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Overall, the currency market retraced some parts of the declines seen on Monday, helped by a number of better than expected news reports. By far, the yen was the pair with the strongest momentum tonight, as it broke below TheLFB S3 even from the Asian trading hours. The developments seen in the Japanese yen may have been influenced by the BoJ interest rate meeting, something that has rarely happened over the last year of trading. Moreover, the market may maintain strong momentum in the following few sessions, as a number of important releases are scheduled on Wednesday and Thursday.
The Euro (Eur/Usd) made a small attempt to break lower during the Asian session, but soon after the euro started to push higher. So far into the day, the euro has gained 90 pips, retracing almost half of the declines seen in the prior day. During the European session, a release showed that inflation fell to 0.0% in the Euro-area, while the German economic sentiment as gauged by the Zew release improved to 44.8 in May.
The Pound (Gbp/Usd) touched TheLFB S1 (1.6215) during the first part of the overnight session, but from there the pair started to head higher. During the European trading hours, the pound gained 85 pips and broke above the resistance trend-line that connects the 06.12 and the 06.15 highs, after a release showed that inflation declined less than expected in the U.K. Many say that, the BoE overestimated its CPI projections, since even now the inflation gauge is standing at relative high values.
The Aussie (Aud/Usd) fell approximately 70 pips during the Asian trading hours. However, the aussie was the first pair to strengthen during the Asian trading hours, as the RBA said there is no need for any further rate cuts. Following this statement, the aussie reversed every pip lost earlier, and broke above the 20-day moving average.
The Cad (Usd/Cad) fell down to the neutral pivot point (1.1290) during the European session, after it earlier tested the high reached during the last U.S. session. Tonight, the Canadian dollar posted its first signs of strength, after Friday and Monday declining in line with oil market prices.
The Swissy (Usd/Chf) tested the high reached on Monday, around the 1.0950 area, during the first part of the overnight session, but then started to head lower in line with the rest of the major pairs. So far, the swissy declined 60 pips, reaching once again the 23.6% retracement area from the downtrend that started in late April. During the European session, a release showed that industrial production tumbled 13.1% in the previous quarter, much more than expected.
The Yen (Usd/Yen) declined as much as 180 pips during the Asian session, breaking below TheLFB S3 (96.40%), something that rarely happens. The Japanese yen’s strength came as the Bank of Japan said that the strong pace of contraction seen in the Japanese economy is easing. During the London open, the pair retraced small parts of the declines seen during the Asian session, but then resumed once again its downward path.
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