Mild relief from USD strength ahead of ECB meeting and Jerome Powell

EUR/USD => The pair holds below 1.00
BTC/USD =>The cryptocurrency rises above $19k
Gold => The commodity falls below 1700

EUR/USD looks to the ECB meeting

EUR/USD performed a spectacular turnaround on Wednesday.

After flirting with the December 2002 low of 0.9859 in the European session, EUR/USD rebounded, regaining parity in the US session as treasury yields eased. Still, the ongoing energy crisis in Europe is likely to keep a lid on EUR gains as soaring energy prices and surging inflation take their toll on households and businesses across the region. Against this backdrop, the ECB will announce its interest rate decision.

The central bank is expected to hike rates by 50 or 75 basis points as it fights record-high inflation. The money markets are leaning slightly in favour of a 75-basis point hike, but both sides have strong arguments. The euro could be disappointed with a 50 basis point hike and risks falling lower. 

US ISM services PMIActual: 57.9 (0.2)Previous: 56.7

Where next for ERU/USD?

EUR/USD once again found support on the multi-week falling trend line before rebounding higher but struggled to retake the 20 sma at 1.0025.

The bullish crossover on the MACD supports further upside. Buyers will need to retake this resistance to extend the recovery to 1.0090, the weekly top, to create a higher high. Meanwhile, support can be seen at 0.9864, the weekly low, and the falling trendline support. A break below here opens the door to 0.98 round number.

BTC/USD recovers above 19k

Bitcoin fell towards a two-year low, crashing 5% in just 24 hours, before recovering on Wednesday.

The latest crash was blamed on hawkish expectations surrounding Fed Chair Powell’s speech today.  Bitcoin’s 70% fall in value since the start of April has largely been blamed on the more hawkish stance of the Federal Reserve. Should Powell indicate a steep path for interest rates, BTC/USD could look to break lower towards 18000. Nerves surrounding the highly anticipated Merge could also be playing a part in Bitcoin’s choppy trading.

The Merge, due to take place in one week, will see the second largest cryptocurrency, Ethereum, shift to a more environmentally friendly blockchain. More prominent institutional investors could then be more open to Ethereum compared to its less environmentally friendly rival, Bitcoin. 

USD/JPY awaits Fed Powell for clues

USD/JPY saw high levels of volatility in the previous session, rising to within a breath of 145.00 before retreating as US treasury yields turned lower.

The pair managed to end the session in positive territory, the ninth straight day of gains. Central bank divergence has been the key driver behind the rally as hawkish Fed bets gained traction after stronger than forecast ISM non-manufacturing data earlier in the week. Meanwhile, the BoJ remains one of the most dovish major central banks. Stronger than forecast Japanese GDP helped firm the yen and pull the pair away from 145.00.

Today all eyes are on Fed Chair Powell, who is due to speak and could use his appearance to prepare the market for a 75 basis point hike at the September FOMC. A hawkish-sounding Jerome Powell could lift USD/JPY back up towards 145.00. US jobless claims will also be in focus and are expected to rise after last week’s surprise fall.

Support can be found at 139.40 (July high) and 138.10 (20 sma).

Resistance for the pair can be seen at 145.00 (round number) and 145.30 (trendline resistance).

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