BOJ Decides to Reduce Bond Purchase Amount, EUR Dependent on French Political Developments【June 17, 2024】

Fundamental Analysis

• The BOJ has decided on a policy to reduce the amount of bond purchases, but the specific plan has been postponed to July.
• The BOJ has hinted at a rate hike in July, with USDJPY trading in the mid-157 range.
• Reports indicate struggles for the ruling parties in France and the UK, leading to selling pressure on the EUR.

EURUSD technical analysis

Reports suggest struggles for the ruling party in France. President Macron’s party has significantly lost seats, while the far-right party is gaining support. The political situation is very unstable, with some whispering about a possible EU exit, exerting significant selling pressure on the EUR. The EURUSD has formed an engulfing pattern, falling sharply to the monthly support line of 1.07 USD.

1.07 USD is a round number and a monthly support line. It is expected to hold, but it may be tested during London hours.

Analyzing the RCI (Rank Correlation Index), the short-term RCI is -81, with the medium and long-term also pointing downwards. This suggests a correlation where prices tend to fall over time.

Day trading strategy (1 hour)

Analyzing the 1-hour chart of EURUSD, it has rebounded perfectly at 1.067 USD, corresponding to 100% of the Fibonacci expansion, and is now hovering around 1.07 USD. The downward momentum has slightly eased, but 1.067 USD remains the next target low. The short-term moving average has again fallen below the medium-term moving average, forming a perfect order.

For day trading, aiming for a sell on the rebound is preferred. Sell around 1.0730 USD, corresponding to 61.8%, and settle around 1.07 USD. The stop should be set at 1.075 USD.

Support/Resistance lines

Consider the following support and resistance lines for the future:

1.07 USD .. Round Number

Market Sentiment

EURUSD Sell: 59% Buy: 41%

Featured Currency Pair of the Week (USDCAD)

USD/CAD has a correlation with crude oil prices. As a resource currency, the CAD is bought when crude oil prices rise, leading to a decline in USD/CAD. Currently, crude oil prices are range-bound and lack movement.

Therefore, the main driver of USD/CAD fluctuations is the USD. With the US PPI falling below expectations, rate cut expectations have risen, resulting in strong selling of the USD.

However, the Bank of Canada recently decided on a rate cut, limiting the extent of the decline. Consider a potential drop to around 1.3660 USD.

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.