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EUR/USD and EUR/GBP rise as USD/JPY weighs on support

EUR/USD and EUR/GBP benefit from a stronger Euro amid hawkish comments from the ECB’s President Lagarde while USD/JPY slips towards key support.

EUR/USD trades in one-month highs

EUR/USD’s advance from its mid-May $1.035 low has taken it to above its two-month downtrend line at $1.0555 and the early May high at $1.0642, following comments by the European Central Bank’s (ECB) President Christine Lagarde in which she essentially pre-committed to a 25 basis point (bp) hike in July and September.

An interim bottoming formation has thus been confirmed with the mid-April low at $1.0758 now being eyed. Another potential upside target is seen along the 55-day simple moving average (SMA) at $1.0788, near the 2022 downtrend line at $1.0849.

Minor support below last week’s high at $1.0607 is seen along the two-week support line at $1.0555 and at Friday’s $1.0533 low. Further minor support sits between the April and 6 May lows at $1.0483 to $1.0472.

EUR/GBP recovers from the 200-day simple moving average

EUR/GBP managed to stabilise above its two-month support line at £0.8425, ahead of Tuesday’s French, German and UK manufacturing and services purchasing managers’ index (PMI) releases for May.

The cross thus managed to recover from around the 200-day SMA at £0.8445 and is trading close to this week’s high at $0.8504. This level needs to be bettered for the late March high at £0.8512 to be back in focus. Further up lurks last Monday’s high at £0.8534.

Below the two-month support line the 55-day SMA can be found at £0.8407 and last week’s low at £0.8393 which, together with the early May low at £0.8368, remains key for the currency pair’s uptrend. If slipped through, the technical picture would become bearish again.

USD/JPY trades close to 4-week lows as Japan manufacturing growth eases to 3-month low

USD/JPY is trading at levels last seen at the end of April, close to its late April ¥126.95 low, as Japan’s manufacturing PMI declined to a 3-month low at 53.2 in May amid supply chain disruptions due to the war in Ukraine versus a revised 53.5 a month earlier.

This comes after Japan’s consumer prices rose by 2.5% year-on-year (YoY) in April last week, the most since October 2014, following a 1.2% gain in March. The April figure also marked the 8th straight month of annual inflation, with food prices rising at the fastest pace in 7 years. Failure at the late April ¥126.95 low on a daily chart closing basis would confirm a topping pattern with a slip back towards the March peak and 55-day SMA at ¥125.31 to ¥124.87 expected to unfold in this scenario.

Minor resistance remains to be seen at the 22 April high at ¥129.11 and also at the mid-April and mid-May highs at ¥129.40 to ¥129.78. This resistance area would need to be overcome for the uptrend to resume.

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