Middle East, while markets look for more information about Fed’s steps in the near future, as the central bank is widely expected to keep the interest rates on hold at the policy meeting that ends today.

Tuesday’s close above important resistance at 98.21 (daily Tenkan-sen / Fibo 23.6% of 101.80/97.10) was initial bullish signal, which requires repeated closing above this level to be verified.

This would brighten near-term prospects for further recovery and unmask targets at 98.90 (Fibo 38.2%) and 99.10 (daily Kijun-sen). Scenario also includes positive dollar’s reaction to Fed’s decision.

Conversely, failure to sustain break above 98.21 would generate initial signals that bulls are running out of steam and that near-term recovery has likely peaked.

Res: 98.50; 98.90; 99.10; 99.45
Sup: 98.06; 97.65; 97.53; 97.10

Markets

Of late investors experienced (too) many sessions being forced counting down to one or multiple event risk. Today was one of those. For some of those event risks sometimes it’s possible to do some conditional scenario analyses. If X, then the market reaction might be Y. This in some way applies to this evening’s Fed decision. For other (geopolitical) event risk, this kind of conditional scenario analysis is impossible. That is what is currently the case with speculation whether the US will join Isreal in its conflict with Iran. Blocked by this squared event risk markets, today, are captured in directionless trading. German and US yields are easing less than 3 bps across the curve. Fed communication recently flagged a firm wait-and-see bias. As long as the labour markets doesn’t collapse, the Fed will take its time to assess the impact of the trade war/tariffs and the budget on the basis of hard facts rather than on anticipative speculation. We see every reason for the Fed to maintain this reactive wait-and-see approach at this evenings meeting (dots & press conference). If anything, the market reaction to last week’s tentatively softer data (CPI, PPI, claims) suggest that investors are inclined to give more weight to even (minor) signs of perceived Fed softness. If so, this also suggests that Powell will have to be surprisingly hawkish to force the dollar out of the well-established sell-on upticks pattern. The dollar today eases back slightly after yesterday’s oil-driven up-tick (DXY 98.6, EUR/USD 1.152). Oil maintains most of yesterday’s gain (Brent $76.7/b). Geopolitically inspired paralysis currently keeps equities in a directionless holding pattern (S&P +0.1%, EuroStoxx -0.5%).

UK May CPI data provided last-minute input for tomorrow’s BoE decision. They won’t be a game-changer. Inflation slowed to 0.2% m/m and 3.4% y/y (from 1.2% m/m and 3.5% y/y in April). Core inflation (3.5% from 3.8%) and services inflation (4.7% from 5.4%) also cooled. The outcome was very close to market expectations, but should be put in perspective. Last month, the market and the BoE got a solid upside surprise. The Bank of England is on a gradual interest rate path where it is tapering restrictive monetary policy by 25bpn on a quarterly basis since August last year. Today’s figures are no reason to accelerate easing, especially since inflation could remain at current or even slightly higher levels until the third quarter for technical reasons. Higher energy prices also warrant caution rather than anticipation in the coming months. After a weak ride in recent days, the pound initially gained marginally after the inflation data. However, markets soon realized that the BoE is potentially being curtailed in (growth-supporting) policy options, especially given the limited fiscal space. It’s not a positive story. Not for the UK economy, nor for the pound. EUR/GBP soon returned close to recent highs (currently 0.855).

News & Views

Sweden’s central bank lowered its policy rate by 25 bps to 2% today. The rate cut was expected by analysts but not fully discounted by the market (+/- 80%). The Riksbank noted the economic recovery is proceeding more slowly than expected amid US import tariffs weighing on growth, despite them probably turning out lower than initially thought. GDP is seen expanding at a 1.2% clip this year compared to 1.9% seen in March. Forecasts for 2026 and 2027 were left more or less unchanged at 2.4% and 2.3%. The unemployment remains high. Inflation, meanwhile, has fallen since the upturn at the beginning of the year. Weaker demand will contribute to inflation being lower than in the March forecast. CPIF would rise by 2.4%-1.7%-2% in the 2025-2027 horizon, compared to 2.5%-1.9%-2% set out in March. The Riksbank concludes: “Overall, the outlook for inflation and economic activity suggests some easing of monetary policy.” The rate forecast entails some probability of another cut this year. Money markets attach a 66% chance to November. Swedish swap yields slide >5 bps across the curve. EUR/SEK rises back above the 11 barrier.

PBOC governor Pan Gongsheng at China’s flagship financial forum in Shanghai laid out how he sees the future global currency order. He warned for overreliance on a single currency, ie the dollar, saying that it gets easily instrumentalized and weaponized in the event of a geopolitical conflict, national security interests or wars. Pan expects a multi-polar international monetary system to emerge after decades of USD dominance in which a few sovereign currencies “coexist, compete with each other, and check and balance each other”. In this world, Pan obviously sees a growing role for the renminbi. The RMB is currently the second-largest trade finance currency and the third-largest payment currency.

Daily Pivots: (S1) 1.1443; (P) 1.1512; (R1) 1.1548; More...

Intraday bias in EUR/USD stays neutral and more consolidations could be seen. With 1.1372 support intact, further rally is expected. Break of 1.1572 will extend the rise from 1.0176. Next target is 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. However, break of 1.1372 support will indicate short term topping, and turn bias to the downside for deeper pullback.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 1.1604 support holds.

Daily Pivots: (S1) 1.3364; (P) 1.3480; (R1) 1.3545; More...

Intraday bias GBP/USD remains mildly on the downside. Fall from 1.3631 short term top is in progress for 55 D EMA (now at 1.3328). Strong support could be seen there to bring rebound. However, sustained break there will bring deeper correction to 38.2% retracement of 1.2706 to 1.3631 at 1.3278.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2937) holds, even in case of deep pullback.

Daily Pivots: (S1) 144.67; (P) 145.02; (R1) 145.65; More...

USD/JPY failed to break through 145.46 resistance and retreated. Intraday bias stays neutral at this point. On the downside, break of 142.10 support will resume the fall from 148.64 to retest 139.87 low. On the upside, above 145.46 will turn bias to the upside for 146.27 first. Firm break there will target 148.64 resistance.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8133; (P) 0.8153; (R1) 0.8184; More….

Intraday bias in USD/CHF remains neutral and outlook is unchanged. On the upside, break of 0.8247 resistance will argue that corrective pattern from 0.8038 is starting the third leg. Bias will be turned back to the upside for 0.8475 resistance again. However, firm break of 0.8038 will resume larger down trend. Next target will be 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8656) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Trading remains subdued across the forex markets as participants brace for the dual risk events: Fed’s policy decision and the escalating tensions between Israel and Iran. Currency pairs are largely bounded inside last week’s ranges, with traders opting for caution rather than conviction. Aussie and Kiwi lead this week’s performance, while Sterling, Franc, and Yen lag. The Dollar sits on firmer ground but has yet to generate strong directional momentum.

Fed is widely expected to leave interest rates unchanged at 4.25–4.50%, a decision already fully priced in by markets. Attention will center on the updated Summary of Economic Projections and the new dot plot. In March, the median forecast pointed to two rate cuts in 2025, but that view was narrowly held. A shift in just two members’ projections could tilt the median down to a single cut.

Fed Chair Jerome Powell is likely to reiterate the “wait and see” strategy, repeating that policy is appropriately restrictive for now. While markets are leaning toward a rate cut by September, Powell is unlikely to offer strong forward guidance, especially with inflation risks and tariff timelines still unresolved. Recent labor market softness may receive some acknowledgment, but overall, Fed is expected to stick with its existing posture.

Meanwhile, global risk sentiment continues to be tested by the increasingly sharp rhetoric between the US and Iran. President Trump called for the “unconditional surrender” of Iranian Supreme Leader Ayatollah Khamenei, warning that he is an “easy target.” In response, Khamenei vowed resistance and warned that a US attack would bring “irreparable damage.” Despite these threats, markets have yet to show panic, with oil and gold prices largely contained.

Looking ahead, tomorrow’s BoE and SNB decisions will take center stage in Europe, but the Asian session may offer volatility first. New Zealand GDP and Australia’s labor market report could provide fresh momentum for the outperforming Antipodean currencies.

Technically, AUD/NZD turned sideway after falling to 1.0724. Near term outlook stays mildly bearish as long as 1.0822 resistance holds. Firm break of 1.0724 will extend the fall from 1.0920 to retest 1.0649 low.

In Europe, at the time of writing, FTSE is up 0.13%. DAX is down -0.37%. CAC is down -0.24%. UK 10-year yield is down -0.25% at 4.534. Germany 10-year yield is down -0.014 at 2.523. Earlier in Asia, Nikkei rose 0.90%. Hong Kong HSI fell -1.12%. China Shanghai SSE rose 0.04%. Singapore Strait Times fell -0.25%. Japan 10-year JGB yield fell -0.016 to 1.457.

US initial jobless claims fall to 245k vs exp 246k

US initial jobless claims fell -5k to 245k in the week ending June 14, slightly below expectation of 246k. Four-week moving average of initial claims rose 5k to 245.5k, highest since August 19, 2023.

Continuing claims fell -6k to 1945k in the week ending June 7. Four-week moving average of continuing claims rose 13k to 1926k, highest since November 20, 2021.

ECB’s Panetta flags prolonged sub-2% inflation, cites trade and geopolitical risks

Italian ECB Governing Council member Fabio Panetta warned that Eurozone inflation is likely to remain below the 2% target for an extended period. Speaking at a conference today, Panetta said the region continues to face a “persistently weak” economy, which, coupled with subdued price pressures, calls for caution on the monetary policy front.

He pointed specifically to "substantial" risks surrounding US trade policy and the Middle East conflict. These factors, Panetta said, make it “difficult to quantify” the clouded outlook.

"Against this backdrop, the ECB's Governing Council, at its most recent meeting, reaffirmed a flexible approach, keeping its options open," he said. "It will continue to take decisions on a meeting-by-meeting basis, without pre-committing to a defined course for monetary policy," he added.

Eurozone CPI finalized at 1.9% in May, disinflation takes hold as services inflation softens

Final Eurozone inflation figures for May confirmed further softening in price pressures, with headline CPI easing to 1.9% yoy from April’s 2.2% yoy. Core CPI (ex energy, food, alcohol & tobacco) also moderated to 2.3% yoy from 2.7% yoy. Services inflation, a key component closely tracked by ECB, slowed markedly from 4.0% yoy to 3.2% yoy, contributing to the broader disinflation trend across the bloc.

According to Eurostat, the largest contribution to the overall annual inflation rate came from services (+1.47 percentage points), followed by food, alcohol, and tobacco (+0.62 pp). Non-energy industrial goods added a modest +0.16 pp, while energy dragged the headline rate down by -0.34 pp. The moderation in services inflation is especially important given its linkage to wage growth.

Looking across the EU, headline inflation was steady at 2.2%, but divergence across member states is stark. Cyprus, France, and Ireland posted the lowest annual rates at 0.4%, 0.6%, and 1.4% respectively, while Romania, Estonia, and Hungary topped the inflation chart with rates above 4.5%. Annual inflation declined in 14 member states compared to April.

UK CPI slows to 3.3% in May, but goods prices surges to highest since late 2023

UK headline CPI eased from 3.5% yoy to yoy in May, slightly above expectations of 3.3% yoy. Core CPI (excluding energy, food, alcohol and tobacco) also slowed from 3.8% to 3.5%, in line with forecasts.

While the overall trend points to gradual disinflation, markets might pay more attention to the reacceleration in goods prices, which rose to 2.0% yoy, the highest rate since November 2023.

Services inflation, however, showed a more meaningful decline, falling from 5.4% yoy to 4.7% yoy, suggesting underlying pressures are softening.

On a monthly basis, CPI rose by 0.2% mom, matching expectations.

Japan’s exports slide - 1.7% yoy in May as auto tariffs from US take toll

Japan’s trade data for May revealed growing pressure on its export sector, with headline exports falling -1.7% yoy to JPY 8.135T. Imports dropped -7.7% yoy to JPY 8.773T. The resulting trade deficit stood at JPY -637.6B.

Of particular concern was the sharp -11.1% fall in exports to the US, where car shipments plunged -24.7% yoy on the immediate impact of US tariffs.

Despite posting a trade surplus of JPY 451.7B with the US, the bilateral trend was negative. Imports from the US dropped -13.5% yoy. Japanese exporters are now grappling with a 25% tariff on autos and auto parts, plus a 10% baseline levy on all other goods. Steel and aluminum products have also been hit with a 50% tariff in early June.

On a seasonally adjusted basis, exports edged up just 0.1% mom, while imports declined -0.3% mom, leaving a narrower but still negative trade balance of JPY -305B.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8133; (P) 0.8153; (R1) 0.8184; More….

Intraday bias in USD/CHF remains neutral and outlook is unchanged. On the upside, break of 0.8247 resistance will argue that corrective pattern from 0.8038 is starting the third leg. Bias will be turned back to the upside for 0.8475 resistance again. However, firm break of 0.8038 will resume larger down trend. Next target will be 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8656) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

US initial jobless claims fell -5k to 245k in the week ending June 14, slightly below expectation of 246k. Four-week moving average of initial claims rose 5k to 245.5k, highest since August 19, 2023.

Continuing claims fell -6k to 1945k in the week ending June 7. Four-week moving average of continuing claims rose 13k to 1926k, highest since November 20, 2021.

Full US jobless claims release here.

• USDJPY edges higher but remains capped below key 2025 resistance trendline.
• Short-term bias is mildly positive; bulls eye a close above 145.50–146.00.

USDJPY held its ground above the 143.00 level last week and rebounded to test a key resistance trendline connecting the January and May 2025 highs, seen near 145.50.

Momentum may remain subdued as investors await the FOMC policy announcement scheduled for 18:00 GMT. While rate cuts are not expected, policymakers face a complicated economic environment. With the Israel-Iran conflict injecting further uncertainty into the inflation outlook, policy easing could be a tough task for the central bank.

Technically, the outlook is cautiously optimistic. The RSI is hovering slightly above its neutral 50 mark, while the MACD remains marginally positive above both its signal and zero lines - signs of tentative bullish momentum.

If buyers manage to push the price decisively above the 145.50 barrier and break through the 146.30 resistance, a stronger recovery could unfold, with the 200-day exponential moving average (EMA) at 148.27 acting as the next target. A successful move beyond that could face initial resistance around 149.60, before aiming for the 151.00 zone.

On the downside, if selling pressure intensifies, the 143.60–144.50 area could provide initial support. A break below that may open the door toward the 142.40 floor. If that floor fails to hold, losses could extend into the 140.40–141.00 zone, with the next significant support seen around 138.00, where the ascending trendline from January 2024 lies.

In summary, while USDJPY has shown signs of stabilization and recovery, a sustained move above the 145.50–146.00 resistance zone is still needed to confirm a bullish breakout and generate stronger upside momentum.

Cable bounced from new three-week low (1.3415), hit after Tuesday’s 1.2% drop, boosted by weaker than expected UK inflation in May.

Weaker dollar also helps Wednesday’s recovery, as markets await Fed’s decision today and BOE’s monetary policy meeting (Thursday).

Both central banks are widely expected to hold rates this time, with market focus on signals from projections for the rest of the year.

Near-term structure weakened after Tuesday’s close below 10/20DMA’s and probe through pivotal support at 1.3444 (Fibo 38.2% of 1.3195/1.3632, also the floor of recent range) though close below this level is needed to validate negative signal and open way for deeper pullback.

On the other hand, recovery needs to regain 1.3500/15 barriers (psychological / 20DMA / 50% retracement of 1.3632/1.3415) to sideline existing downside risk and shift focus to the upside (1.3550; 1.3595; 1.3616).

Res: 1.3515; 1.3550; 1.3595; 1.3616.
Sup: 1.3415; 1.3400; 1.3377; 1.3321.