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ECB Governing Council member Pablo Hernandez de Cos conveyed his anticipation of another interest rate hike. He underscored that ECB's decisions would continue to rely on key data and inflation outlook.

He stated today, "If the central scenario of our forecasts published by the ECB last week materialises, we will also have to raise 25 basis points again in July." However, "beyond that it is not appropriate to make any forecasts."

De Cos highlighted the essential role of key data and inflation dynamics in shaping ECB's decisions. He added, "we will continue to take our decisions depending on the data and, in particular, on the aggregate assessment of the inflation outlook, the dynamics of underlying inflation."

As Yen continues to face intense selling pressure, Japanese Finance Minister Shunichi Suzuki reiterated the importance of market-determined exchange rates and the undesirability of abrupt currency movements.

Suzuki stated, "Currency rates should be set by the market, reflecting fundamentals." He also emphasized the need for stability, saying, "Sharp moves are undesirable, currencies should move stably reflecting fundamentals. With that in mind, we will continue to keep firm watch on market moves."

His comments come as the USD/JPY surged past the 143 handle, marking a significant acceleration in Yen's recent depreciation. The slide began last week following BoJ's decision to maintain its ultra-loose monetary policy stance. Today's strong inflation data, rather than tempering Yen's decline, seemed to have had little impact in averting its downtrend.

The verbal intervention from Suzuki underscores the growing concern over the pace and extent of Yen's depreciation. It also signals the government's readiness to monitor market trends closely, and possibly intervene should the currency's movements threaten to undermine the economic fundamentals.

Market picture

Crypto market capitalisation has adjusted 0.65% in the past 24 hours to 1.17 trillion, remaining near the highs since early May. The correction is primarily due to a 0.55% dollar strengthening over the same period. The current dynamic is still a halt after a 16% rally but not a correction.

Bitcoin is frozen at $30K, a significant technical level. These levels were pivotal for the first cryptocurrency in April, and last May it took more than a month for the bears to sell the rate lower. Also, a furious part of the crypto rally started from this level in early 2021. It’s worth being prepared for quite a long consolidation, but this week’s bullish breakout suggests that long-term investors have already moved to accumulate Bitcoin on drawdowns.

Ethereum’s dynamics are settling into a general uptrend channel with buying on downturns, roughly repeating the dynamics we’ve seen for 2019 and 2020. It could take months before a FOMO rally.

News background

Gemini cryptocurrency exchange co-founder Cameron Winklevoss announced a new phase of bitcoin hoarding. He says, “Anyone watching the flow of ETF bids understands that now is a good time to buy BTC before the ETFs hit the market.

Eight founder Michael van de Poppe sees $28.5K as an excellent level to buy before Bitcoin moves towards $40K. He noted that the BTC dominance index is approaching meaningful resistance, which should lead to Bitcoin consolidation and a shift in market attention to altcoins.

Valkyrie Investments has applied to the SEC to launch an exchange-traded fund (ETF) based on the Bitcoin spot price. BlackRock, WisdomTree, Invesco and Bitwise had also previously applied to establish a spot bitcoin ETF.

Singapore has approved a digital token licence for Ripple, allowing the company to expand its platform for cross-border payments in XRP.

The Euro accelerated lower on Friday morning, losing around 0.9% in early European trading, pressured by stronger dollar and weak EU economic data.

Fed Chair Powell said that the central bank will move interest rates at a careful pace after pausing sharp rate hiking cycle in June, but markets widely expect rate hikes to resume in July, seeing overall picture as hawkish.

Another negative factor for the single currency was stall of EU business growth in June, as data released on Friday showed further downturn in manufacturing sector, while the activity in dominant services sector barely expanded.

Weak Eurozone PMI data in June add to growing worries that bloc’s economic growth would remain negative in the second quarter and keep in play risk of recession.

Pullback from Thursday’s top at 1.1012 extended into second straight day, following a bull-trap above Fibo 76.4% barrier at 1.0983 and psychological 1.10 level, with formation of reversal pattern on daily chart, weakening near-term structure.

Fresh weakness has so far retraced over 38.2% of 1.0635/1.1012 bull-leg and penetrated deeply into thick daily Ichimoku cloud.

Friday’s close below broken Fibo 38.2% support (1.0868) is needed to confirm bearish signal and keep bears fully in play for test of targets at 1.0823 (50% retracement / daily Kijun-sen), 1.0805 (daily cloud base) and 1.0779 (Fibo 61.8% of 1.0635/1.1012).

Broken Fibo 38.2% marks initial resistance, followed by converged 10/55 DMA’s (1.0890) and daily cloud top (1.0905) which should cap extended upticks.

Res: 1.0868; 1.0890; 1.0905; 1.0923.
Sup: 1.0823; 1.0805; 1.0779; 1.0733.

• USD/JPY climbs above 143
• Japan’s core CPI remains above 3%

The Japanese yen has stabilized on Friday after falling close to 1% a day earlier.  In the European session, USD/JPY is trading at 143.05, down 0.04%. Earlier, USD/JPY touched a high of 143.45, the highest level since early November 2022.

On the data calendar, the US releases ISM Services PMI later today. The consensus stands at 54.0 for June, following 54.9 in May. The services sector has posted four straight readings over the 50 level, which separates expansion from contraction.

Japan’s core inflation higher than expected

Japan continues to grapple with high inflation and core CPI for May was higher than expected. With inflation around 3%, other central banks would love to trade places with the Bank of Japan, but Japan’s inflation remains above the 2% target and has become an issue for the central bank after decades of deflation.

Nationwide core CPI, which excludes fresh food but includes energy items, climbed 3.2% in May y/y, down from 3.4% in April but above the consensus of 3.1%. What was more worrying was the “core-core index”, which excludes fresh food and energy, jumped 4.3% in May, up from 4.1% in April. This was above expectations and marked the highest level since June 1981.

Core CPI has now remained above the BoJ’s inflation target of 2% for 14 consecutive months. This puts into question the BoJ’s stance that cost-driven inflation is temporary and therefore there is no need to tighten monetary policy. Inflation risks are tilted to the upside and the BoJ will find it more difficult to defend its ultra-loose policy if inflation pressures don’t ease.

The BoJ maintained its policy settings at last week’s meeting and has no plans to tighten interest rates anytime soon. This puts the BoJ at odds with other major central banks, which have been aggressively tightening rates in order to curb inflation. The US/Japan rate differential has been widening as the Fed raises rates while the BoJ stands pat. This has sent the yen sharply lower, raising concerns that the government could intervene in the currency markets in order to prop up the yen.

The Ministry of Finance stunned the global financial markets in September and October when it intervened, at a time when the yen had fallen below the 150 line. The yen hasn’t fallen quite that low, but I would expect to hear louder verbal intervention out of Tokyo if the yen falls below 145.

USD/JPY Technical

• USD/JPY tested support at 142.82 earlier. The next support level is 142.07
• There is resistance at 143.83 and 144.27

Daily Pivots: (S1) 0.8570; (P) 0.8603; (R1) 0.8627; More...

Intraday bias in EUR/GBP remains neutral as it reversed after brief recovery to 0.8635. On the downside, break of 0.8517 will resume the fall from 0.8977 to 161.8% projection of 0.8977 to 0.8717 from 0.8874 at 0.8453. Nevertheless, decisive break of 0.8635 will confirm short term bottoming, and bring stronger rebound to 55 D EMA (now at 0.8670) and above.

In the bigger picture, the down trend from 0.9267 (2022 high) is still in progress. It's seen as part of the long term range pattern from 0.9499 (2020 high). Deeper fall would be seen towards 0.8201 (2022 low). But strong support should be seen from there to bring reversal. This will now remain the favored case as long as 0.8717 support turned resistance holds.

Daily Pivots: (S1) 1.6159; (P) 1.6209; (R1) 1.6266; More...

Intraday bias in EUR/AUD stays on the upside for the moment. Corrective fall from 1.6785 should have completed with three waves down to 1.5846. Further rise should be seen to 1.6513 resistance next. On the downside, though, break of 1.6142 minor support will mix up the outlook and turn intraday bias neutral first.

In the bigger picture, price actions from 1.6785 are seen as a correction to up trend from 1.4281 (2022 low) only. Strong support should be seen around 38.2% retracement of 1.4281 to 1.6785 at 1.5828 to complete the first leg and bring rebound. However, sustained trading below 1.5828 will raise the chance of trend reversal and target 61.8% retracement at 1.5238.

Daily Pivots: (S1) 155.96; (P) 156.45; (R1) 157.27; More....

Intraday bias in EUR/JPY is turned neutral first with current retreat. Further rally would remain in favor as long as 154.30 minor support holds. Above 156.92 will resume larger up trend to 100% projection of 139.05 to 151.60 from 146.12 at 158.67. On the downside, break of 154.03 will turn bias back to the downside for deeper pull back.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 100% projection of 124.37 to 148.38 from 138.81 at 162.82. For now, medium term outlook will remain bullish as long as 148.38 resistance turned support holds, even in case of deep pull back.

Daily Pivots: (S1) 181.26; (P) 181.91; (R1) 183.08; More...

Intraday bias in GBP/JPY is mildly on the upside with break of 182.10 temporary top. Current up trend should be seen to 138.2% projection of 148.93 to 172.11 from 155.33 at 187.36. On the downside, however, break of 179.90 support will confirm short term topping, and turn bias back to the downside for deeper pull back.

In the bigger picture, up trend from 123.94 (2020 low) is extending. Next target is 195.86 (2015 high). For now, medium term outlook will remain bullish as long as 172.11 resistance turned support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.9783; (P) 0.9812; (R1) 0.9834; More...

Intraday bias in EUR/CHF is turned neutral with current retreat. On the upside, break of 0.9840 will resume the rebound from 0.9670 resistance. Firm break there should confirm that whole correction from 1.0995 has completed at 0.9670. On the downside, break of 0.9763 minor support will turn bias back to the downside for retesting 0.9670 low instead.

In the bigger picture, prior rejection by 38.2% retracement of 1.1149 to 0.9407 at 1.0072 suggests that medium term outlook is staying bearish. The pair is also capped below 55 W EMA (now at 0.9924). Down trend from 1.2004 (2018 high) is not complete yet and is in favor to resume through 0.9407 at a later stage. However, decisive break of 1.0095 resistance will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484).