EUR/JPY - Technical View
How will the Euro react to the ECB’s rate decision? The EUR/JPY has been seeing a longer-term bullish price trend, which the Japanese Yen's weakening has triggered. Since the start of the month, the price has increased by 3% but lost momentum slightly while traders waited for the European Central Bank (ECB) to confirm its decision on the latest monetary policy increase.
However, the announcement has now been made - the ECB has increased the Main Refinancing Rate by 0.75%. The alteration has taken the total rate to 1.25%, the highest it's been in over a decade. The Euro has reacted negatively, mainly because the rate hike was already priced into the exchange rate.
In general, it should be noted that the Japanese Yen has declined against most of the market. After this morning’s publication of positive data on Japan's gross domestic product (GDP), investors expected a change in the trend of the trading instrument, but the price only lost momentum.
The country's economy strengthened by 0.9% in the second quarter, with preliminary estimates of 0.7%, and the annual value reached 3.5%, exceeding analysts' expectations of 2.9%. However, Japan's weak monetary policy continues to keep investors away.
XAU/USD - Technical View
Gold continues to increase for a second consecutive day after three weeks of sharp declines. Over the past three weeks, the price had shed 4.40% but has since regained some lost ground.
What changed? The primary influence has been the decreasing value of the US Dollar over the past 24 hours. Overall, this has supported the price of the commodity.
The price of the commodity has generally been pressured by the rise in interest rates which, in turn, has resulted in the US Dollar increasing in value. The main competitors of XAU/USD and XAG/USD, in terms of capital preservation, are most likely bonds, which are also within the “safe haven asset group.”
Over the past weeks, bonds have seen increased yield levels, which attracts investors. Since the beginning of summer, short-term annual US bonds have risen from 2.053% to the current 3.611%, while gold has lost 7% over the same period.
Investors will look for further monetary policy indications during this evening's Fed speech by Chairman Powell. This is likely to cause some volatility for the USD and Gold.