Japanese yen

European Central Bank's Potential Minimum Reserve Increase Sparks Concerns

Profit-Taking on Dollar Longs after Better than Expected Jobs Report Sets Stage Until CPI

Marc Chandler 08.11.2021 09:57

The US dollar turned in a solid week's performance, rising against most currencies and recording a marginal new high for the year against the euro. Sterling and the Australian dollar competed for the worst performer. Both central banks pushed against market expectations for aggressive near-term tightening. The central banks triggered a short squeeze in the bond market, where 10-year benchmark yields from 10 bp in the US to 34 bp in Italy. UK 10-year Gilts and French Oats yields fell nearly 22 bp. Germany lagged with an almost 18 bp decline. The speculative market had its largest net short Treasury note futures position since March 2020. It has swung from its largest net long position in four years (~181k contracts) in early October to a net short position of almost 270k as of November 2. The macro focus shifts back to inflation next week with American and Chinese reports. Rising inflation in the world's two largest economies may arrest the rally in the bond markets. We anticipated the dollar to move broadly higher this month, and the move we envision does not appear over. However, important support has been approached in a sharp thrust that has penetrated Bollinger Bands, suggesting some patience may be needed. The dollar did close relatively softly, especially given the stronger than expected employment report. Dollar Index: A new high for the year was recorded after the employment report was slightly above 94.60. The momentum indicators are trending higher, and the five-day moving average crossed back above the 20-day moving average. Recall that the 94.50 area is (38.2%) retracement of the sell-off since the March 2020 peak (~103). The high from last September was closer to 94.75, but above there, nothing stands out until the 95.70-96.10 band. Yet ahead of the weekend, it finished poorly and formed a potential bearish shooting star candlestick. Initial support is seen around 93.80. Euro: The single currency was virtually flat last week, but it does not hide the fact that a new low for the year (~$1.1515) was recorded. The MACD and Slow Stochastic are moving lower, and the price action has been poor. The $1.1490 area corresponds to the (50%) retracement objective of the rally from the March 2020 low (~$1.0635). The next retracement (61.8%) is found a little below $1.13. The euro finished on a firm note near session highs, suggesting scope for some corrective gains at the start of the new week. The new momentum shorts are frustrated with the lack of follow-through and maybe in weak hands. A close above $1.1620 would lift the technical tone. Japanese Yen: The Japanese yen was the strongest of the major currencies, gaining an inconsequential 0.25% against the dollar. The decline in US rates helped drag the dollar lower against the yen. In terms of market positioning, short-yen carry trades had become momentum trades, too and the unwind was also supportive of the yen. The dollar-yen exchange rate continues to track US 10-year yields. The 10-year yield fell below 1.50% for the first time in a month ahead of the weekend, and the dollar made a new low for the week near JPY113.30. Recall that in the big picture, we have suggested a range-trading affair between around JPY113.00 and JPY114.50-JPY115.00. That still seems reasonable. However, we note the dollar's momentum is flagging, and the five-day moving average slipped below the 20-day for the first time since late September. The Slow Stochastic and MACD are trending lower. A break of JPY113.00 signals the next leg down into the JPY112.00-JPY112.50 band. British Pound: After the Bank of England confounded market expectations, sterling was spanked, falling more than 1% for only the second time this year (the other was on September 28, which arguably was more of a dollar move). Expectations, partly facilitated by official comments, for tighter monetary policy spurred a roughly 4.3-cent rally in sterling last month. If the BOE is saying, "sorrow about the mate, you misunderstood the conditionality and our job," it seems only fitting that sterling return to the late-September low near $1.3400. It did so ahead of the weekend to $1.3425. Ahead of the weekend, it settled below the lower Bollinger Band for the second consecutive session. The momentum indicators are still falling. However, it managed to close near session highs, and a potential hammer candlestick may have been formed. However, if $1.34 does not hold, it is difficult to find much chart support ahead of the $1.3165-$1.3200 area should $1.3400 be convincingly broken. Canadian Dollar: The Canadian dollar fared better than the other dollar-bloc currencies but still lost about 0.5% against the US dollar. Since meeting the head and shoulders objective near CAD1.23, the US dollar has been consolidating and forming a rounded bottom. The five-day moving average crossed back above the 20-day for the first time in a month. The greenback finished the week bumping against the 200-day moving average (CAD1.2480), while the momentum indicators suggest there is more to come. A retracement (38.2%) of the greenback's slide since September 20 high (~CAD1.29) is found near CAD1.2520, and the next retracement (50%) is slightly below the neckline of the head and shoulders pattern (~CAD1.2600). Australian Dollar: The Australian dollar's pullback has been more profound than the other majors. It dropped almost 2.6% from the late October higher (~$0.7555), which was its best level since early July, and retraced half of last month's rally at the pre-weekend low (~$0.7360). The momentum indicators are still falling, and the five and 20-day moving averages have crossed for the first time in nearly a month. The next (61.8%) retracement target is closer to $0.7315. Still, it closed firmly and with a possible bullish hammer candlestick, suggesting a bounce early next week is likely. The $0.7430-$0.7450 area may be the first important hurdle. The Reserve Bank of Australia, like many other central banks, is emphasizing labor market developments in their forward guidance. Given the gap between what the RBA is saying (no hike likely until 2024) and what the market is saying (the swaps market implies nearly 70 bp of tightening over the next 12 months), next week's October jobs data may have greater impact. Australia lost almost 285k jobs in August and September amid the lockdown. A modest recovery is expected. In fact, the worst was probably in August. Full-time positions increased by almost 27k in September. Mexican Peso: The peso staged a brilliant recovery last week, but only after first falling to its lowest level since March. The fall in US rates helped take pressure off the peso and emerging markets more broadly. The strong US employment report bolstered risk appetites and lifted the JP Morgan Emerging Market Currency Index, which had been lower on the week, ahead of the data. The dovish FOMC tapering announcement saw the dollar record a key downside reversal against the peso by reversing lower after making new highs and closing below the previous session's low. Modest follow-through selling pushed the dollar through the (61.8%) retracement objective (~MXN20.46) of the rally that had begun in late October (from ~MXN20.21), ahead of the FOMC meeting and jobs report. Before the weekend, it settled at the lows for the week (~MXN20.30). Initial support is seen near MXN20.20. The central bank meets next week (November 11). Most expect a 25 bp hike, but an acceleration in CPI last month ( to be reported on November 9) may boost the risk of a 50 bp move. Chinese Yuan: The yuan's 2% gain this year puts it in third place globally, behind the Russian ruble (4.5%) and the Canadian dollar (2.3%). The yuan has drifted higher in recent weeks. It has risen for the past three months for a cumulative gain of a little less than 1%. For the past several weeks, the PBOC consistently set the dollar's reference rate above market expectations (median projection in Bloomberg's survey) but did not do so ahead of the weekend. Last week the dollar traded quietly within the range seen in the past two weeks. The dollar recorded four-month lows in October in front of CNY6.38. Given the official penchant for stability, the issue now is the upper end of the range, and it seems to be CNY6.40-CNY6.41. Since late September, the dollar has not settled above the 20-day moving average (~CNY6.4075), the middle of the Bollinger Bands. China's 10-year bond yields peaked in mid-October near 3.05% and last week finished below 2.90% for the first time in several weeks. It is the only country whose 10-year yield has fallen this year (~25 bp). The October inflation gauges are the market's focus, but trade and lending figures may generate more insight into the economic drivers. Disclaimer

Markets Calmer, Awaiting Fresh Incentives

Marc Chandler 08.12.2021 13:51

December 08, 2021 $USD, Bank of Canada, Currency Movement, Germany, India, Japan, Poland, Russia Overview: The capital markets are calmer today, and the fear that was evident at the end of last week remains mostly scar tissue. Led by gains in Japan, China, Australia, New Zealand, and India, the MSCI Asia Pacific Index extended yesterday's gains. Europe's Stoxx and US futures are firm. The US 10-year yield is softer, around 1.43%, while European yields are mostly 1-2 bp lower. The Norwegian krone and euro lead major currencies higher against the greenback, but the New Zealand dollar and sterling are underperforming. Most of the emerging market currencies are enjoying an upside bias. The Turkish lira is giving back a little more than half of yesterday's 2.25% bounce. Gold is edging higher and is near the 200-day moving average (~$1792). January WTI is off $1 around $71 after rallying around 8% in the past two sessions. API reported a three million barrel drawdown in inventories but a big jump in Cushing. US natural gas is consolidating and paring Monday's 11.5% drop. Europe (Dutch) natural gas prices are rising for the third consecutive session and around 10% this week. Iron ore has extended this week's rally and is at the highs since October. Copper is flat. Asia Pacific Australia has joined the US in the diplomat boycott of the winter Olympics in Beijing. South Korea and Japan have not formally decided yet. China's quarantine policies made it difficult for many diplomats to attend in any event, and many apparently will not attend. Beijing threatens unspecified retaliation. Japan reported an increase in its October current account, rising to JPY1.18 trillion from JPY1.03 trillion in September. The swing in the trade balance from a JPY230 bln deficit to a JPY167 bln surplus more than accounted for it. Japan also revised Q3 GDP to a 0.9% contraction (from -0.8%). The composition changed. Consumption was a greater drag (-1.3% quarter-over-quarter rather than -1.1%), and inventories contributed less (0.1% vs. 0.3%) and net exports were flat (rather than contribute 0.1 percentage points). Business investment was less a drag (-2.3% vs. -3.8%). Still, there is reason to be more optimistic about the outlook for the world's third-largest economy. Social restrictions have eased, the vaccination rate is among the best, and the government is providing fresh stimulus. The Kishida government is expected to finalize its fiscal efforts toward the end of the week. A key issue is the tax incentive (subsidy) for companies that boost wages by 3%, which has not happened since 1997. India left its key rate corridor on hold today. The repo rate is 4%, and the reverse repo rate is 3.35%. Some observers saw the possibility of a hike in the reverse repo rate. The monetary policy committee voted unanimously to keep the repo rate steady. The reverse repo rate is a broader issue decided by the central bank, not the MPC. The emergence of Omicron may have encouraged the central bank to maintain a steady hand, while the cut in the excise duty and VAT for petrol and diesel may help ease price pressures. It made some technical changes in its liquidity management, which some see as a prelude to a hike in February 2022, when the central bank meets again. The dollar is consolidating in a narrow 30-point range above JPY113.35 against the Japanese yen. Yesterday's high was just below JPY113.80. An option for about $550 mln will roll off today at JPY114.25, while there is a nearly $1.5 bln option at JPY114.00 that expires tomorrow. The JPY114 area also holds the 20-day moving average, which the dollar has not closed above since November 25. The Australian dollar began the week flirting with the $0.7000 area. It is rising for its third consecutive session and has reached almost $0.7145 today. Last week's highs were set a little above $0.7170. Despite words of caution by Chinese officials and the cut in reserve requirements, the yuan continues to march higher. It is at new three-year highs today. The dollar has been sold down to almost CNY6.3455. Local dollar bonds and bonds below investment grade have rallied as officials signal a focus on supporting the economy. Today the rate for re-lending to rural and small businesses was cut by 25 bp. The PBOC has also been generous with its liquidity provisions. The reference rate for the dollar was set at CNY6.3677, a little firmer than expected (CNY6.3665, Bloomberg survey). Europe An era is formally over today as Germany's new government takes office. The challenges it faces are profound. The virus was surging even before the Omicron variant was detected. The economy has been hobbled. Inflation is high (6% on the harmonized measure in November) and without the fiscal stimulus seen in the US, where CPI is up 6.2% from a year ago (October). This year, the German deficit is estimated to be about 5.8% and seen falling to 2.5% next year. The US deficit is around 12.5% this year and is expected to fall to around 6.5% in 2022. Russia is amassing troops, and fears that it will invade Ukraine early next year are running high. Germany reportedly will nix the controversial Nord Stream II pipeline if Russia carries through with its threat as part of the economic sanctions being considered. Italy's Draghi has had a bit of a honeymoon, but that will change. Two of the three largest unions will strike on December 16 to protest Draghi's budget, which must be passed by the end of the month. Moreover, the selection of a new Italian president in January may mark the beginning of the political process that will lead to a new parliamentary election by the middle of 2023. The president of Itlay is chosen by the Italian Parliament and regional representatives. The current president, Mattarella, has declined to run for a second term. Draghi does lead any political party, but the latest surveys show the center-left Democratic Party is in first place, polling a couple percentage points higher than it got in the last election at 21.4% support. The Brothers of Italy on the right are in second place with slightly less than 20% support. The Five Star Movement has seen its fortunes slip to about 15%. Poland's central bank is set to hike its base rate today. It will be the third consecutive increase. The base rate was slashed from 1.50% last year to 10 bp. It was hiked by 40 bp in October and 75 bp last month to stand at 1.25%. The headline CPI surged from 2.4% at the end of last year to 7.7% in November. Czech and Hungary have been more aggressive in raising rates. Last month, Czech's central bank delivered a 125 bp increase to lift its key two-week repo rate to 2.75%. It was at 25 bp to start the year. Its CPI is near 6%. Hungary has raised its base rate every month since June and taken it from 60 bp to 2.10%. It has also taken its one-week deposit rate from 75 bp to 3.10%, with 130 bp delivered in the past three weeks. Earlier today, it reported that CPI rose to 7.4% last month from 6.5%. Most look for a 50 bp increase from Poland's central bank today. The euro briefly dipped below $1.1230 yesterday but recovered in the North American afternoon. It is extending the recovery today and traded $1.1300 in the European morning. The $1.1310-$1.1320 offers nearby resistance. The UK government is being embarrassed by reports about its holiday party a year ago in violation of the social restrictions in place at the time. It adds to the sleaze factor that has weakened it. The latest polls show that the Labour Party is extending its lead. Also, ideas that the BOE could raise rates next week have diminished and been pushed into next February. Sterling is heavy, near $1.3200. We have warned of near-term risk toward $1.3165, the (38.2%) retracement objective of the rally from the March 2020 low near $1.14. America A deal appears in the works to lift the US debt ceiling. The maneuver requires 60 votes to allow the debt ceiling to pass with a simple majority. The Republican leadership appears willing to go along with this. It will likely set a new precedent that will be used and possibly expanded when control of Congress changes. PredictIt.Org shows that the Republicans are favored to win control of both houses in next year's mid-term election. The US calendar today features the JOLTS report on job openings. The week's highlight, the November CPI, is out on Friday, and both the headline and core rates are expected to accelerate. Fed officials are in the blackout period ahead of next week's FOMC meeting. Today's North American feature is the Bank of Canada meeting. No one expects a change in rates. It is more about the rhetoric. Despite the uncertainty surrounding the Omicron variant, Bank of Canada officials are likely to be more confident about the strength of the recovery. Last week's jobs data adds to the positive impulses. Moreover, the government is providing more fiscal support. The biggest challenge is that the market has discounted five hikes over the next 12 months. This is aggressive and difficult for the central bank to get ahead of market expectations. Even after the strong Canadian jobs data at the end of last week, the US dollar closed firmly above CAD1.28, showing the Loonie's vulnerability to the risk-off wave. However, as cooler heads have prevailed, the Canadian dollar has bounced back. The US dollar closed below the 20-day moving average yesterday (~CAD1.2670) for the first time in a month and was sold to about CAD1.2620 today. The (38.2%) retracement of the greenback's rally since the October 21 low (below CAD1.23) is found near CAD1.2640. The next retracement (50%) is around CAD1.2570. Initial resistance now is likely by CAD1.2680. The greenback also closed below its 20-day moving average against the Mexican peso yesterday for the first time since November 9. It has slipped below MN21.00 today for the first time in about two-and-a-half weeks. With today's loss, the US dollar has retraced (61.8%) of its rally from November 9 low (~MXN20.2750). The move seems exaggerated, and consolidation is likely. Nearby resistance is seen in the MXN20.05-MXN20.10 area. Disclaimer

Dollar Starts the Week Bid ahead of the FOMC

Marc Chandler 13.12.2021 13:44

December 13, 2021 $USD, Australia, Canada, China, Currency Movement, FOMC, Japan, Mexico, South Korea, Switzerland, Turkey, UK Overview: Equities, bonds, and the dollar begin the new week on a firm note. Japanese, Chinese, Australian, and New Zealand equities advanced in the Asia Pacific region. Europe's Stoxx 600 is snapping a three-day decline, and US futures are 0.25%-0.35% higher. The US 10-year yield is a little softer at 1.48%. European benchmark yields are mostly 1-2 bp lower, and near 0.71%, the UK Gilt's yield is at a three-month low. The dollar is rising against all the major currencies and is 0.3%-0.45% higher against most. The Canadian dollar and sterling are the most resilient. Among emerging market currencies, the Chinese yuan continues to defy official signals to eke out a small gain. The Turkish lira is off more than 2%, after having dropped 4% initially. Intervention at the end of last week failed to have a lasting impact, and the central bank is expected to cut rates again later this week. The JP Morgan Emerging Market Currency Index is giving back last week's 0.2% gain plus more today. It was the first weekly gain in five weeks. Gold is quiet in the upper end of the pre-weekend range, holding above $1780. January WTI is firm but capped near the 20-day moving average (~$72.80). US natgas is firm after falling 5% last week. Dutch gas is up 8% to new two-month highs. It has a six-week rally in tow, during which time it has gained a little more than 60%. Industrial metals are higher too. Iron ore snapped a three-day air pocket and gained it all back and more with its 6.5% rally today. Copper has steadied after falling almost 2.5% in the last two sessions. Asia Pacific The results of Japan's Tankan survey were in line with the talk we have picked up that while the new government, vaccination efforts, and fiscal stimulus are helping fuel the economic recovery, businesses are not yet convinced that significant change is taking place. Sentiment among large manufacturers was steady at 18, and the outlook ticked lower. The improvement in sentiment among the large non-manufacturers was more pronounced (9 vs. 2). However, the outlook was subdued at 8 (from 3). Capex plans from the large businesses were softer than expected at 9.3% (from 10.1%). Sentiment among the small companies improved, but the diffusion index and the outlook remained negative. South Korea reported strong traded numbers for the first ten days of December (exports 20.4% and imports 42.3% year-over-year). Seoul was busy. Its foreign minister met with high Japanese counterpart on the sidelines of the G7 meeting and struck a cooperative tone. South Korea's President Moon met with Australia's Prime Minister Morrison and struck a A$1 bln weapon deal for self-propelled howitzers (which have already been purchased by other countries, including India and Turkey). South Korea, however, will not be participating in the diplomatic boycott of the Winter Olympics, citing the need for Beijing's cooperation to denuclearize the peninsula. The US dollar remains within its recent range against the Japanese yen (~JPY113.20-JPY113.95). The 20-day moving average is at the top of the range, and it has not traded above it this month yet. An option for almost $400 mln at JPY114.00 expires today. It is the fifth session that the dollar has not traded below JPY113.20. The Australian dollar's rally stalled near $0.7185 last week and is testing the lower end of its three-day range (~$0.7130) in the European morning. Support is seen in the $0.7090-$0.7115 area. The highlight of the week is the November jobs report, which is expected to show a strong bounce after three months of Covid-related declines. More problems among China's property developers and activity in the manufacturing hub in Zhejiang were suspended due to an outbreak of the virus that failed to trigger a retreat in the yuan. The dollar spent most of the local session below the pre-weekend low (~CNY6.3615). The PBOC set the dollar's reference rate at CNY6.3669. The market (Bloomberg survey) expected CNY6.3649. Europe The UK appeared to make two concessions over the weekend. First, it signaled that it was no longer seeking to exclude a role for the European Court of Justice in enforcing the Northern Ireland protocol. Second, new fishing licenses were made available to the EU and French fishers. Jersey and the UK issued another 23 licenses, and although Paris was seeking more, it seemed sufficient to de-escalate the situation. The UK government is under pressure from many sides. The "partygate" scandal is a culmination of miscues by the Prime Minister, who has struggled with a Peppa Pig speech and a Kermit the Frog speech at the UN. Several petty sleaze scandals have also marred the government. Recent polls put Labour ahead of the Conservatives. This Thursday, the special election could see the Tories defeated in a traditional stronghold (ie Lib-Dems a protest vote for disenchanted Tories?). The UK's stance toward the EU and the risk to the Good Friday Agreement have estranged the US government to some extent, which has not lifted Trump's steel and aluminum tariffs and put much energy into a free-trade agreement between the two special allies. Turkey reported a large than expected October current account surplus ($3.16 bln) current account surplus. While the currency's sharp depreciation would be expected to help the trade account, it also scares international investors. It reported a net outflow of $2.2 bln portfolio capital in October. Industrial output surprised on the upside in October, rising by 0.6%. Economists (Bloomberg survey) expected a 0.1% decline after a 1.5% fall in September. Turkey appeared to intervene in the foreign exchange market at the end of last week. The dollar held below TRY14 but jumped to almost TRY14.76 today before pulling back. The Swiss National Bank also looks like it intervened last week. The euro held above CHF1.04 after having been sold to about CHF1.0375 earlier this month, its lowest level since July 2015. Swiss domestic sight deposits rose by CHF1.12 bln, the biggest increase in three weeks. Note that after buying euros against the franc, the SNB is believed to sell euros for dollars to maintain the allocation of its reserves. The euro peaked last week near $1.1355. It has been sold to a four-day low of $1.1260 today. There is an option for 1.44 bln euros at $1.1250 that expires today. The low for the year was set on November 24 near $1.1185, while last week's low was slightly below $1.1230. With diverging impulses expected from the Fed and ECB this week, the euro looks vulnerable. Sterling closed on its highs before the weekend and is on the defensive today. The market appears to be absorbing bids that might be related to the expiration of a couple of options today (~GBP500 mln at $1.3235 and ~GBP560 mln at $1.3200). The low for the year was set last week (December 8) near $1.3165, but initial support today is around $1.3220. The odds of a BOE rate hike later this week have fallen to less than a 1 in 5 chance. America The highlight of the week is the FOMC meeting. Nearly everyone expects the Fed to accelerate its tapering and for individual forecasts to shift, matching the more hawkish rhetoric seen since the October CPI print jumped above 6% (November 10). November's CPI, reported at the end of last week, accelerated to 6.8%. Before we get to the FOMC meeting, though, this US reports PPI (the heading is expected to accelerate above 9% and the core above 7%) and November retail sales (a solid gain is anticipated of around 0.8% but off the heady 1.7% pace seen in October). After the mid-week FOMC meeting conclusion, the US reports November housing starts, industrial production, and the Philly Fed's December survey. The preliminary December PMI estimates are also due Thursday. The week's data highlight for Canada is the mid-week estimate of November CPI. Prices may have edged up by 0.2% on the month, but the year-over-year rate is expected to be little changed from the 4.7% pace seen in October. The underlying measures may have edged up a little. Price pressures are elevated but do not appear to be accelerating, as seen in the US. Tomorrow, the new central bank mandate will be announced. The mandate is reviewed every five years. The press reports that the 2% inflation target will be retained, but the mandate may include a component of the labor market as it takes what is expected to be a small step toward a dual mandate like the Fed's. Mexico's central bank meets on Thursday. It is widely expected to lift the overnight rate target by 25 bp to 5.25%. In Bloomberg's survey of 17 economists, three forecast a 50 bp hike. It would be the fourth hike in the cycle that began in August. Chile and Colombia's central banks also are expected to hike rates this week. Chile, which hiked by 125 bp in October after a 75 bp increase in August, is expected to make another 125 bp adjustment tomorrow. It would lift the policy rate to 4%. It holds the second round of its presidential election on December 19. Colombia's central bank meets on December 17. A 50 bp increase would lift the repo rate to 3.0%. The first increase in the cycle was 75 bp in October (to 2.5%). November's CPI was a little above 5.25%. The US dollar is rising against the Canadian dollar for the fourth consecutive session. It is poking above CAD1.2750 in the European morning, where an option for almost $450 mln expires today (and another for $515 mln expires tomorrow). A convincing move above CAD1.2760 could retarget the month's high (~CAD1.2855). The market has 125 bp of hikes discounted over the next 12 months, but little new encouragement from the central bank. The greenback fell against the peso in four of last week's five sessions. It is little changed today, trading above the pre-weekend low (~MXN20.8430). The next support area is seen closer to MXN20.70. Still, the market is likely to be cautious extending short US dollar positions ahead of the Fed. Disclaimer

AUDUSD, USDCHF and EURJPY status explained

John Benjamin 28.12.2021 08:43

AUDUSD falls back for support The Australian dollar pulls back as risk assets tread water amid low liquidity. A break above the previous high at 0.7220 reveals a strong bullish bias. However, the RSI’s repeatedly overbought situation may have prompted short-term buyers to take some chips off the table. In turn, this left price action vulnerable to retracement. 0.7200 is the closest support. Its breach would trigger a deeper correction towards 0.7120. A close above 0.7250 may resume the reversal and carry the Aussie to the daily resistance at 0.7360. USDCHF tests consolidation range The US dollar softens over weaker Treasury yields. The pair’s latest rebound has met aggressive selling at the upper bound of the consolidation range near 0.9250. That is a sign of lingering bearish pressure. The greenback is testing the lower bound near 0.9160. Range traders were eager to buy the dip as the RSI ventured into the oversold zone. 0.9210 is an intermediate hurdle leading to the upper limit where a breakout could trigger a bullish reversal towards 0.9350. Otherwise, a drop below 0.9160 may send the pair to 0.9100. EURJPY breaks higher The Japanese yen weakened after Japan’s jobless rate rose to 2.8% in November. The long side has gained the upper hand after they pushed above 129.60. A bullish MA cross following a brief consolidation indicates an acceleration in the upward momentum. A break above the psychological level of 130.00 would set 130.60 as the next target, clearing the path for a rally to 131.30. An overbought RSI may cause a temporary pullback. 129.20 from the previous supply zone has become a fresh support.

Quiet Start to New Year

Marc Chandler 03.01.2022 14:10

January 03, 2022 $USD, autos, Canada, China, Currency Movement, Inflation, jobs, Mexico, PMI, Trade Overview: The New Year begins slowly. Japan, mainland China, Australia, New Zealand, and the UK markets remain closed. While Hong Kong shares traded heavily, Taiwan, South Korea, and India moved higher. Led by consumer discretionary and staple sectors, Europe's Stoxx 600 is up about 0.6%. US futures are 0.4%-0.6% higher. European yields have drifted lower, with the periphery doing bettter than the core. The US 10-year yield will begin the local session at 1.51%. The dollar is mostly firmer, after weakening broadly at the end of last year. The Norwegian krone and New Zealand dollar are the most resilient, while the Canadian dollar is off nearly 0.3% to pare the year-end gains, followed by the euro, which is in the middle of its $1.1335-$1.1380 range. The greenback is holding above JPY115.00. Emerging market currencies are mixed but mostly softer. Higher than expected inflation is weighing on the Turkish lira. The South Korean won leads the other softer EM currencies. It is off about 0.25%. The South African rand (~0.7%) and Russian ruble (0.5%) lead the advancers. The JP Morgan Emerging Market Currency Index rose by about 2.5% in the last two weeks of 2021 and is slightly firmer today (~0.2%). Iron ore is higher for the third consecutive session and rallied more than 45% from the middle of November through Xmas, before falling 5.3% last week. Copper has a four-week 4.6% rally in tow but is slightly softer today. Gold is stalling near $1830, the (61.8%) retracement of its sell-off from $1880 mid-November high. Oil rallied for the last two weeks, with February WTI gaining about 6.2%. OPEC+ meets tomorrow and WTI is up a nearly 1.5% to push above $76. US natural gas gained slightly more than 1% in the past two weeks and is hovering around little changed level. Recall that diverted shipments from the US and Asia to Europe saw natural gas prices collapse from above 180 euros on December 21 to 65.5 euros at the end of last week. Asia Pacific China's property developers remain in the spotlight. Bloomberg estimates that the sector's debt servicing costs, including deferred wages, and maturing obligations are at $197 bln this month. Evergrande shares were suspended in Hong Kong. When the problems, bubbling below the surface for some time, emerged last September, global risk appetites were shaken, and many observers made comparisons to the Great Financial Crisis. However, so far, the problems seem localized and unlike the US and Europe, new lending has not frozen. The macro data highlights include China's Caixin PMI after the official one surprised on the upside. The preliminary PMIs for Australia and Japan steal the thunder from the final report. Japan's weekly MOF report on portfolio flows may be noteworthy. Foreign investors have been on a buying spree, buying the most Japanese bonds over the first three weeks of December in at least 20 years. The dollar has risen for the past four weeks against the Japanese yen. It closed the last two sessions slightly above JPY115.00 and remains above it today. Recall, last year's high, set in late November, was near JPY115.50. Today's high thus far is about JPY115.35. The market may be reluctant to push the dollar much higher before Tokyo returns. The Australian dollar advanced almost 2% in the second half of December. It is stalling near the (50%) retracement of its decline from around $0.7555 in late October, found close to $0.7275. Support is ahead of $0.7200. Thin trading on New Year's Eve saw the dollar plunge to its low for the year near CNY6.34 before settling slightly above CNY6.3560. Chinese officials have signaled their desire to avoid further yuan appreciation. If the divergence of monetary policy and higher fx reserve requirements are not sufficient, investors must be wary that other tools can be deployed. Europe The uptick in Germany's December manufacturing PMI was revised away, leaving it unchanged from November at 57.4. The flash estimate put it at 57.9. In contrast, the French reading was revised up to 55.6 from 54.9. This pared the decline from 55.9 in November. Italy's manufacturing PMI held in better than expected, slipping to 62.0 from 62.8, the post-Covid high. Spain, on the other hand, disappointed, with its manufacturing PMI falling to 56.2 from 57.1, its lowest since last February. The net result was the flash aggregate estimate of 58.0 was sustained (58.4 in November). The final Eurozone aggregate PMI is of passing interest. The main takeaway from the preliminary estimate continues to resonate: the economic activity was slowing. The flash estimate put the composite at 53.4 (down from 55.4), the lowest since March. It has risen once in the last five months. More notable for the market will be the preliminary estimate of December inflation. Consumer prices are expected to have stabilized after reaching 4.9% year-over-year in November (2.6% core). The Turkish government has tried to absorb the currency-risk that it has unleashed by forcing the central bank to cut key interest rates by 500 bp since mid-September. It managed to spur a powerful short-covering squeeze in the lira, which saw the dollar fall from around TRY18.36 on December 20 to nearly TRY10.25 on December 23. The greenback recovered to nearly TRY14.00 today, its sixth consecutive advance. Today's CPI report blew away expectations. Just in the month of December, Turkish consumer prices jumped nearly 13.6%. This sent the year-over-year rate to almost 36.1%. The core rate rose about 31.9% year-over-year. Short covering helped lifted the euro a little more than 1.1% over the past two weeks. It reached about $1.1385 on New Year's Eve. It has not traded above $1.14 since mid-February. Ahead of this week's two key economic reports (EMU CPI and US employment), the market may not have the conviction necessary to extend its year-end gains. Sterling gained about 2.1% in the last two weeks. It reached $1.3550 at the end of last week, its best level since mid-November. It is little changed today. The $1.3575 area corresponds to the (50%) retracement of its sell-off from $1.3835 area in late October. Initial support is seen in the $1.3455-$1.3465 area. America The US economic diary is jammed packed to begin the New Year. The highlight is the jobs report at the end of the week. The median forecast (Bloomberg survey) calls for a 400k increase after being disappointed with the 210k increase in November. The unemployment rate is expected to ease to 4.1% from 4.2%, and average earnings growth likely moderated. At the end of last year, an article in the Financial Times made two important observations. First, the uniqueness of the covid-impact renders seasonal adjustments suspect. The response rate was less than two-thirds, the lowest for the month of November in more than a decade. In November, the raw establishment survey showed a 778k gain in nonfarm payrolls, but the BLS adjustment cut a record 568k. Second, also complicating the data is the participation by businesses. The response rate was less than two-thirds, the lowest for the month of November in more than a decade. The monthly auto sales report seems under-appreciated as a broad economic indicator. The supply chain disruptions depressed auto production and, in turn, auto consumption (not just in the US). However, late in the year, there seemed to be some improvement. The median forecast (Bloomberg survey) December US auto sales (seasonally adjusted annual rate) at 13.1 mln, which would then be the most since July. Elsewhere, the preliminary goods trade balance, like the flash PMI, is the real new news. The final reading tends not to be very meaningful. In any event, the trade deficit will widen considerably. The goods deficit widened to a record $97.8 bln from $83.2 bln. Lastly, the FOMC minutes will be looked at especially for clues about the timing of the first hike. March? It is unreasonable to expect Canada to match the nearly 154k job increase reported for November. The median forecast is 25k. Canada also reports November trade figures. Canada's trade balance has steadily improved since March 2020, and the 12-month moving average through October was the highest in around six years. The swaps market has a little more than half of the first hike (25 bp) priced in at the January 26 Bank of Canada meeting. Mexico's data highlights include worker remittances, which could be the most important source of private capital inflows. Without meaningful fiscal support and in the face of tightening monetary policy, the economy lacks much momentum. The December CPI is expected to have edged higher toward 7.5%. Monetary policy is where the drama will be as the new central bank governor takes the reins (Rodriguez). The 50 bp hike in December lifted the overnight target to 5.5%. If the market is concerned about a policy mistake or possible erosion of its independence, you would not know it from looking at the peso. It was the strongest currency in the world in December, rising almost 4.5% against the dollar. The Canadian dollar rallied about 2% over the past two weeks. This saw the US dollar retrace half of its rally from the mid-October low below CAD1.23 that peaked on December 20 by CAD1.2965. That retracement came it near CAD1.2625. The momentum indicators are still headed down, but the greenback is recovering today. Initial resistance is seen around CAD1.2700. A move above CAD1.2750 warns that a low may be in place. The Mexican peso has rallied for the past five weeks, and despite the poor close at the end of the year, it is bid today. The US dollar was sold from near MXN20.55 to MXN20.45 in the European morning but has found a bid near midday. The low from New Year's Eve was set around MXN20.3070 and the 200-day moving average is closer to MXN20.27. Disclaimer

Dollar Eases

Marc Chandler 05.01.2022 13:19

January 05, 2022 $USD, auto sales, Currency Movement, Omicron, PMI, technology Overview: The tech sell-off in the US yesterday, ostensibly driven by higher rates, carried over into trading today. South Korea, China, and Hong Kong led the regional sell-off. News that China's zero Covid tolerance led to a lockdown of the city of Xian with a population of around 13 mln played on fears of more supply chain disruptions. A second city, Yuzhou, considerably smaller, has also been lockdown. Japan, India, and several smaller markets gain. European bourses, where tech is less prominent have edged higher and the Stoxx 600 is extending its gain for the third consecutive session. US futures are softer. Asia and most European bonds yields have risen today, while the US 10-year is steady around 1.64%. Of note, with Italian politics rising as an issue ahead of the presidential contest later this month, maybe helping lift the 10-year BTP to new six-month highs near 1.22%. The US dollar is seeing its recent gains trimmed against the major currencies. The Japanese yen is recovering a little after falling to five-year lows yesterday. The Canadian dollar is the laggard today, amid a sell-off in its bonds. The emerging market currency complex is mixed, and the JP Morgan EM FX index is recouping about half of yesterday's 0.35% loss. Gold is firm but remains within Monday's range (~$1798.50-$1832). Among the industrial metals we monitor, iron ore bounced back after yesterday's minor loss and is at its best level since Xmas eve. Copper is being turned back after yesterday's rally stalled near the $448 cap. Crude oil is consolidating yesterday's gain and February WTI is near $77.00. US LNG firm but within the $3.50-$4.00 range, while European (Dutch) is extending yesterday's dramatic gain (31.6%). Asia Pacific While China has moved quickly to impose lockdowns where cases of the virus appear, the tech sector is off to a poor start. The Heng Seng Tech Index fell 4.6% today, the most since July, and the third consecutive drop. Tencent is reducing its investments, and this took a toll on companies it backed. Some link Tencent decision to Beijing's push against anti-competitive practices. The NASDAQ Golden Dragon Index, which tracks Chinese lists companies fell 4.3% yesterday. The tech sell-off was also clear in the US where the NASDAQ shed 1.3%. Japan's "Mothers" gauge weighted toward small and medium-sized software and technology companies fell 5% to its lowest level since May 2020. In the last hours of trading, after HK tightened social restrictions, the equity loss intensified. Japan reported that December auto sales were 10.2% lower than a year ago. Yesterday, the US reported disappointing December auto sales. Auto sales were expected to have risen to their best level since August but instead fell to a 12.44 mln unit annual pace. It was the lowest since September and reflects a 23.6% decline from December 2020. Last year, US auto sales averaged 14.93 mln a month compared with 14.41 mln in 2020 and 16.91 mln in 2019. Although supply is argued to be a bigger problem than demand, some producers, like GM, have reported a substantial rebuilding of inventories. The dollar closed above JPY116.00 yesterday but has failed to sustain the upside momentum. It peaked near JPY116.35 and is approaching support at the previous resistance around JPY115.50. A break of JPY115.00, which seems unlikely ahead of the US jobs data on Friday, would lend credence to the idea that it was a false breakout. The Australian dollar is firm near $0.7250 after recovering from the dip below $0.7200. Still, it needs to resurface above $0.7275-$0.7280 to be notable. We suspect the Aussie will pullback in North America and see initial support around $0.7220. Outside of the dramatic year-end session, the Chinese yuan continues to trade quietly in a well-worn range. The dollar continues to trade mostly between CNY6.3660 and CNY6.3830. The PBOC set the dollar's reference rate at CNY6.3779. The (Bloomberg) survey found a median expectation for CNY6.3773. Note that offshore yuan (CNH) swaps/forward points are at their lowest level since April 2020 amid reports that overseas branches of state-owned banks are continuing to lend out CNH. Lastly, we note that the China Securities Journal plays up the possibility that the PBOC eases policy ahead of the Spring Festival holiday (January 31). Europe The main economic news from the eurozone today is the final reading of the December service and composite PMI. The takeaway is that it is a little softer than the preliminary estimate. On the aggregate level, the service PMI eased to 53.1 from 53.3 flash estimate and 55.9 in November. The composite eased from 55.4 in November to 53.4 preliminary estimate and 53.3 final. It is the lowest since March and is the fourth decline in five months. While the German services PMI was revised higher, it remains below 50 boom/bust (48.7) and this coupled with the weakness in manufacturing saw the composite revised to 49.9 from 50.0 initially and 52.2 in November. It is the weakest composite reading since June 2020. France's service PMI slipped to 57.0 from the 57.1 flash reading and 57.4 in November. The composite was revised higher to 55.8 from 55.6. It stood at 56.1 previously. Italy and Spain disappointed with readings of both the service and composite below expectations. The Italian composite stands at 54.7 down from 57.6. Spain's composite is at 55.4 from 57.6 in November. Intervention by the Swiss National Bank draws attention as the euro traded at six-year lows at the end of last year. Sight deposits rose by CHF3.37 bln in December after CHF2.27 bln and CHF2.57 bln in November and October, respectively. Overall, sight deposits rose by CHF18.85 bln in 2021 after surging CHF119.3 bln in 2020. Denmark also anchors its monetary policy in the exchange rate peg to the euro. Its central bank sold DKK47 bln (~$7.1 bln) in December to defend the peg. It was the largest intervention in seven years. Although inflation is running a little below 4%, there is some speculation that the Danish central bank may have to cut rates as its next defense of the peg. The euro is trading inside yesterday's (~$1.1270-$1.1320) range. It is difficult for bulls or bears to find much to like with it hovering around the middle of the two-cent range that has confined it for nearly two months. The 480 mln euro option at $1.1290 that expires today has likely been neutralized, but there are options at $1.1275 for 1.3 bln euros that expires tomorrow that may be in play still. Sterling is steady at the upper end of yesterday's range when it briefly poked above $1.3555. It is the highest it has been since November 10. An option for GBP375 mln at $1.3505 expires tomorrow. Initial support is seen near $1.3520, and a break could test support in the $1.3480-$1.3500 area. America ADP 's private sector jobs estimate is the early feature in the US today. The median estimate (Bloomberg survey) is for an increase of 410k after 534k in November. The final PMI will likely draw little attention. The FOMC minutes from last month's meeting, at which officials announced the acceleration of tapering will be looked upon for insight into the Fed's balance sheet and any signal that it may allow maturing issues to roll-off soon. Besides the rate hikes, for which the market has priced in three this year, the balance sheet is quickly emerging as the new focus. Also, on tap today is the EIA inventory data. The API reportedly showed a large rise in gasoline inventories but another drop (6.4 mln barrels) in crude stocks. Canada's build permits are not typically a market mover. Tomorrow it reports the November trade balance, and the highlight is Friday's jobs data. It is difficult to envision a report as strong as November’s nearly 154k increase. Proportionately, it would be as if the US nonfarm payrolls rose by around 1.7 mln. Mexico reports December domestic auto sales. In November, its auto sales were off about 13.5% year-over-year. The highlight of the week is Friday's CPI figures. The year-over-year pace is expected to have edged up from 7.37% in November. The US dollar is trading inside yesterday's range against the Canadian dollar (~CAD1.2665-CAD1.2765), which was inside Monday's range (~CAD1.2630-CAD1.2780). It is trading around CAD1.2720 near midday in London. The intraday technical indicators seem to favor a retest of the greenback's highs. The US dollar's performance against the Mexican peso is similar. It is inside yesterday's range, which was inside Monday's range (~MXN20.41-MXN20.65). The US dollar looks soft and could test the December 31 low near MXN20.33. The 200-day moving average is near MXN20.27 and the greenback has not traded below it in a little more than two months. Disclaimer

Intraday Market Analysis – USD Consolidates

John Benjamin 11.01.2022 08:57

AUDUSD attempts reboundThe Australian dollar bounces back over strong retail sales in November. The pair saw bids near a previous trough (0.7130).The RSI’s double-dip into the oversold area attracted some traders in taking up the bargain. A bullish RSI divergence suggests a deceleration in the downward momentum. And a jump above 0.7180 could be the first step towards a bounce.The Aussie may surge to the daily resistance at 0.7360 if buyers succeed in lifting offers around 0.7270. Otherwise, the price could test the critical floor at 0.7080.USDJPY tests supportThe Japanese yen rose as risk appetite fades across markets.A bullish MA cross on the daily chart indicates that the dollar’s rally gained traction. However, an overbought RSI means that a pullback could be an opportunity for the bulls to buy dips.The dollar is testing the psychological level of 115.00, the origin of the rally above the November peak (115.50). An oversold RSI has brought in some buying interest. A bearish breakout could trigger a correction to 114.30. Then, the bulls will need to reclaim 115.90 in order to resume the uptrend.US 30 continues to retreatThe Dow Jones tumbled as US Treasury yields hit a two-year high on hike bets.A bearish RSI divergence foreshadowed the current sell-off. A drop below 36300 prompted leveraged positions to close out, driving up volatility as short-term sentiment deteriorated. Rebounds could be opportunities for the bears to sell into strength.35700 is an area of interest, as it lies in a former supply zone and along the 30-day moving average. 35200 would be a second layer of support, while 36400 is the immediate resistance.

USDJPY Chart Looks Alike A Stable One, GBPUSD Resembles A Hillock

John Benjamin 19.01.2022 09:01

GBPUSD falls into correction The sterling fell back after a slowdown in Britain’s wage growth in November. Sentiment favors the pound after it rallied above the daily resistance at 1.3700. However, an overbought RSI has cut back buyers’ appetite. A break below 1.3630 has prompted some traders to take profit, driving down the price. As the RSI dips into the oversold zone, 1.3570 is the next support. A bearish breakout would send the pair to 1.3480 which sits on the 30-day moving average. 1.3660 is the immediate resistance when a rebound takes shape. USDJPY struggles to bounce The yen softened after the Bank of Japan signaled no shift in its ultra-loose monetary policy. The US dollar bounced off the critical floor at 113.50 from the daily chart. A bullish RSI divergence revealed a deceleration in the downward impetus. The indicator’s oversold situation also attracted a number of bargain hunters. A break above 114.70 suggests a strong interest in keeping the correction in check. 115.50 from the latest sell-off is a major hurdle and its breach could extend the rally to the recent peak at 116.30. SPX 500 to test daily support The S&P 500 extended losses over rising rate worries. The fall below 4640 invalidates the latest rebound and indicates that sentiment is still downbeat. Below the psychological level of 4600, 4540 is a key support near last December’s lows on the daily chart. A bearish breakout would trigger a deeper correction towards 4400, the origin of the October rally. An oversold RSI may cause a limited rebound. Nonetheless, the bulls need to clear offers around 4675 and then 4745 to gain momentum.

XAUUSD, USDJPY And AUDJPY Are Mentioned In Jason Sen's Video Analysis

Jason Sen 18.01.2022 13:39

AUDJPY longs work if you are still holding them hitting target & only resistance for today at 8280/8300. Therefore a break above 8320 is a buy signal targeting 8365/75. A buying opportunity again at 8220/10. Stop below 8190. A break below 8190 is a sell signal targeting 8160/55, perhaps as far as 8100/8090. EURJPY straight through minor resistance at 130.60/70 to the next target of 130.95/99 with a test of trend line resistance at 131.20/30 now likely. Shorts need stops above 131.45. A break higher is a buy signal - try to jump in and hold long in to the end of the week. A buying opportunity again at 130.10/129.90 with stop below 129.80. EURUSD longs at the buying opportunity at 1.1400/1.1380 target strong resistance at 1.1455/65. This held quite well on the last test. Further gains are likely eventually towards 1.1500/10 & 1.1560/70 A buying opportunity at 1.1400/1.1380 - stop below 1.1365. If this trade fails, I fear we will remain stuck in a sideways trend. GBPUSD shorts at the 200 day moving average at 1.3735/40 worked in severely overbought conditions to test support at 1.3670/60. Further losses today meet strong support at 1.3620/00 with a good chance of a low for the day. Longs need stops below 1.3585. Next target & support at 1.3535/25. 200 day moving average resistance again at 1.3735/40 Shorts need stops above 1.3755 this week. A break higher is the next buy signal targeting 1.3780 & 1.3805/15. Expect some resistance at the October high at 1.3830/35. Emini S&P got close to a test of the neck line at 4590/80 on Friday but bounced from 4606. If tested this week, longs need stops below 4570. A break lower is a significant sell signal. Minor resistance at 4670/80 & again at 4695/4705. Further gains can retest last week's high of 4735/40. Next target is 4750/60. Above 4765 can retest the all time high at 4800/08. Nasdaq perhaps building a minor negative trend in January perhaps. Holding quite important resistance at 15700/750 is negative for today initially targeting 15550/500. If we continue lower look for 15350/320 before a retest of last week's low at 15170/150. Further losses test the 200 day moving average at 15000/14950. First resistance at 15700/750 - shorts need stops above 15800. A break higher targets more minor resistance at 16000/16100. A break above here is a buy signal & we could even retest the all time high. Emini Dow Jones I am waiting for a clear pattern of trend to develop. For now, minor resistance at 35800/850 tested as I write over night but if we continue higher look for a test of minor resistance at 36000/36050. Further gains can target 36300/350. Holding minor resistance at 35800/850 can target 35750/700 before a retest of this week's low at 35540/520. A break lower this week targets support at the 100 day moving average at 35350/330. To subscribe to this report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk No representation or warranty is made as to the accuracy or completeness of this information and opinions expressed may be subject to change without notice. Estimates and projections set forth herein are based on assumptions that may not be correct or otherwise realised. All reports and information are designed for information purposes only and neither the information contained herein nor any opinion expressed is deemed to constitute an offer or invitation to make an offer, to buy or sell any security or any option, futures or other related derivatives.

COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

Invest Macro 24.01.2022 11:36

USD To JPY Chart - What an Upswing! SPX Doesn't Go Really High

John Benjamin 28.01.2022 08:39

USDJPY tests major resistance The Japanese yen inched higher after January’s Tokyo CPI beat expectations. The US dollar found support in the daily demand zone around 113.50. And that is a sign that upbeat sentiment in the medium-term remains intact. A close above the psychological level of 115.00 attracted momentum traders and sped up the rebound. 115.60 at the origin of the January liquidation is key resistance. In fact, its breach could put the uptrend back on track. The RSI’s overextension may cause a limited pullback with 114.50 as the closest support. USOIL breaks to new high Oil climbed amid fears of disruption as tensions between Russia and the West grew. After a short-lived pause, WTI crude saw bids near a previous low at 82.00 which lies on the 20-day moving average. A break above the January peak at 87.80 indicates solid interest in keeping the rally in shape. As the bulls’ run continued, more trend-followers would push the price to 89.00. An overbought RSI temporarily restrained the fever, and buyers could see a pullback towards 85.00 as an opportunity. SPX 500 struggles for support Upcoming US rate hike still weighs on equity markets. A tentative break below last October’s low (4300) has put the S&P 500 on the defense. A bearish MA cross on the daily chart shows that sentiment could be deteriorating as price action struggles to stabilize. An oversold RSI led to a limited rebound as intraday sellers took profit. Nonetheless, buyers should be wary of catching a falling knife, leaving the index vulnerable to another sell-off if it drops below 4230. 4490 is the first resistance to clear to initiate a recovery.

COT Forex Speculators reduce their US Dollar bullish bets to 7-week low

Invest Macro 05.02.2022 20:24

COT Forex Speculators reduce their US Dollar bullish bets to 7-week low - 06.02.2022

Invest Macro 05.02.2022 20:24

COT Currency Speculator’s bullish bets for Brazilian Real jump by most on record - 12.02.2022

Invest Macro 12.02.2022 18:28

COT Currency Speculators raise their Euro Futures bullish bets to 26-week high

Invest Macro 19.02.2022 18:38

GBPUSD Chart - Green Candles On The Right Hand Side, USDCAD Moved Down A Little

John Benjamin 21.02.2022 08:53

GBPUSD tests resistance The sterling edged higher after January’s retail sales beat expectations. The recent pause has been an opportunity for the bulls to accumulate. A break above 1.3640 would signal solid buying after previous failed attempts. The daily resistance at 1.3750 would be the next hurdle. Its breach could trigger a broader reversal in the weeks to come. 1.3560 is the immediate support. And 1.3490 at the lower end of the horizontal consolidation is the second line of defense in case the pair needs to attract more support. USDCAD awaits breakout The Canadian dollar tanked after disappointing retail sales in December. The US counterpart is still struggling below the supply zone around 1.2800. A close above this daily resistance could propel the pair to last December’s high at 1.2950, a prerequisite for a bullish continuation in the medium-term. The current sideways action is a sign of indecision. 1.2640 is the lower boundary of the recent consolidation range. A bearish breakout would bring the greenback to a previous low at 1.2560. EURJPY struggles for support The Japanese yen rallies amid growing risk aversion across the board. The euro continues to shed gains from the surge earlier this month. A fall below 131.90 triggered profit-taking, and the latest rally came out to be a dead cat bounce after it was capped by this support-turned-resistance. A break below 130.40 (which sits over the 30-day moving average) shows fragility in market sentiment and would cause another round of sell-off. 129.20 at the base of the bullish impetus would be the next support.

Positions of large speculators according to the COT report as at 15/2/2022

Purple Trading 22.02.2022 11:48

Positions of large speculators according to the COT report as at 22/2/2022

Purple Trading 02.03.2022 21:33

Intraday Market Analysis – USD Consolidates Gains - 04.03.2022

John Benjamin 04.03.2022 09:19

USDJPY tests supply areaThe Japanese yen stalled after an increase in January’s unemployment rate.The pair’s rally above the supply zone around 115.80 has put the US dollar back on track. The general direction remains up despite its choppiness. 114.40 has proved to be solid support and kept the bulls in the game.A close above 115.80 would extend the rally to the double top (116.30), a major resistance on the daily chart. Meanwhile, an overbought RSI caused a limited pullback, with 115.10 as fresh support.NZDUSD breaks resistanceThe New Zealand dollar recovers amid commodity price rallies.After the pair found support near last September’s lows (0.6530), a bullish MA cross on the daily chart suggests that sentiment could be turning around. A bullish breakout above the recent high (0.6810) would further boost buyers’ confidence and lift offers to January’s high at 0.6890.On the downside, 0.6730 is the first support if buyers struggle to gather more interest. 0.6675 would be a second layer to keep the current rebound intact.UK 100 lacks supportThe FTSE 100 slipped after the second round of talks between Russia and Ukraine ended without much result.The index met stiff selling pressure at 7560 then fell below the critical floor at 7170. Increasingly bearish sentiment triggered a new round of sell-off to the psychological level of 7000 from last November.A deeper correction would lead to a retest of 6850, dampening the market mood in the medium-term. On the upside, the bulls must clear 7300 and 7450 to reclaim control of the direction.

Large Currency Speculators raise their Brazilian Real bullish bets to Record High

Invest Macro 05.03.2022 20:47

Positions of large speculators according to the COT report as at 1/3/2022

Purple Trading 07.03.2022 21:35

Intraday Market Analysis – USD Consolidates Gains - 09.03.2022

John Benjamin 09.03.2022 08:47

USDJPY breaks higherThe Japanese yen softened after weaker-than-expected GDP in Q4. Despite choppiness in recent price action, confidence in the greenback remains high.A failed attempt at the supply zone (115.80) suggests a lack of momentum, but a swift bounce off 114.65 reveals strong enough buying interest.A bullish breakout would lead to the double top at 116.35. Its breach could end the two-month-long consolidation and trigger an extended rally towards January 2017’s highs around 118.00. 115.40 is fresh support.AUDUSD seeks supportThe Australian dollar stalls as commodity prices consolidate. The rally above 0.7310, a major supply area, has weakened selling pressure and put the pair on a bullish reversal course.The Aussie’s parabolic ascent and an overbought RSI prompted short-term buyers to take profit. As the RSI swings back into the oversold zone, the bulls may see the current fallback as an opportunity to stake in.0.7380 is a fresh resistance and 0.7250 is the immediate support. Further below 0.7170 is a critical level to keep the rebound valid.UK 100 sees limited bounceThe FTSE 100 struggles as the UK plans to ban Russian energy imports.On the daily chart, a break below the demand zone (6850) wiped out 11-months worth of gains and signaled a strong bearish bias. The RSI’s oversold situation may cause a temporary rebound, but a bearish MA cross could attract more selling interest.The liquidation is yet to end as medium-term buyers scramble for the exit. 7200 is a fresh resistance and 7450 is a major supply zone. A drop below 6800 may lead to 6500.

COT Currency Speculators boost Mexican Peso bullish bets to 104-week high

Invest Macro 12.03.2022 22:20

Positions of large speculators according to the COT report as at 8/3/2022

Purple Trading 14.03.2022 16:01

GBPUSD Almost Full Recovered After BoE's Decision, USDJPY Doesn't Fluctuate Significantly, S&P 500 (SPX) Is Not So Far From 4400.00

Jing Ren 18.03.2022 07:58

GBPUSD attempts to rebound The British pound stalled after the BOE failed to secure a unanimous vote for higher rates. A bullish RSI divergence suggests exhaustion in the sell-off, and combined with the indicator’s oversold condition on the daily chart, may attract buying interest. A tentative break above 1.3190 led some sellers to take profit. The bulls will need to push above the 1.3250 next to the 20-day moving average to get a foothold. On the downside, the psychological level of 1.3000 is a critical floor to keep the current rebound valid. USDJPY takes a breather The Japanese yen struggles as the BOJ pledges to stick with stimulus. Sentiment turned extremely bullish after the pair rallied above December 2016’s high at 118.60. The RSI went overbought on both hourly and daily charts, and the overextension could refrain buyers from chasing bids. Trend followers may be waiting to buy at pullbacks. 117.70 is the first level to gauge buying interest and 116.80 is the second line of support. A rebound above 119.00 would extend gains beyond the psychological level of 120.00. SPX 500 tests resistance The S&P 500 bounced higher after Russia averted a bond default. Price action has stabilized above last June’s lows around 4140 where a triple bottom indicates a strong interest in keeping the index afloat. A previous attempt above 4350 forced sellers to cover but hit resistance at 4420. A bullish close above this key level on the daily chart could trigger a runaway rally. 4590 would be the next target when sentiment turns around. Otherwise, a lack of conviction from the buy-side would send the index to test 4250.

Large Forex Speculators boosted their bets of Commodity Currencies this week

Invest Macro 19.03.2022 17:45

Bank of Japan will not keep the yen from falling

Alex Kuptsikevich 22.03.2022 14:53

The Japanese yen has fallen for the third week in a row, and the amplitude of this decline has become rather scary on Tuesday. It seems yen traders' stop-lines have been blown as the markets have become increasingly aware of the monetary authorities' reaction to inflation and the outlook for the balance of payments. In addition, over the past three weeks, we have seen a careful return of investors to risky assets, which is causing the yen to sell-off.USDJPY is trading above 120.70, which was last seen six years ago, having gained more than 5% since March 7th, while GBPJPY has soared 6% and EURJPY is up 7%. Against the yen are new comments from the Bank of Japan, which shows no sign of a change in its monetary policy, while central banks in other parts of the world issue increasingly hawkish statements.The pressure on the yen is exacerbated by its dependence on oil and metal imports, which widens the trade deficit of the historically export-oriented country. The value of exports in February 2022 was 18% higher than in 2020, while imports soared by 49%. Booming prices for energy, metals, and agricultural products set Japan up for a further plunge into trade deficits.In former years, sustained surpluses helped the yen maintain its strength or even strengthen during periods of market turbulence, ignoring anaemic economic growth and rising government debt to GDP levels.The resulting crisis in commodity prices will force central banks to unambiguously choose their policy towards government bonds on the balance sheet and the general level of government debt. While the USA and Europe are tightening their rhetoric on interest rates, Japan is deliberately lagging. At the same time, the government maintains an apparent calm, pointing out that there are both disadvantages and advantages of a weak exchange rate. The yen problem is not bothering the authorities right now.We should wait and see if investor confidence in the Japanese currency is undermined. Losing control of the exchange rate would risk an escalation of selling into Japanese government debt more than 250% of GDP. The only realistic soft solution is to deflate the national debt by accelerating inflation, but only if the central bank remains a big buyer to prevent an appreciation of the national debt. Such a policy would lead to sustained pressure on the yen.

US Dollar (USD) Amid Fed's Rhetoric And Tomorrow’s Powell Speech. EUR/USD, GBP/USD And USD/JPY In Focus

Mikołaj Marcinowski 22.03.2022 18:48

The last raise of Fed’s interest rate seems to be tip of the iceberg as hawkish rhetoric is vivid in following Jerome Powell’s testimonies. Inflation is still here and according to Investing.com Goldman Sachs predicts that Fed’s next moves are 50bps raises in the two following months. As we’re waiting for tomorrows midday (GMT) which is the time Fed Chairman speaks, let’s review how have most traded, dollar-based pairs traded over last 24 hours. EUR/USD Morning declines appear to be only temporary, USD has weakened in the afternoon and slightly decreased as the pair gained 0.1% until now. GBP/USD The pair has gained ca. 0.6% and can be threated as a ‘trailer’ of the dollar strengthening later this week. USD/JPY After today’s news about Russian-Japanese end of negotiations considering official truce of World War II (!) and ongoing hawkish Fed’s rhetoric Japanese yen has weakened and the pair has gained ca. 1.1% USD/PLN Exotic pair shows an interesting performance once again after an increase of over 0.4% USDPLN has decreased by over 0.5% as the pair seems to be affected by many factors as the country lies close to Ukraine and had its interest rate increased two weeks ago. Source/Data: Investing.com, TradingView.com Charts: Courtesy of TradingView.com

Positions of large speculators according to the COT report as at 15/3/2022

Purple Trading 23.03.2022 19:52

Falling Japanese yen suggests a changing world order

Alex Kuptsikevich 24.03.2022 15:23

The collapse of the Japanese yen continues, and so far, there are no signs of a trend reversal. The rise in the Yen is often linked to capital flight from risky assets, and the weakening is a sign of increased demand for risky assets. But that explanation hardly fits with what is happening now. We likely see the start of a significant reassessment by the markets of Japan's position in the financial system. In a worst-case scenario, this may turn into a debt crisis in the Land of the Rising Sun and be an even bigger disaster for financial markets than the eurozone debt crisis of a decade ago.The starting point for the weakening of the Yen was at the start of February. At that time, equities were in demand as a haven for capital to maintain the purchasing power of investments. The flow into equities was interrupted by the war in Ukraine but accelerated in the last couple of weeks on signs that these events have hyped up the processes that were taking place before. And these processes are now most visible in the dynamics of the Japanese yen against those currencies where the central bank can respond adequately to inflation.Since the start of February, the USDJPY has risen by 6.5%, and almost all of this increase has taken place since March 7th, taking the pair back to levels last seen at the end of 2015. A much more impressive rally is taking place in the Aussie and Kiwi against the Yen. Since the start of February, they have soared by more than 12%. So far this month, the strengthening is the largest in 11 years for AUDJPY and in more than 12 years for NZDJPY.The interest rate differential game, which was so beloved by traders in Japan before the global financial crisis, has found a second life. Australia and New Zealand have the economic potential to raise interest rates, as they are experiencing a surge in exports due to the boom in their export prices. However, the situation in Japan looks considerably more alarming, as Japan's debt-to-GDP ratio has risen by 77 percentage points to 170% since the financial crisis. Permanent QE from the Bank of Japan has kept government debt costs down but doesn't solve the problem.In the last decade, Japan has turned into a net commodity importer due to its growing dependence on energy and metals and increasing competition from China and Korea. The exchange rate should act as a natural mechanism to stabilise trade in this situation.But this adjustment is difficult for debt-laden Japan because selling currency would de facto mean selling bonds denominated in that currency. Under these circumstances, the Bank of Japan will either have to openly accept that it will finance the government (i.e. increase purchases despite inflation) or soften QE. The first option risks triggering a historic revaluation of the Yen. The second option would deal a blow to the economy and finances by raising questions about whether Japan can service its debt.

Operation in Ukraine leads to German Business climate collapse

Alex Kuptsikevich 25.03.2022 12:20

According to fresh Ifo estimates, business sentiment in Germany fell in March to its lowest level since January 2021. The business climate index fell from 98.5 to 90.8 following a collapse in business expectations amid war in Ukraine and the associated surge in energy and several other commodity prices.The drop in economic expectations was comparable to what we saw exactly two years ago at the start of the pandemic. New sentiment data may prove to be the first indication of the depth of the economic losses in the next quarter or two from ongoing events. They could wipe out as much as 1% of GDP in the outgoing quarter and another 2% in the next.However, the current scenario is already priced in the financial markets. The Eurozone stock indices, which often outperform the economic cycle, are now more than 15% above their lows of March 7th. The same can be said for the euro, which is firmly based around USD 1.10, which has been stable for the last three months against the pound and strengthened by more than 8% against the Japanese yen.

Large Currency Speculators sharply cut back on Canadian dollar bets

Invest Macro 27.03.2022 13:29

Euro (EUR), Japanese Yen And Dollar (USD) Interactions. Dollar Index (DXY) Looks Quite Fine. A Year Full Of Fed Decisions...

Alex Kuptsikevich 28.03.2022 12:44

There has been a lot of talk lately about the decline of the US dollar's reserve status. However, investors and traders should separate long-term trends from short-term market impulses. Reserve fund managers often prefer to refrain from active selling so as not to cause unnecessary market turbulence, so all reserve trends are stretched out over decades. As long as there is no real threat to the existence of the dollar and the solvency of the US government, managers will avoid making active moves to sell dollar assets. And all the revolutionary changes, such as switching to national currencies, will only result in CBs buying fewer new dollars. But it has little effect on the exchange rate. Right now, we are seeing the opposite picture, as the main competitors are under pressure. Investors are getting rid of the Japanese yen as the Bank of Japan accelerates its currency printing to buy bonds out of the market to stem rising yields. The local government is overburdened with debt, and the economy is still stalling. The only market solution is a devaluation of the yen, which would make exports from Japan more competitive and boost domestic spending. The single currency is suffering from a spike in energy prices and economic problems related to the war in Ukraine. Trading below 1.1000, the EURUSD pair is now where it was heading for the last six months before the pandemic. The medium-term outlook for the dollar is largely influenced by the extent to which the Fed will be able to implement policy tightening. More accurately, how Fed policy compares with the policy of the Bank of Japan, the ECB, or another major central bank. The Fed is clearly acting with greater amplitude, setting itself up for 7 rate hikes this year, which is far more than one would expect from Japan or the eurozone. Moreover, the US remains much further away from the war in Ukraine in business and trade terms than its biggest competitors, which means it can continue to benefit from capital inflows as a haven.

Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

Intraday Market Analysis – JPY Struggles For Bids

Jing Ren 29.03.2022 08:40

USDJPY seeks support The Japanese yen recouped some losses after a drop in February’s unemployment rate. The pair surged to August 2015’s high and the psychological level of 125.00. An overwhelmingly overbought RSI may cause a pullback if short-term buyers start to unwind their bets. As the market mood stays upbeat, trend followers could be waiting to jump in at a discount. 122.20 is the closest level if the greenback needs to gather support. A break above the current resistance would propel the pair to new highs above 127.00. AUDUSD hits major resistance The Australian dollar stalls as caution prevails ahead of major economic data. The rally slowed down at last October’s peak at 0.7550. A combination of profit-taking and fresh selling weighs on the Aussie. The bulls may see a pullback as an opportunity to accumulate in hope of a new round of rally. 0.7400 from the latest bullish breakout would be key support should this happen. On the upside, an extended rally could propel the pair to last June’s highs around 0.7770 and pave the way for a reversal in the medium-term. US 100 to test major resistance Growth stocks rose amid a sell-off in the bond market. Short-term sentiment remains bullish after a series of higher lows which indicates sustained buying interest. The Nasdaq 100 is heading to the daily resistance at 15050. A bearish RSI divergence suggests a deceleration in the rally, foreshadowing a potential retracement. 14600 is the support and its breach may trigger a sell-off towards 14200 which sits at the base of the recent breakout. A close above the said hurdle may put the index back on track in the weeks to come.

Fed Expectations Amid Mixed Data: Wishful Thinking or Practical Pause?

Japanese Yen (JPY) Being Healed, Nikkei Has Added 11%, Wheat Has Decreased By Ca. 8%

Marc Chandler 30.03.2022 14:18

March 30, 2022 $USD, BOJ, China, Currency Movement, German, Inflation, Japan, Russia, Spain, Ukraine, Yield Curve Overview: A pullback in US yields yesterday and the Bank of Japan's stepped-up efforts to defend the Yield Curve Control policy helped extend the yen's recovery. This spurred profit-taking on Japanese stocks, where the Nikkei had rallied around 11% over the past two weeks. Hong Kong, China, and Taiwan led the regional advance. However, facing a surge in inflation (Spain and German states) and a jump in European natural gas prices (~9%) is snapping the Stoxx 600's three-day advance. US futures are trading with a heavier bias. The US 10-year yield has edged a little higher to 2.40%, while the two-year that briefly traded above the 10-year yield yesterday is off about four basis points. European benchmark yields are 3-6 bp higher. The greenback is trading lower against all of the major currencies, led by the yen's recovery. After poking above JPY125 to start the week, the dollar fell to around JPY121.30 today before steadying. The Canadian and Australian dollars are the laggards with minor gains. Among emerging market currencies, the Turkish lira is the notable exception, and is posting a modest decline. Gold appeared to post a bullish hammer pattern yesterday but there has not been much follow-through and the yellow metal is in around a $6 range on either side of $1922. May WTI is also in a narrow range--mostly $105-$107 today. Copper and iron ore are trading firmer. Wheat is still soft after losing around 8% over the past couple of sessions. Asia Pacific The Bank of Japan stepped-up its efforts to cap interest rates earlier today. It increased the amount of bonds it bought at its regular scheduled operation. It offered to buy JPY600 bln (instead of JPY450 bln) 3–5-year bond, and JPY725 bln (instead of JPY425 bln) of 5-10-year bonds, in addition to the pre-announced defense of the 0.25% cap on the 10-year bond. It did not increase the amount of longer-term bonds. Tomorrow, the BOJ is expected to announce next quarters asset purchase plans. Although BOJ Governor Kuroda, who met with Prime Minister Kishida earlier today, does not seem concerned about the yen's weakness, Finance Minister Suzuki seemed more cautious. He suggested continuing to check if the yen's weakness is harming the economy. For example, the weaker yen is aggravating the surge in energy prices, which Kishida was to cushion the blow to households and businesses. If intervention is best understood as an escalation ladder, as we suggest, then this might be seen as a low rung. Separately, Japan reported that retail sales fell by 0.8% in February, which was more than twice the decline expected by the median forecast in Bloomberg's survey. It also drove the year-over-year rate below zero (-0.8%) for the first time since last September. Beijing has offered some economic support for Shanghai, but the surge in Covid there, and lockdowns there and elsewhere, are seeing economists slash growth forecast and lift inflation projections. China's March PMI will be released tomorrow. A poor report is expected, and the risks are on the downside. Thus far, though, officials have used targeted measures and have not provided the overall economy with new support. The dollar did not trade for long above JPY125 on Monday, but it seems to have completed something and the greenback has traded down to JPY121.30 today. The (38.2%) retracement of this month's rally is around JPY121.10 and the next retracement (50%) is a little below JPY120. Month-end and fiscal-year end considerations may also be at work but is often used as a catch-all narrative. Note that reports suggested that Japanese retail accounts were beginning to buy yen toward the end of last week. The Australian dollar bounced off four-day lows slightly below $0.7460 yesterday and settled above $0.7500. It is firm today but below this year's high set Monday near $0.7540. It still feels like it is consolidating. The broad US dollar weakness was evident against the Chinese yuan today. It is trading nearly 0.25% lower, the most in about two weeks. The greenback is trading at a nine-day low near the 20-day moving average, slightly below CNY6.35. That is also around the middle of this month's range (~CNY6.3080-CNY6.3860). The PBOC set the dollar's reference rate at CNY6.3566. The median projection in Bloomberg's survey was CNY6.3560. Europe The common narrative now is that Putin initially anticipated a quick overwhelming victory over Ukraine and as it has stalled, he is falling back on Plan B. Plan B is to secure the territorial claims of the two separatist regions and later incorporate them into Russia. Russia is curtailing the use of Hryvnia in the occupied areas and introducing the rouble. This military objective has not been met. Turning Clausewitz on his head, the political negotiations are a continuation of the war by other means. Putin has already achieved a key strategic goal; Ukraine will foreswear joining NATO. One cannot help but wonder that if Zelenskiy accepted this more than a month ago, the course of events may have been different. The date for the next round of negotiations have not been set. In a war, the losing side is more anxious for negotiations by definition. After consolidating its forces and enlarging the field of control of the separatist regions, Russia can then be in a position to negotiate. This seems to be the key to the timeline that can lead to a sustainable cease-fire. The cost of rebuilding Ukraine, which had serious developmental challenges before the war, will fall to the EU, IMF, World Bank, and UN. A surge in eurozone inflation was expected, but the Spanish and German state figures are over the top. The market (Bloomberg median forecast) was for a strong 1.3% monthly increase in Spain, instead the national figure jumped 3%. The harmonized measure surged 3.9% this month and lifted the year-over-year rate to 9.8% from 7.6% in February. Details are sparse in the initial estimate, but the Economic Minister suggested that three-quarters of the rise was due to food and energy. Still, the core rate rose by 0.4% on the month. Most of the German states reporting CPI figures today showed a 2.6%-2.7% month-over-month increase in their CPI. The national and harmonized figures are due shortly. There seems to be upside risk to the expectations that the year-over-year rate of the harmonized measures (HICP) will accelerate to 6.8% from 5.5% in February. The aggregate preliminary estimate for the euro area is due Friday. The euro rallied yesterday on the hopes that the Russian invasion of Ukraine may be near the endgame and is extending the gains today amid further positioning squaring. We note that that the US premium over Germany on two-year money has reversed sharply lower. It peaked on Monday above 245 bp and is testing 230 bp today. The German two-year yield is up around seven basis points today and is again trying to secure a foothold above zero for the first time since 2014. Yesterday's attempt was rebuffed. The surging inflation will strengthen the hawks’ hands, many of whom see scope for two hikes this year that could bring the deposit rate to zero. The euro is trading at its best level since March 1, which was the last time it traded above $1.12. Its gains have now retraced a little more than half of this month's decline (~$1.1150). The next technical target is the $1.1200-$1.1230 area. Sterling is a laggard. It is trading inside yesterday's range (~$1.3050-$1.3160). There may be scope for additional gains, albeit marginal, as the intraday momentum indicators are stretched. We suspect the $1.3180-$1.3200 cap may suffice today. America The US 2-10-year yield curve briefly inverted yesterday before finishing around three basis points. It is drawing a great deal of attention, but like any statistic it needs to be placed in a context. Few believe the US is recession-bound. The median forecast in Bloomberg's survey has the US economy growing 3.5% this year and 2.3% next year. This is still above the Fed's estimates of the long-term growth trend (1.6%-2.2%.). The most pessimistic forecasts in Bloomberg's survey do have growth less than 1% this year or next. That said, there are those who are warning of a recession, including ourselves, and the yield curve did not enter the picture. Interest rates are not waiting for the Fed's meetings to increase, as the 93 bp increase in the 2-year yield this month. The halving of the deficit (as a percentage of GDP) this year still strikes us as an under-appreciated drag. The rise in energy and food prices cuts the purchasing power of households. US inflation expectations are not just a function of what the Fed is or is not doing. The correlation of the change in the 10-year breakeven (the difference between the yield of the inflation protected security and the conventional note) and oil (the front-month light sweet crude oil contact, WTI) over the past 30-days is nearly 0.65, the highest in seven months. The 60-day correlation is almost 0.55, a five month-high. The price of May WTI has risen by almost 25% ($20 a barrel) net since the US warned that a Russian attack could happen at any moment on February 11. OPEC+ meets tomorrow and there still seems little chance that it will boost output. Most of OPEC's spare capacity is in Saudi Arabia (~1.6 mln barrels a day) and the UAE (~1.3 mln barrels a day). Today's ADP private sector jobs estimate is the data highlight. We remind that it is not a particularly useful guide to the BLS estimate for the particular month, though it gets the larger trend fairly right. The median estimate for Friday's nonfarm payroll report has crept up in recent days to stand at 490k. The US also reports another revision to Q4 21 GDP. It may be left at 7.0%. With Q1 22 nearly over, the market will not be sensitive to Q4 data. The economy is expected to have slowed to around 1.0%-1.5% this year from 7% last. The Fed's Barkin and George speak today. While George is a voting member of the FOMC this year, Barkin, like Harker and Bostic, who spoke yesterday, do not. Mexico reports February unemployment today. It may have ticked up slightly. Canada's economic calendar is light, but there is much talk about Ontario's imposition of a 20% tax on foreign purchases and real estate in the province. The "speculation levy" is meant to slow the surge in house prices. Lastly, late yesterday Chile hiked its overnight target rate 150 bp to 7.0%. This was a bit less than expected and the central bank indicated that it may not need to make such big moves going forward. Latam countries hiked rates early and many aggressively, and ideas that the tightening cycles may end later this year appears to be encouraging flows into local bond markets. That said, the swaps market has about 300 bp of additional hikes over the next six months before a cut in rates toward the end of the year or early 2023. The US dollar is near the recent trough against the Canadian dollar (~CAD1.2465-CAD1.2475). Below there is the year's low around CAD1.2450. A break targets the CAD1.2400 area. However, the intraday momentum indicators suggest the greenback may bounce first in early North American activity and a retest of CAD1.2500-CAD1.2515 would not be surprising. Meanwhile, the greenback is slipping to new lows for the year against the Mexican peso (~MXN19.9120). The next notable chart support is closer to MXN19.85, a shelf from last September. Here, too, the intraday momentum indicators favor a US dollar bounce in the North American morning. Disclaimer

Currency Speculators continue Japanese Yen bearishness, push bearish bets to 20-week high

Invest Macro 02.04.2022 19:33

COT Currency Speculators boost Australian Dollar bets to best level in 37-weeks

Invest Macro 09.04.2022 20:09

Positions of large speculators according to the COT report as at 29/3/2022

Purple Trading 11.04.2022 06:40

Positions of large speculators according to the COT report as at 5/4/2022

Purple Trading 11.04.2022 22:12

CADJPY – Wait For The Trigger!CADJPY is approaching a strong weekly resistance and round number 100.0 so we will be looking for sell setups

Richard Nasr 12.04.2022 13:05

M30: CADJPY formed a valid trendline in red but it is not ready to go yet. Trigger => Waiting for a momentum candle close below the last low in gray to sell. Meanwhile, until the sell is activated, CADJPY would be overall bullish and can still trade higher. Good luck! All Strategies Are Good; If Managed Properly! ~Rich

EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

(US Dollar) USD/JPY (Japanese Yen) Hits 20-Year-Low!? Japanese Currency Is Quite Weak. What Will Bank Of Japan Do?

Conotoxia Comments 13.04.2022 15:50

The USD/JPY reaching 126 yen this morning means that the Japanese currency appears to be at its weakest against the US in nearly 20 years. The reason? The Bank of Japan's commitment to maintain ultra-loose monetary policy may contrast with the actions of the world's other major central banks, which appear to be normalizing monetary policy. Yen falls, bank doesn't intend to react Shunichi Suzuki, Japan's finance minister, declined to comment Tuesday on specific rates in currency markets. He said the government is keeping a close eye on the yen's trading and that excessive volatility in the exchange rate could have a negative impact on the economy and financial stability. The Bank of Japan has repeatedly intervened to keep bond yields near zero. Recently, however, Shunichi Suzuki has cooled hopes for any government intervention in the currency markets, saying the central bank does not deal with exchange rates. Since the beginning of the year, the yen appears to be the weakest among the world's major currencies and may be losing more than 8 percent to the USD. Since the beginning of April alone, JPY depreciation against the USD may have reached 3.5 percent. Learn more on Conotoxia.com Inflation 8.5 percent - rates are going up In the United States, after the inflation reading, which rose to 8.5 percent in March, the US dollar appears relatively strong, and the exchange rate of the main currency pair remains in the region of 1.08. The market may expect the Fed to decide on two consecutive interest rate hikes of 50 basis points in response to the rise in prices. Such a move is priced today with over 80 percent probability, and the next decision will come as early as May 4. Related article: ECB To Shock Markets In The Following Week!? US Dollar Rate Under Pressure As Well! Oil: demand in China falls, demand in USA rises Increased volatility may arise on the oil market. The futures contract for WTI crude oil rose to around $100 per barrel today, falling from the session high at $102. Data from China's customs office showed that crude imports into the world's largest crude consumer fell for the second month in a row. That's likely because further restrictions due to coronavirus have reduced demand. Japan, the world's third-largest oil consumer and importer, saw its biggest monthly drop in machinery orders in February in nearly two years. Fears persist that supplies could become even tighter because of the war in eastern Europe. OPEC has already warned that it will not be able to replace potential supply losses from Russia. At the same time, there could be strong demand for fuel in the U.S., where gasoline and distillate stocks fell by more than 5 million barrels last week. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

COT Currency Speculators drop their Japanese Yen bets to 183-week low

Invest Macro 16.04.2022 22:07

Greenback Skyrockets! Record-Breaking US Dollar (USD)!? Is It Possible For Dollar Index (DXY) To Reach 112 As In Early 2000s? Fed Decision Incoming!

Alex Kuptsikevich 19.04.2022 10:34

The dollar index passed 101, which we last saw for just over a week at the height of the lockdowns. But history suggests that this rally has roughly passed the halfway point. DXY is unlikely to stop near 103-104 as it has done in the last six years Except for a brief period of stock market panic in March 2020, the last time the dollar was at this level against a basket of the six most popular currencies was in April 2017. The Dollar Index peaked in the 103-104 area in both cases and has not traded consistently higher for the past 20 years. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun The past two times, the dollar’s rise has been halted by the Fed, easing its policy or tone of commentary, as we have seen stock and commodity markets crash along with the USD rally. That is not the case this time, so the DXY is unlikely to stop near 103-104 as it has done in the last six years. For USDJPY, it could spike to 140, which has not been seen since 1998 We are now seeing a rise in the dollar, mainly on the Fed’s switch to monetary tightening mode. We saw that the last three such impulses of dollar growth, which started in 2014, 1998, and 1992 caused the DXY to appreciate by about 25%. For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy? Applying this pattern to the current case, we get that the dollar has exhausted just over half of its upside potential and could strengthen as much as 110-112 on the DXY in the next few months. For EURUSD, this scenario sets up a plunge towards parity, the lows of the last 20 years. For USDJPY, it could spike to 140, which has not been seen since 1998. And for GBPUSD, a return to 1.2000, the lows of the Brexit-fear era.

The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

What A Plunge Of Japanese Yen (JPY)! US Dollar (USD) Is Really Strong! Will Bank Of Japan (BoJ) Raise The Interest Rate? USDJPY And More In Eyes Of Saxo Bank

Saxo Bank 19.04.2022 12:06

Forex 2022-04-19 10:30 Summary: The Japanese yen has seen a relentless decline over the last few weeks, underpinned by a widening yield differential between the US and the Japanese government bonds. As verbal interventions from the Bank of Japan and Ministry of Finance fail to be heard, we are looking at a subtle policy shift with the aim to manage volatility, or a real physical intervention. The JPY continues to run away to the downside, with USDJPY surging above 128.00 for the first time since 2002. The next major chart point is the early 2002 high near at 135.00. AUDJPY has also surged to fresh record highs of 94.50+ as the AUD was slightly firmer following the hawkish tilt in RBA minutes. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun The big why? US 10-year treasury yields have notched a new cycle peak and will soon threaten the 3.00% level if they continue to rise, widening the policy divergence with the Bank of Japan (BOJ), that continues to stick with its yield-curve-control (YCC) policy that caps 10-year Japanese government bond yields (JGB) yields at 0.25%. Both the BOJ and the Japanese Ministry of Finance (MoF) have stepped up their verbal interventions against JPY volatility as recently as overnight, but these have hardly had any effect. The BOJ conducted unprecedented four-day purchase plan into the end of its financial year on March 31 after the JGB yields had hit 0.25%, a ceiling the central bank had made clear in March last year. This further highlighted their commitment to capping yields. While the BoJ may be concerned about the volatility and the pace of JPY decline, the Bank is unlikely to be worried about its direction. In fact, BOJ rhetoric repeatedly suggests that it sees JPY weakness as good news for the economy and exports as well as a factor helping to spur imported inflation pressures. This is especially important if we note that GDP is still well below pre-COVID levels and core inflation is negative. Is inflation a concern? The rise in JGB yields has little to do with expectations that Japanese inflation is moving sustainably higher. CPI is expected to increase above the BOJ’s 2% (from 0.9% currently) target, but the central bank expects the move to be temporary. Much of the gains in inflation are on the back of base effects and higher energy prices, and underlying price pressures remain muted. Stripping out energy prices and fresh food clearly shows that core inflation is still very benign at multiyear lows at -1% y/y. Will the YCC be tweaked? We are probably starting to see the limit of the yield curve control program, as sustained BOJ purchases could be a problem for a central bank that already owns around half of government issues. Would the BOJ go Australia’s way that clumsily abandoned its peg in November? That would need more domestic demand for JGBs which is unlikely to be achieved. Historically, BoJ has been open to adjusting targeting range of bond yields. It widened the range to +/-0.25% from +/-0.20% in March 2021, which was changed in July 2018 from +/-0.10% before that. The BoJ could tweak its YCC policy to target 10-year yields form +/-25bps to +/-30bps to give itself more flexibility and manage volatility. This move, if effected, will be communicated as a measure to manage the increased volatility in bond markets, to ensure that it is not taken as a sign of any shift in policy thinking. Article on Crypto: Hot Topic - NEAR Protocol! Terra (LUNA) has been seeing a consistent downward price trend, DAI Should Stay Close To $1 What to watch next? Our sense is that until a policy shift is spotted, or real intervention is mobilized, the market is content to continue driving the JPY lower. Ironically, in the past, the MoF has mobilised intervention in the yen in the direction of avoiding further JPY strength, not weakness. These interventions may not achieve more than temporary success if the underlying policy and market dynamics don’t shift (i.e., the BOJ sticking to its current policy while inflationary pressures and yields elsewhere continue higher). But the risk of tremendous two-way, intraday volatility should be appreciated. Japan’s Finance Minister Suzuki is heading for a bilateral meeting with the US and comments would be on watch. Next BOJ meeting is scheduled for April 27-28, but focus will still be tilted more towards the Fed’s May meeting where a 50bps rate hike is expected along with the start of quantitative tightening. The only other way could be to hope that the yen would find a floor, and wait for BoJ governor Kuroda’s tenure to end in April 2023. This may then be followed up with rate hikes.

Record-Breaking US Dollar To Japanese Yen (USD/JPY): Turbo-accelerated Dollar Index (DXY) Makes Not So Strony JPY Plunge Against The Greenback

Conotoxia Comments 19.04.2022 21:27

The dollar index reached 101 points on Tuesday for the first time since March 2020, which may be influenced by rising U.S. Treasury bond yields. Investors appear to be awaiting a series of half-point interest rate hikes from the Federal Reserve as it tries to rein in rising inflation. James Bullard, the St. Louis Fed chairman known for his hawkish views, said Monday that U.S. inflation is far too high, reiterating his case for raising interest rates to 3.5 percent by the end of the year. Will the Fed accelerate interest rate hikes? Last month, the Fed raised its target interest rate by 25 basis points, and forecasts released at the time indicated that interest rates could rise to 1.9 percent by the end of the year. Bullard's preferred path would require rate hikes of half a percentage point at all six remaining Fed meetings this year. James Bullard's remarks also included a statement that interest rates could rise by 75 basis points to accelerate the entire monetary tightening cycle. Article on Crypto: Binance Academy: Immutable X Token (IMX) - What Is It? IMX Explained. How To Buy IMX?| FXMAG.COM From a monetary policy perspective, there may be a strong divergence between the actions of the Fed and the rest of the central banks, including the Bank of Japan. This in turn may translate into currency rates, including the USD/JPY pair, which is trading at 128 yen per dollar. Weakness of the yen beneficial for exporters Since the beginning of the year, the yen may have lost 10 percent against the U.S. dollar, and more than 5 percent in April alone. In this situation, as calculated by Bloomberg, the yen seems to have lost the most against the dollar since 1971. A weak yen theoretically can help the Japanese economy raise the inflation rate due to more expensive imports of products from abroad. It can support Japanese manufacturers who export their goods, potentially making them more competitive. Thus, for Japan, the current situation may be quite comfortable. Only inflation getting out of control would be an undesirable phenomenon. SNB limits the appreciation of the Franc The USD/CHF exchange rate recorded 12-month highs as the pair may be under pressure from a strong dollar despite potential interventions by the Swiss Bank. Current deposits at the SNB increased by CHF 2.2 billion in the week ending April 8 from the previous week, following an increase of CHF 5.7 billion in the previous week. Article on Crypto: Altcoins Showing Promising Growth - Take a Look at Solana (SOL), POLKADOT (DOT) and SHIBA INU (SHIB-USD)| FXMAG.COM The rise in deposits is widely seen as an indicator of the central bank's foreign exchange interventions dictating the amount of credit added to the sight accounts of commercial banks that hold freshly created francs in exchange for foreign currency. At its last meeting, the SNB stressed that it would limit the appreciation of the franc, which is near a 7-year high against the euro. This level was reached after Russia's invasion of Ukraine. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The Swing Overview - Week 16 2022

Purple Trading 22.04.2022 15:00

The Swing Overview - Week 16 Jerome Powell confirmed that the Fed will be aggressive in fighting the inflation and confirmed tighter interest rate hikes starting in May. Equity indices fell strongly after this news. Inflation in the euro area reached a record high of 7.4% in March. Despite this news, the euro continued to weaken. The sell-off also continued in the Japanese yen, which is the weakest against the US dollar in last 20 years. The USD index strengthens along with US bond yields Fed chief Jerome Powell said on Thursday that the Fed could raise interest rates by 0.50% in May. The Fed could continue its aggressive pace of rate hikes in the coming months of this year. US 10-year bond yields have responded to this news by strengthening further and have already reached 2.94%. The US dollar has also benefited from this development and has already surpassed the value 100 and continues to move in an uptrend. Figure 1: US 10-year bond yields and USD index on the daily chart Earnings season is underway in equities Rising interest rates continue to weigh on equity indices, which gave back gains from the first half of the last week and weakened significantly on Thursday following the Fed’s information on the aggressive pace of interest rate hikes. In addition, the earnings season, which is in full swing, is weighing on index movements. For example, Netflix and Tesla reported results last week. While Netflix unpleasantly surprised by reducing the number of subscribers by 200,000 in 1Q 2022 and the company's shares fell by 35% in the wake of the news, Tesla, on the other hand, exceeded analysts' expectations and the stock gained more than 10% after the results were announced. Tesla has thus shown that it has been able to cope with the supply chain problems and higher subcontracting prices that are plaguing the entire automotive sector much better than its competitors. The decline in Netflix subscribers can be explained by people starting to save more in an environment of rising prices. Figure 2: The SP 500 on H4 and D1 chart The SP 500 index continues to undergo a downward correction, which is shown on the H4 chart. The price has reached the resistance level at 4,514-4,520. The price continues to move below the SMA 100 moving average (blue line) on the daily chart which indicates bearish sentiment. The nearest resistance according to the H4 chart is at 4,514 - 4,520. The next resistance is around 4,583 - 4,600. The support is at 4,360 - 4,365. The German DAX index The DAX is also undergoing a correction and the last candlestick on the daily chart is a bearish pin bar which suggests that the index could fall further. Figure 3: The German DAX index on H4 and daily chart This index is also below the SMA 100 on the daily chart, confirming the bearish sentiment. The price has reached a support according to the H4 chart, which is at 14,340 - 14,370. However, this is very likely to be overcome quickly. The next support is 13 910 - 14 000. The nearest resistance is 14 592 - 14 632. The DAX is affected by the French presidential election that is going to happen on Sunday April 24, 2022. According to the latest polls, Macron is leading over Le Pen and if the election turns out like this, it should not have a significant impact on the markets. However, if Marine Le Pen wins in a surprise victory, it can be very negative news for the French economy and would weigh on the DAX index as well. The euro remains in a downtrend The Fed's hawkish policy and the ECB's dovish rhetoric at its meeting on Thursday April 14, 2022, which showed that the ECB is not planning to raise rates in the short term, put further pressure on the European currency. The French presidential election and, of course, the ongoing war in Ukraine are also causing uncertainty. Figure 4: The EURUSD on the H4 and daily charts. The inflation data was reported last week, which came in at 7.4% on year-on-year basis. The previous month inflation was 5.9%. This rise in inflation caused the euro to strengthen briefly to the resistance level at 1.0930 - 1.0950. However, there was then a rapid decline from this level following the Fed's reports of a quick tightening in the economy. A support is at 1.0760 - 1.0780. The sell-off in the Japanese yen is not over The Japanese yen is also under pressure. The US dollar has already reached 20-year highs against the Japanese yen (USD/JPY) and it looks like the yen's weakening against the US dollar could continue. This is because the Bank of Japan has the most accommodative monetary policy of any major central bank and continues to support the economy while the Fed will aggressively tighten the economy. Thus, this fundamental suggests that a reversal in the USD/JPY pair should not happen anytime soon. Figure 5: The USDJPY on the monthly chart In terms of technical analysis, the USD/JPY price broke through the strong resistance band around the price of 126.00 seen on the monthly chart. The currency pair thus has room to grow further up to the resistance, which is in the area near 135 yens per dollar.

Currency Speculators raise their bullish bets for Canadian Dollar to 40-week high

Invest Macro 23.04.2022 20:49

Tuesday's EUR/USD Analysis: Chaotic Movements on 30M Chart

Will US Dollar (USD) Beat British Pound (GBP), Japanese Yen (JPY) And All Other Currencies? Bank Of Japan To Tackle The Weaking Of JPY?

Marc Chandler 27.04.2022 22:09

April 27, 2022 $USD, Australia, BOJ, Brazil, Currency Movement, Mexico, Russia Overview: Russia's decision to cut gas supplies to Poland and Bulgaria and the sharp sell-off in US equities yesterday casts a pall over the markets today. But not the dollar. The euro punched through $1.06 for the first time in five years and the greenback turned higher against the yen after falling to a seven-day low. The major bourses in the Asia Pacific region fell by more than 1% except China and Hong Kong. The Hang Seng eked out a minor gain, but China's CSI 300 rose nearly 3%. Europe's Stoxx 600 gapped lower but has recovered with the help of materials, consumer discretionary, and energy sectors. US futures are firm. Treasury yields have recovered part of yesterday’s decline, putting the 10-year near 2.77% and the 2-year close to 2.58%. European yields are mostly firmer and the core-periphery spreads are widening. In the foreign exchange market, the greenback is mixed. The Antipodeans and Scandis are firm, especially the Australian dollar, after the higher-than-expected Q1 CPI. The yen, euro, and Swiss franc are heavy. Emerging market currencies are mostly lower. Of note, the Philippine peso and the Mexican peso are among the most resilient today. Hungary, the only EU country that has agreed to pay Russia in roubles, is among the weakest (~0.9%). That dubious honor goes to the South Korean won today, off 1.1%, the largest loss since last June and the fifth consecutive decline. Gold was sold to fresh two-month lows near $1887 before steadying. June WTI is firm but in a narrow range (~$101.50-$103) near yesterday's highs. US natgas prices are almost 0.75% higher after gaining nearly 5% over the past two sessions. Europe's benchmark rose about 8.2% yesterday on top of yesterday's nearly 6% gain. It is back to early April levels. Iron ore rose for a second consecutive session, while copper is trying to end a three-day fall. July wheat is steady after rising 2% yesterday. Asia Pacific Australia's Q1 CPI rose 2.1%, faster than the 1.7% anticipated by the median in Bloomberg's survey and well above the 1.3% increase in Q4 21. The year-over-year pace accelerated to 5.1% from 3.5%. The underlying measures also rose. The central bank meets next week, and the market sees the inflation figures as boosting the chances of a rate hike, which previously was expected after the May 21 election. Yesterday the market had about six basis points of tightening discounted for the May 3 meeting. Now there are 18 bp increase priced into the cash rate futures. The Bank of Japan's two-day meeting began today. Officials have clearly signaled no intention to change course. Its defense of the 0.25% cap on the 10-year yield continued to today but the softer global yields yesterday took some pressure off the JGB market and there were sellers of 10-year bonds to the BOJ under its fixed-rate operation. The BOJ is well aware that energy and food prices are lifting measured inflation and the reduction in wireless charges drop out of the 12-month comparison. It pushes back and says that those developments do not make the increase in CPI sustainable. Note too that the new economic package is estimated to shave 0.5% off headline CPI in the May-September period. Many observers still seem to put the cart before the horse. They are concerned that the weaker yen reduces Japanese demand for Treasuries. The recent price action lends support for the hypothesis that the causation arrow is running the other way. The increase in US yields weakens the yen. The US 10-year yield peaked on April 20. So did the dollar against the yen. They both recorded eight-day lows earlier today and have recovered. Moreover, the indirect bids show that the recent US Treasury auctions have been strong, including yesterday's two-year note sale. That is where foreign participation is often picked up. The dollar found a bid after slipping a little below JPY127. A $540 mln option at JPY126.75 rolls off today. The greenback has already resurfaced above JPY128. A move above JPY128.25 would lift the tone, but it needs to get above JPY128.50 to sign another attempt on the JPY129.50-JPY130 area. The Australian dollar recovered from around $0.7120 to almost $0.7200, but the upside momentum faltered and it fell back to the $0.7140 area in late Asia Pacific turnover. That said, the intraday momentum indicators suggest the potential to retest the highs in North America. The Chinese yuan is trading in its narrowest range for a little more than a week. The dollar is consolidating its recent gains and traded roughly between CNY6.5480 and CNY6.5615. The cut in reserve requirements for foreign currency deposits appears to have succeeded not in pushing the yuan higher but in steadying the exchange rate. The PBOC set the dollar's reference rate slightly higher than expected in the Bloomberg survey (CNY6.5598 vs. CNY6.5596). Europe In a bizarre turn of events, Russia is insisting on being paid roubles for its gas while Europe is insisting to adhering to contracts to pay in hard currency, euros. Russia is making good on its threats and announced that its cutting off gas supplies to Poland and Bulgaria. Poland's gas supplies are around three-quarters capacity so the cut of new supply will not pinch immediately. Bulgaria has indicated it has taken steps to secure alternative supplies. Russia's actions do raise the question of who is next and that will likely be seen next month. That said, Europe's reluctance or inability to move quicker on gas reveals their vulnerability, which Russia is exploiting. It is quitting Europe before being fired, in a way. Meanwhile, the tensions are rising in Moldova's breakaway region. Some argue that Russia ultimately will likely link up the parts of Ukraine that it appears to be trying to take with the Moldova region, which would pen-in Ukraine. Musk's leveraged buyout of Twitter is spurring a debate about freedom of speech in the US. The constitutional right protects US citizens from abridgement of that right by Congress not by the private sector. Clearly newspapers do not have to print all the op-ed submissions it receives and its not denying the rejected authors their freedom of speech. In Europe, the reaction is different. Musk is reminded that Twitter, regardless of its ownership structure, must adhere to the Digital Services Act, approved last week. It forces the platforms to moderate illegal and harmful content that their users post. The 1.4 bln euro option at $1.06 that expires today appears to have been neutralized. The euro fell to about $1.0585 in late Asia/early Europe. Initial resistance is seen near $1.0630 and then $1.0660. On the downside, the 2015-2017 lows were in the $1.0340-$1.0530 area, but there is increasing talk of a move to parity which has not been seen since 2002. Sterling's losses have also been extended. It fell to about $1.2535 before recovering to around $1.2590 in the European morning. The $1.25 area represents the (61.8%) retracement of sterling's rally off the March 2020 low near $1.14. The next chart point below there is the June 2020 lows around $1.2250. Over the last five sessions, sterling has shed more than a nickel. The lower Bollinger Band is set two standard deviations below its 20-day moving average and sterling's losses are nearly three standard deviations below the 20-day average. America The US reports mortgage applications, which have fallen every week since the end of January but one. March pending home sales are expected to have fallen for the fifth consecutive month. The March trade deficit, which remains near a record imbalance, and March (wholesale and retail) inventories will help economists put their final touches on Q1 GDP forecasts ahead of tomorrow's report. Due to the revisions in retail sales reported earlier this week, the Atlanta Fed's GDP tracker fell to 0.4%. It will update it again after today's reports. As noted, there was a strong reception at yesterday's US sale of $48 bln two-year notes. Indirect bidders took down 2/3 and direct bidders took another 21.4%. This left the dealers with slightly more than 12%, the least in almost two decades. On tap today are a $30 bln two-year floater auction and $49 bln 5-year note sale. Still, the angst in some corners of the market about the implications of a strong dollar on foreign demand is unlikely to dissipate. Bank of Canada Governor Macklem laid out the logic of raising rates even though it will have little impact on the prices of internationally traded goods that are understood to be the main drivers of Canadian inflation. He argued that keeping inflation expectations anchored will help prices ease when the higher energy and disrupted supply chains ease. Mexico reports its March trade figures. The balance may have swung into a small deficit after a $1.29 bln surplus in February. Tomorrow it reports unemployment figures ahead of Friday's preliminary Q1 GDP. After a flat Q4 21, it is expected to have grown around 1% in Q2 quarter-over-quarter. Brazil reports April's IPCA inflation measure today. It is expected to have accelerated to 12.15% from 10.79% in March. This will further challenge the signals by the central bank that next month could be the peak in what has been an aggressive tightening cycle. The risk-off mood, which unlike when Russia first invaded Ukraine, is now seen as negative for commodities and commodity currencies. The Canadian dollar has suffered in this phase despite constructive macro considerations. The US dollar bottomed last week near CAD1.2460 and today has approached CAD1.2850. The year's high was set in early March slightly north of CAD1.29. The greenback has closed above its upper Bollinger Band for the last three sessions and remains above it (~CAD1.2810) now. The greenback remains within the range set on Monday against the Mexican peso (~MXN20.16-MXN20.4850). A convincing break of MXN20.50 could spur a quick move toward MXN20.60-MXN20.65. Note the upper Bollinger Band is found today slightly above MXN20.40. The Brazilian real is a market favorite this year, with high yields, monetary policy near a peak, and commodity exposure. However, alongside Latam in general and the setback for metals, market participants have raced to reduce exposure in both the options and forward markets. The dollar has jumped from around BRL4.60 a week ago to nearly BRL5.00 yesterday. A move above there today could target the BRL5.20 area. Disclaimer

Forex: USD/JPY Is Expected To Reach 145 In The End Of The Year. Why Is That?

(USD/JPY) Oanda: "Japanese yen stabilizes around 130"

Kenny Fisher 29.04.2022 11:49

Another week has meant more losses for the Japanese yen, as USD/JPY punched above the symbolic 130 line for the first time in 20 years. How badly is the yen doing? The currency last posted a winning week in February, and USD/JPY has soared 6.86% in the month of April. Not a good report card. The yen’s downswing has been sharper than expected, as USD/JPY has broken through resistance at 130 much more quickly than expected. The rapid movement in the exchange rate has drawn the usual jawboning from the BoJ and Japan’s Ministry of Finance (MOF), but aside from strong rhetoric, it’s unlikely that we’ll see any intervention with the aim of propping up the battered yen. On Thursday, while the MoF said that the yen’s descent was “extremely worrying”, BoJ Governor Kuroda reiterated that a weak yen was good for Japan’s economy. BoJ focused on yield curve control The BoJ doesn’t want to see the yen continue to plummet, but its focus is on stimulating the economy, not on the exchange rate. We’ve seen the BoJ show its determination to protect its yield curve control, as the Bank continues to offer to make unlimited purchases of 10-year JGPs in order to cap yields at 0.25%. The BoJ will continue its ultra-accommodative policy, even though this will put it out of sync with the Federal Reserve and other major central banks, which are tightening policy in order to combat soaring inflation. If the price for this policy is a falling yen, so be it, in the minds of BoJ policymakers. If there is a “line in the sand” when it comes to the yen’s value, any intervention is likely to come from the MoF rather than the BoJ. After decades of deflation, Japan is finally experiencing some inflation, but at much lower levels than in the US and elsewhere. Until inflationary pressures increase, the BoJ will have a free hand to pursue its ultra-loose policy, and that could spell more trouble for the yen. USD/JPY Technical USD/JPY has broken below support at 129.89. Next, there is support at 1.2807 There is resistance at 1.3122 and 1.3304 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Swing Overview – Week 17 2022

Purple Trading 03.05.2022 11:04

The Swing Overview – Week 17 Major stock indices continued in their correction and tested strong support levels. In contrast, the US dollar strengthened strongly and is at its highest level since January 2017. The strengthening of the dollar had a negative impact on the value of the euro and commodities such as gold, which fell below the $1,900 per ounce. The Bank of Japan kept interest rates low and the yen broke the magic level 130 per dollar. The USD index strengthened again but the US GDP declined The US consumer confidence in the month of April came in at 107.3, a slight decline from the previous month when consumer confidence was 107.6. The US GDP data was surprising. The US economy decreased by 1.4% in 1Q 2022 (in the previous quarter the economy grew by 6.4%). This sharp decline surprised even analysts who expected the economy to grow by 1.1%. This result is influenced by the Omicron, which caused the economy to shut down for a longer period than expected earlier this year. The Fed meeting scheduled for the next week on May 4 will be hot. In fact, even the most dovish Fed officials are already leaning towards a 0.5% rate hike. At the end of the year, we can expect a rate around 2.5%. The US 10-year bond yields continue to strengthen on the back of these expectations. The US dollar is also strengthening and is already at its highest level since January 2017, surpassing 103 level. Figure 1: US 10-year bond yields and the USD index on the daily chart Earnings season is underway in equities Earnings season is in full swing. Amazon's results were disappointing. While revenue was up 7% reaching $116.4 billion in the first quarter (revenue was $108.5 billion in the same period last year), the company posted an total loss of $8.1 billion, which translated to a loss of $7.56 per share. This loss, however, is not due to operating activities, but it is the result of the revaluation of the equity investment in Rivian Automotive. Facebook, on the other hand, surprised in a positive way posting unexpectedly strong user growth, a sign that its Instagram app is capable of competing with Tik Tok. However, the revenue growth of 6.6% was the lowest in the company's history. Apple was also a positive surprise, reporting earnings per share of $1.52 (analysts' forecast was $1.43) and revenue growth of $97.3 billion, up 8.6% from the same period last year. However, the company warned that the closed operations in Russia, the lockdown in China due to the coronavirus and supply disruptions will negatively impact earnings in the next quarter. Figure 2: The SP 500 on H4 and D1 chart In terms of technical analysis, the US SP 500 index is in a downtrend and has reached a major support level on the daily chart last week, which is at 4,150. It has bounced upwards from this support to the resistance according to the 4 H chart which is 4,308 - 4,313. The next resistance according to the H4 chart is 4,360 - 4,365. The strong resistance is at 4,500. German DAX index German businessmen are optimistic about the development of the German economy in the next 6 months, as indicated by the Ifo Business Climate Index, which reached 91.8 for April (the expectation was 89.1). However, this did not have a significant effect on the movement of the index and it continued in its downward correction. Figure 3: German DAX index on H4 and daily chart The index is below the SMA 100 on both the daily chart and the H4 chart, confirming the bearish sentiment. The nearest support according to the H4 is 13,600 - 13,650. The resistance is 14,180 - 14,200. The next resistance is 14,592 - 14,632. The euro has fallen below 1.05 The euro lost significantly last week. While the French election brought relief to the markets as Emmanuel Macron defended the presidency, geopolitical tensions in Ukraine continue to weigh heavily on the European currency. The strong dollar is also having an impact on the EUR/USD pair, pushing the pair down. The price has fallen below 1.05, the lowest level since January 2017. Figure 4: EURUSD on H4 and daily chart The euro broke through the important support at 1.0650 - 1.071, which has now become the new resistance. The new support was formed in January 2017 and is around the level 1.0350 - 1.040. Japan's central bank continues to support the fragile economy The Bank of Japan on Thursday reinforced its commitment to keep interest rates at very low levels by pledging to buy unlimited amounts of 10-year government bonds daily, sparking a fresh sell-off in the yen and reviving government bonds. With this commitment, the BOJ is trying to support a fragile economy, even as a surge in commodity prices is pushing the inflation up. The decision puts Japan in the opposite position to other major economies, which are moving towards tighter monetary policy to combat soaring prices. Figure 5: The USD/JPY on the monthly and daily chart In fresh quarterly forecasts, the central bank has projected core consumer inflation to reach 1.9% in the current fiscal year and then ease to 1.1% in fiscal years 2023 and 2024, an indication that it views the current cost-push price increases as transitory. In the wake of this decision, the Japanese yen has continued to weaken and has already surpassed the magical level 130 per dollar. Strong dollar beats also gold Anticipation of aggressive Fed action against inflation, which is supporting the US dollar, is having a negative impact on gold. The rising US government bond yields are also a problem for the yellow metal. This has put gold under pressure, which peaked on Thursday when the price reached USD 1,872 per ounce of gold. But then the gold started to strengthen. Indeed, the decline in the US GDP may have been something of a warning to the Fed and prevent them from tightening the economy too quickly, which helped gold, in the short term, bounce off a strong support. Figure 6: The gold on H4 and daily chart Strong support for the gold is at $1,869 - $1,878 per ounce. There is a confluence of horizontal resistance and the SMA 100 moving average on the daily chart. The nearest resistance according to the H4 chart is 1 907 - 1 910 USD per ounce. The strong resistance according to the daily chart is then 1 977 - 2 000 USD per ounce of gold. Moving averages on the H4 chart can also be used as a resistance. The orange line is the EMA 50 and the blue line is the SMA 100.

Currency Speculators drop Euro bets into bearish territory on interest rates & low growth

Invest Macro 07.05.2022 14:13

Is JPY Idle? British Pound To US Dollar (GBPUSD) And EUR/USD Have Decreased. "Risk-aversion lifts (USD) US dollar in Asia" | Oanda

Kenny Fisher 09.05.2022 12:54

China concerns boost the US dollar The US dollar booked some modest gains post-Non-Farm Payrolls on Friday, but the dollar index resistance zone at 104.00 held once again. The dollar index finished 0.11% higher at 103.66 having traded in a wide range intra-day. The risk aversion China slowdown price action seen in equities has spilt into currency markets today, lifting the US dollar after US 10-year yields closed comfortably above 3.0% on Friday. The dollar index has risen 0.34% to 104.00 and is, once again, making a determined test of resistance here. Support at 102.50 remains intact. A close above 104.00 will signal rapid gains to 105.00 and in the bigger picture, the technical picture still says a multi-month rally to above 120.00 is possible. EUR/USD and GBP/USD have fallen by 0.35% today to 1.0508 and 1.2290. EUR/USD support at 1.0470 is in jeopardy, while GBP/USD is threatening the Friday lows of 1.2275, having closed on support at 1.2325 last week. EUR/USD rallies above 1.0650 will be challenging to sustain now, with the 45-year trendline at 1.0800 now distant. Similarly, GBP/USD will run into headwinds between 1.2400 and 1.2500. The technical picture signals much lower levels for both and a formal declaration of war from Mr Putin against Ukraine today will signal a test of 1.0300 and 1.2000 in the coming days, if not sooner. USD/JPY has crept higher over the past few sessions, rising 0.30% today to 130.95. With the Bank of Japan showing no signs of adjusting its 0.25% JGB yield cap, and US rates continuing to climb as the Fed gets busy fighting inflation, downside pressure on the yen seems inevitable. Support lies at 128.50, but a rally by USD/JPY through 131.35 sets the stage for a move to the 135.00 area. Plummeting stock markets in Asia appear to be prompting heavy outflows from Asian currencies today, with USD/CNH and USD/CNY over 0.50%, as are the USD/THB and USD/INR. Elsewhere across the region, the US dollar has booked 0.30% plus gains versus the IDR, SGD, MYR, and KRW. Chinese officials have still not made overt noises about the pace of the CNY sell-off to 6.7050, despite setting a slightly stronger fixing today. USD/INR has traded at all-time highs around 77.255 today and has fallen around 1.80% since the RBI’s last week. That does leave the RBI in somewhat of a bind, and it is an issue the Bank Indonesia and others around Asia will be feeling sooner, rather than later. In the first instance, thanks to Asia’s huge FX reserves, I expect some judicious “smoothing” to be the first strategy. Indonesia, the Philippines, and South Korea have already taken this route, I suspect. If international sentiment continues to fall and the US dollar continues to gain, those noises may get louder, but ultimately, regional central banks will fight a losing battle if China remains comfortable with yuan depreciation. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Doge (DOGE) Vs Bitcoin (BTC) - Elon Musk Comments!

(USDT) Tether's Not That Stable? JPY Goes Higher, How Will It Perform Against US Dollar? | Saxo Bank

Saxo Bank 12.05.2022 15:42

Summary: Fires are springing up everywhere and it feels like markets are under siege, but the volatility curve doesn’t even look particularly alarming yet. We focus on the areas that could continue to keep markets on tilt, including the breaking of the largest "stable" coin Tether already in evidence today after Bitcoin melted through a huge chart level yesterday, the Hong Kong dollar peg under pressure, the Tesla-Bitcoin-Ark triangle, etc. In FX, the focus is on the jolt higher in the JPY even more so than the ongoing USD strength, while commodity traders have it relatively easy on the volatility front. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it. Read next: Saxo Bank: Markets are assessing the global growth outlook and the pace of Fed tightening| FXMAG.COM Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Read next: Philip Morris Buys Match, Fed Members Spills The Tea And Gold Price Nears Quite Low Values | Saxo Bank| FXMAG.COM Source: Saxo Bank

Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

FX Update: Bond rally supercharges JPY comeback rally. | Saxo Bank

John Hardy 12.05.2022 16:01

Summary: An extension of the rout in risky assets has continued to drive the US dollar higher against the smaller currencies and most G10 currencies as well, but the Japanese yen has not only taken on a new shine, but is even sharply stronger against the strong US dollar as global bonds have suddenly rediscovered their safe haven appeal. Elsewhere, HKD is worth watching as the HKMA intervened for the first time of this cycle to maintain the top of the USDHKD band. FX Trading focus: JPY woke up and smelled the coffee. Watching HKD as USD presses upper level of USDHKD band. The JPY upside potential has been more fully realized since yesterday on the heavy weight of falling yields in global sovereign bond, which are finally serving their function as a go-to safe haven in an environment of generally risk deleveraging. The JPY is even handily outpacing the ongoing strength in the US dollar as the yield focus dominates. And the technical damage in JPY crosses is spreading: NZDJPY and GBPJPY, the latter our focus yesterday, are already trading back into old ranges that preceded the JPY sell-off sparked by the commodity rally in the wake after Russia invaded Ukraine. Now watching AUDJPY and EURJPY for whether the feat is repeated there (key levels around 86.00 and 134.00, respectively), and CNHJPY has come down hard, with more to come. More thoughts on the most important USDJPY pair below in the chart discussion. The JPY can continue higher, but the price is far “fairer” now relative to long term bond yields. Yields must extend lower still, possibly with a helping hand from crude oi and LNG prices for a full reversal of the JPY sell-off since late February. Chart: USDJPYYesterday, our focus in JPY crosses was on GBPJPY, which took out the 160.00 and 158.00 area supports yesterday. Today we have a look at the big one: USDJPY and what levels might trigger a more notably slide. Arguably, the first of these has already been under strain today in the 128.50 area. Regardless, the direction of the US 10-year benchmark yield is the key coincident indicator, with global energy prices a secondary indicator. The next support area below is the 127.03 pivot low followed perhaps by the 125.00 area, which was a stopping point on the way up. Source: Saxo Group Sterling suffered a sell-off to new lows in the wake of the Q1 GDP data, which showed a +8.7% growth rate, slightly below expectations, but a -0.1% month-on-month figure for March, with weak production figures to boot. The March Trade Balance data was also out and showed a toe-curling negative £23.8B trade balance, a staggering figure. Still, after a run to fresh lows against the G3 currencies, the EURGBP rally reversed rather sharply, in part as EURUSD tipped over to new lows after a couple of weeks of defending the 1.0500 support area. All traders should monitor the crypto situation as a possible aggravator of additional volatility risk across markets. The TerraUSD “stable coin” broke its parity level with the US dollar earlier this week and traded as much as 70% below par. Then yesterday, a key Bitcoin support level at 30,000 broke, possibly inspiring the instability of the Tether stable coin, which is a commonly used as a kind of parking space between going in and out of crypto trades and in and out of the crypo market itself. The Tether coin traded as much as 5% below par against the US dollar this morning before the whole crypto-complex recovered. More directly pertinent to FX, we have to watch the Hong Kong dollar (HKD), as the USD strength has taken the USDHKD exchange rate to the upper limit of its band at 7.85 and has seen the Hong Kong Monetary Authority out intervening for the first time of this cycle overnight. The HKMA will also need to copy Fed policy to avoid the worst of pressure on the HKD, even with Hong Kong’s economy in a funk. The HKD band is one of those legacy set-ups that makes little sense here almost forty years after its creation, but Hong Kong remains a key gateway into and out of the mainland Chinese economy, and China probably doesn’t want to add HKD instability to its long list of challenges. Note the Chinese demand concerns continuing to weigh on the copper price, which has punched to the lowest reaches of the range since early 2021. This in turn weighs on the Aussie, which itself has punched to new lows for the cycle. The CAD has gotten off easy so far by comparison, perhaps as oil prices remain in the higher range here – but after breaking above resistance, if USDCAD loses its tethering to the 1.3000 area it is in danger of a sharp extension higher. Table: FX Board of G10 and CNH trend evolution and strength.We have noted the euro resilience of late, but signs of this crumbling today as EURUSD, EURCHF and especially EURJPY come under pressure. But the development of note here is the strong revival of the JPY momentum and outright positive trend measurement in recent days. Elsewhere, CAD looks too strong with this backdrop, although there is quite a race to the bottom of late among the weakest horses in G10 FX. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note EURJPY and CADJPY trying to join other JPY crosses in flipping to the negative side after the sharp JPY rally today. All G10 currency pairs save for a few GBP pairs (due to Brexit-related events) are in the highest 10% of their ATRs of the last 1000 trading days, as shown in the dark orange shading for the ATR readings. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1230 – US Apr. PPI 1230 – US Weekly Initial Jobless Claims 1800 – US 30-year T-Bond auction 1800 – Mexico Overnight Rate Announcement

UK Budget: Short-term positives to be met with medium-term caution

COT Currency Speculators raised British Pound Sterling bearish bets for 10th week

Invest Macro 15.05.2022 14:26

British Pound To Japanese Yen (GBP/JPY) Reaches Lower Levels! British Pound (GBP) has been producing some weaker data as of recently and I expect it to continue. | Saul Lokier

Saul Lokier 16.05.2022 08:02

The BoE have hiked their rates for a 4th time but have signalled there is less to come. A dovish hike and mixed data reports is giving a bearish tone for the currency. Weekly trade idea on GBP/JPY. Week: 16-20.05.2022 Weaker PMIs and Retail Sales for the GBP. JPY on the other hand has had a recent re-evaluation after the steep runs. Potential profit taking moving the market. Rising rates and the central bank's level of hawkishness could drive stocks lower, therefore driving the JPY higher. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Key Levels: Resistance 159.00 Support 156.400 Trend GBP/JPY. Bearish Overall trend recently has been to the downside on the pair, I think this trend will continue into the near future and breaking lower lows as it moves. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Call to Action/Trade Idea Wait for a pullback and a fair value price to enter short on this pair for the short term future.

US Dollar To Japanese Yen (USD/JPY) Forecast: Three reasons to sell the pair as the tides turn against it | FXStreet

FXStreet News 16.05.2022 16:09

The yen has returned to attracting safe-haven flows as China's covid crisis intensifies. Fear of a Fed-fueled recession is pushing 10-year Treasury yields lower. Technicals are pointing to a clear peak and a clearer downtrend. USD/JPY bearish – there are good reasons to expect the currency pair to fall, and the trade seems more straightforward than other ones. *Note: This content first appeared as an answer to a Premium user. Sign up and get unfettered access to our analysts and exclusive content. 1) When things go wrong in Asia, buy the yen The yen benefits from safe-haven flows related to China's aggressive policies against covid. Lockdowns in Shanghai and Beijing, the world's second-largest economies largest and most important cities, are hurting the economy. Recent retail sales figures showed a plunge of 11.1% YoY in April, nearly double the early expectations and a sign of falling demand. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Not only consumption is dropping. Industrial output also badly missed estimates with a fall of 2.9% YoY, worse than the 0.5% increase projected. Japanese investors are repatriating investments in China and other places in Asia. The yen's status as a safe currency is mostly seen when there is trouble in its own continent. 2) The wrong yields are rising The second reason for the USD/JPY decline – and the potential for more – comes from the US. The Federal Reserve's aggressive policy of raising interest rates has been positive for the pair, especially as it contrasted with the Bank of Japan's dovish policy. However, there can be too much of a good thing. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM While short-term Treasury yields continue rising – reflecting expectations for higher inflation and higher borrowing costs – the part that is relevant to USD/JPY is turning south. Returns on 10-year bonds have declined from their peak above 3% as investors begin pricing in growing chances of a recession. Lloyd Blankfein of Goldman Sachs said it is "a very high risk" and that consumers and businesses should get ready. That prophecy may be self-fulfilling. 3) Technical decline Third, the technical tide has turned against the pair. It has begun trading in a downtrend channel, with lower highs and lower lows. Momentum on the 4h-chart has turned negative, the RSI has failed to climb above the 50 level, and the price is capped at the 100-SMA – after falling below the 50-SMA. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Support is at 128.70, which cushioned the pair twice in May. The monthly low of 127.50 is the next level to watch, and it also converges with the 200-SMA. Further down, 126.90 and 126.40 are noteworthy. Resistance is at 1.2950, and then at 130.90. Final thoughts The list above provides ample ammunition for bears, and bulls may need to cling to hopes for further yen-printing from the Bank of Japan – a highly unlikely scenario given the current, already extremely loose monetary policy.

Forex Speculators weaken Commodity Currency sentiment over last month - 22.05.2022

Invest Macro 22.05.2022 12:34

Currency Speculators reboot their Euro bullish bets to a 6-Week High

Invest Macro 28.05.2022 21:32

The EUR/USD Pair Maintains The Bullish Sentiment

Euro Currency Speculators continue to boost their bullish bets for 4th Week

Invest Macro 04.06.2022 22:45

Positions of large speculators according to the COT report as at 31/5/2022

Purple Trading 07.06.2022 15:38

COT Week 23 Charts: Forex Speculators Positions mostly higher led by Canadian dollar & Swiss franc

Invest Macro 12.06.2022 17:16

Positions of large speculators according to the COT report as at 7/6/2022

Purple Trading 17.06.2022 10:30

Currency Speculators boost US Dollar Index bets to 5-year high while Euro bets dip into bearish level

Invest Macro 18.06.2022 20:13

The Swing Overview – Week 24 2022

Purple Trading 17.06.2022 16:54

The Swing Overview - Week 24 We've had a week in which the world's major stock indices took a bloodbath in response to rising inflation, which is advancing faster than expected. Central banks have played a major part in this drama. As expected, the US, the UK and, surprisingly, Switzerland raised interest rates. Japan, on the other hand, is still one of the few countries that decided to keep interest rates at their original level of - 0.10%. Macroeconomic data The 0.75% interest rate hike to 1.75%, which was 0.25% higher than the Fed announced at the last meeting, might not have come as a surprise to the markets given that inflation for May was 8.6% on year-on-year basis (8.3% for April). The market reacted strongly in response to the inflation data, and a sell-off in equity indices and a strengthening US dollar followed. The 0.75% rate hike is the highest since 1994 and the next Fed meeting is expected to see another rate hike again in the range of 0.50% to 0.75%. The Fed is trying to stop rising inflation with this aggressive approach. The problem is that economic projections point to slowing economic growth. Retail data for May fell by 0.3%, which was a surprise to the markets. This is the first drop in consumer spending in 2022. The Fed also lowered GDP growth projections and unemployment is expected to rise as well. All of this points to the risk of stagflation. But the labour market data is still good. The number of initial claims in unemployment reached 229k last week, down from 232k the previous week. The US dollar hit a new high for the year at 105.86 in response to high inflation and a faster tightening economy. The US 10-year bond yields also rose, reaching 3.479%. Figure 1: The US 10-year bond yields and the USD index on the daily chart The SP 500 Index The SP 500 index, like other global indices, was in a bloodbath last week as data on rising US inflation in particular surprised. Major supports according to the H4 chart were very quickly broken and the market is showing that it is still in a bearish mood. According to the daily chart, another lower low has formed which together with the lower highs confirms this bearish trend. Figure 2: The SP 500 on H4 and D1 chart A support according to the H4 chart is in the 3,645 - 3,675 range. The nearest resistance is at 3,820 - 3,835. A broken support in the 3,710 - 3,732 area can also be considered as resistance. The most important news is behind us and the market could take a breath for a while. The low levels could also be noticed by long-term investors who will be buying dip. But for speculators, it is very risky to speculate on a market reversal in a downtrend. German DAX index The German DAX index offers a very similar picture to the SP 500. The ZEW economic sentiment indicator in Germany for the month of June showed a deterioration in sentiment among institutional investors and analysts, with the index reading coming in at -28.0. The ongoing war in Ukraine is undoubtedly influencing this pessimism. The end of this tragic event is still not in sight. What is clear, however, is that the longer the conflict continues, the stronger the impact on the European economy will be. Figure 3: German DAX index on H4 and daily chart The DAX is in a clear downtrend and broke through significant support at 13,300 last week. The nearest resistance according to the H4 chart is 13,250 - 13,300. Significant resistance is at 13,650 - 13,700. A new support according to the H4 chart is at 12,950 - 12,980. The euro has rejected lower readings Information about higher inflation in the US and a rate hike sent the EUR/USD pair to support levels at 1.0370. However, the level was not broken and the euro then took a strong move from this area. Investors seem to assume that the ECB will have to respond with a higher than 0.25% rate hike announced at the last meeting. Figure 4: The EUR/USD on H4 and daily chart According to the H4 chart, the nearest resistance is at 1.0560 - 1.0600. The next resistance is then at 1.0760-1.0770. Current support is at 1.0340 - 1.0370 according to the daily chart. The Bank of England raised rates as expected Rising inflation did not leave the Bank of England in dovish mood as it raised its key rate by 0.25% as expected. The current rate is 1.25%. Inflation may be approaching double digits, but the bank could not afford to be more aggressive. In Britain, economic activity has already fallen and the GDP is falling at its fastest pace in a year. On a month-on-month basis, the GDP in Britain fell by 0.3%. Manufacturing production fell by 1% in April. Figure 5: The GBP/USD on H4 and daily chart The GBP/USD currency pair had a very dramatic week, first breaking below 1.20, only to stage an unprecedented rally later. Anyway, according to the H4 chart and also the daily chart, the pound is below the SMA 100 moving average, which indicates a bearish sentiment. There are also clear lower lows and lower highs on the daily chart, confirming the downtrend. The UK interest rate hike did send the GBP/USD currency pair to 1.24, but the price did not stay there for long time as the pound descended from higher values, underlining the overall downtrend. The nearest resistance is at 1.24. A support is then at 1.1930 - 1.2000. Central Bank of Japan still dovish In the early hours of Friday morning, the Bank of Japan was also deciding on rates. There, as expected, everything remains as it was, i.e. the rate remains negative at - 0.10%. This situation means a favourable interest rate differential between the US dollar and the Japanese yen in favour of the dollar. It is therefore no surprise that the USD/JPY pair has reached its highest level since 2002. However, the weak yen is a big problem for the Japanese economy, as it makes imports of basic manufacturing raw materials more expensive and thus contributes to inflation. Figure 6: The USD/JPY on H4 and monthly charts The USD/JPY pair has reached the resistance level at 134.5 - 135.0, the highest level since 2002. A support according to the H4 chart is at 131.50 - 131.80.

Currency Speculators boost Japanese Yen bets to 15-week high while Canadian dollar bets drop sharply

Invest Macro 26.06.2022 13:28

Currency Speculators reduced their British Pound and Japanese Yen bearish bets to multi-week lows

Invest Macro 02.07.2022 20:24

Currency Speculators drop Euro bets further into bearish territory as EURUSD nears parity

Invest Macro 09.07.2022 19:55

Euro, Mexican Peso & Brazilian Real lead Currency Speculators bets lower

Invest Macro 16.07.2022 19:19

Kuroda Stayed On The Sidelines And The Yen Responded With Losses

Japanese Exports Exceeded Expectations Hitting 19%

ING Economics 18.08.2022 09:45

Japan’s trade deficit widened in July as imports surged due to high commodity prices while forward looking core machinery orders rebounded in June. Today's data supports our view that GDP will likely continue to rise in the current quarter led by investment, but at a slower pace than the previous quarter Source: Shutterstock 19.0% Exports Year-on-year Higher than expected Imports grew faster than exports, deepening the trade deficit in July Exports rose 19.0% year-on-year in July (vs 19.4% in June), a bit higher than the market consensus of 17.6%. Auto exports to the US and semiconductor exports to China were particularly strong. Meanwhile, imports jumped 47.2% in July (vs 46.1% in June), also above the consensus forecast of 45.5%, mainly led by the high cost of commodities. Still, as global oil prices have dropped since June, we expect the trade deficit to narrow, with import growth decelerating. Also, auto exports are expected to improve as the production of other major automakers continues to increase. Thus, the contribution of net exports to GDP will likely record a small gain in 3Q (vs 0.0% in 2Q). Trade deficit widened in July Source: CEIC Core machinery orders rebounded slightly in June A leading indicator of capital spending, core machinery orders rose 0.9% month-on-month seasonally-adjusted in June (vs -5.6% in May), slightly missing the market consensus of 1.0%. In the second quarter, core machinery orders rebounded firmly by 8.1% quarter-on-quarter sa (vs -3.6% in the first). Thus, we expect Capex investment to improve in the rest of this year, with growth momentum slowing gradually. Auto and electrical machinery orders increased as global supply bottlenecks and China lockdowns eased while semiconductor manufacturing equipment orders fell for the first time in three months. Read this article on THINK TagsJapan trade Core machine orders Capex Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

Japanese PPI Stays The Same. Decline Of The US CPI Let US Stocks And EUR/USD (Euro To US Dollar) Gain

ING Economics 13.09.2022 12:46

Asian currencies likely to extend gains against the USD as risk sentiment remains solid ahead of the US inflation report Source: shutterstock Macro outlook Global Markets: US equities made further gains yesterday ahead of the US CPI release later today, which is expected to show a decline in headline inflation thanks to lower crude oil, and hence retail gasoline prices. The risk-on sentiment has also hurt the USD, with EURUSD pushing back above 1.01 to 1.0126, and other G-10 currencies all following suit. In Asia, currencies yesterday made modest gains on the whole against the USD, but have lagged the G-10 moves. So with equity futures suggesting no turn in sentiment just yet, Asian FX will likely continue to strengthen today ahead of the US session. USDCNY is now down to 6.9265, taking the USDCNY 7.0 target off the agenda for the time being. US Treasury yields were slightly higher yesterday, especially at the back end, where a lackluster USD32bn 10Y auction saw yields on 10Y bonds rising almost 5bp to 3.358%. G-7 Macro: It’s all about the US August CPI result tonight. And though the headline inflation rate will most likely decline from July’s 8.5%YoY rate, thanks to lower gasoline prices, the core rate is expected to rise 0.3%MoM, and take core inflation up to 6.1% from 5.9%. Markets are likely to balance any headline falls against core rises, so its too early to be celebrating the end of inflation, as some market participants seem already to be doing. UK labour market data and Germany’s ZEW business confidence survey are also on the calendar. India: August inflation came in just above the consensus expectation at 7.0% (consensus 6.9%, ING f 7.0%), mainly due to somewhat stronger food price inflation. In any event, with inflation still well above the RBI’s target range (2-6%), more rate increases are still likely over the coming 2 meetings before the year end. The repo rate is currently 5.4%. We see rates ending the year at 5.9%. China: With the yuan under recent weakening pressure, we don’t anticipate the PBoC making any further amendments to its 1Y medium term lending facility (1Y MLF) rate today, which will remain at 2.75%. Japan: Pipeline prices appear to have stabilized in August. Producer price inflation remained unchanged at 9.0% YoY in August (vs 9.4% in June) and import price growth slowed to 21.7%YoY (vs 26.1% in July). Despite the recent weakness in the JPY, the drop in global oil prices has led to price stabilization. But next week’s August CPI report is expected to show inflation still accelerating to nearly 3.0%. Despite the recent depreciation of the JPY and looming 3% inflation, we still expect no policy change from the BoJ at its September meeting. What to look out for: US inflation and China activity data Japan PPI (13 September) Australia consumer confidence (13 September) US CPI inflation (13 September) Japan industrial production and core machine orders (14 September) Hong Kong PPI and industrial production (14 September) US PPI inflation (14 September) Japan trade balance (15 September) Australia labour market data (15 September) US initial jobless claims and retail sales (15 September) South Korea unemployment (16 September) Singapore NODX (16 September) China industrial production, retail sales and fixed asset (16 September) US University of Michigan expectations (16 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

ECB's Knot: July Rate Hike Necessary, Beyond July Uncertain; Canadian CPI Supports Rates on Hold; Global Crypto Market at $1.2 Trillion; Oil Market Tightens with Russian Shipments Drop and China's Support Measures

The Downward Pressure On The Japanese Yen Will Remain High

TeleTrade Comments 20.09.2022 09:14

Then Bank of Japan is set to maintain a dovish stance this week. At the same time, the Federal Reserve is set to continue its hiking cycle. Thus, the USD/JPY pair could extend its upmove, economists at Commerzbank report. Prices in Japan continue to rise “The BoJ is likely to be the only G10 central bank to leave its ultra-expansionary monetary policy unchanged this week. This is despite the fact that prices in Japan are also rising at an increasingly rapid pace. As a result, criticism of Japan's monetary policy is likely to grow louder and downward pressure on the JPY will remain high.” “If the Fed acts decisively again tomorrow, USD/JPY could continue to trend upward. After all, the differences in monetary policies are simply too striking.”

The Run Higher In Japanese Yields Is Likely To Create Further Volatility In Global Markets

The Intervention Of The Bank Of Japan May Orove Futile (USD/JPY)

InstaForex Analysis 28.09.2022 08:09

The yen's situation is unfolding in such a way that the Bank of Japan's intervention on September 22 to protect the level of 145.00 may turn out to be in vain. The price has already approached the resistance of 145.05, consolidating above which opens the 147.30 target – an embedded line of the global price channel. The Marlin Oscillator is still kept in the positive area. Obviously, the BOJ is not able to withstand the global strengthening of the dollar, although the yen has been staying at current levels for three weeks now. So, if there is no repeated intervention of the central bank close in volume to the last action (which is more likely), the pair will grow to 147.30. Support in the current situation is the embedded line of the price channel and the MACD indicator line approaching near the 141.28 mark. On the four-hour chart, the price is consolidating under the linear resistance of 145.05. Consolidation above the level will be the first sign of the price's determination to go to 147.30. The Marlin Oscillator is stable in the positive area, it managed to consolidate, probably for a breakthrough upwards. Relevance up to 04:00 2022-09-29 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322844

Belgian housing market to see weaker demand and price correction

The US Housing Market Is Experiencing Severe Price Drops | The Market Is Now Leaning Towards A RBNZ Rate Hike By 75 bp

Saxo Bank 18.10.2022 11:38

Summary: A huge squeeze across equity markets developed yesterday on no readily identifiable catalyst, with yields easing a bit lower and the US dollar dropped falling sharply, as most markets posted a sudden reversal of the Friday melt-down in sentiment. One possible driver for the fresh thaw in sentiment was a report that the Bank of England may delay its quantitative tightening programme, perhaps raising hopes that other central banks will eventually do the same. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Strong equity session yesterday with S&P 500 futures closing at their highest level since 7 October as the index futures rebounded 2.6%. The momentum is continuing this morning with S&P 500 futures trading around the 3,742 level with the 3,800 as the next major resistance level on the upside. Nasdaq 100 futures are trading around the 11,295 level this morning with 11,494 as the next upside level to watch. The US 10-year yield is still hovering around the 4% level and US financial conditions remain around their average historical level. As we scan across different markets there are no obvious reasons for the major rebound so our best guess is short coverings and technical flows. Our medium-term outlook is still negative on equities. Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Stocks traded in Hong Kong bounced the second day in a row with the benchmark Hang Sang Index rising nearly 1.5%. Heavy weight HSBC (00005:xhkg) gained 2.6% and China Internet names surged from 3% to 7%. BYD (01211:xhkg) surged 6.4% after the leading EV maker said its Q3 profit may soar up to 365%. CSI300 was bouncing around small gains and losses. China’s National Development and Reform Commission said China’s economic growth “rebounded significantly” in Q3 while the National Bureau of Statistics delayed the release of Q3 GDP, September industrial production, retail sales, and fixed asset investment data that were scheduled to come today without providing a reason or a new schedule. A document from the European Action Service advises EU’s finance ministers that EU must take a tougher line in its dealing with China and see the latter as an all-out competitor. USD drops as risk sentiment jolts back higher...BoE to drop QT for now? Yesterday was the third consecutive session in which risk sentiment posted a sharp U-turn, as equities rallied sharply and the US dollar sold off steeply, led initially by a drop versus a hard rallying sterling yesterday on hopes that newly minted Chancellor Jeremy Hunt’s elimination of most of PM Liz Truss’ initiatives will stabilize the currency and the country’s bond market. An additional report from the FT that the Bank of England would look to delay its original quantitative tightening (QT) plan may be at the root of some of the broad risk-on, as hopes that other central banks will slow the tightening pressure could bring some relief to deteriorating liquidity across markets. Crude oil (CLX2 & LCOZ2) Crude oil prices stabilized in early Asian hours on Tuesday after a slight decline yesterday. WTI futures rose towards $86/barrel while Brent was above $91. Chinese demand concerns however weighed on the commodities complex coming out of the weekend CCP announcements on Zero Covid. On the OPEC front, Algeria's Energy Minister echoed familiar rhetoric from the group that the decision to reduce output is a purely technical response to the world economic circumstances. US treasuries (TLT, IEF) US treasury yields fell slightly, and the curve steepened in a session marked by far less volatility than the gyrations elsewhere, as the US dollar sold off and risk sentiment squeezed sharply higher. At stake for the longer end of the curve is whether yields remain sticky near the key 4.00% level and head higher still. Data this week is generally second tier stuff. If treasuries rally, the downside focus would be on the 3.84% pivot low in yields. What is going on? Hot Q3 CPI in New Zealand data jolts RBNZ rate expectations The Q3 CPI report came in far above expectations, with the headline printing at 2.2% q/q and +7.2% YoY, far above the 1.5/6.5% expected. This took RBNZ rate expectations sharply higher, and the NZD snapped higher as well. The market is now leaning for the RBNZ to hike by 75 basis points (about 70 bps priced in) at the November 23 meeting, which would be the first time the bank has hiked by more than 50 basis points for this cycle. NZDUSD rose to 0.5700 and AUDNZD punched lower to near 2-month lows after breaking below 1.11 with RBA minutes continuing to highlight concerns of rapid tightening for housing market and household budgets. Q3 earnings recap Bank of America beat estimates yesterday with stronger earnings on disciplined cost controls and robust client activity across both the commercial banking and investment banking activities. Q3 EPS was down 5% y/y, which is much better than its peers, and up q/q to $0.81 from $0.79 in Q2. The US bank is seeing a little slowdown in consumer spending, but it is still minimal supporting the view that the US consumer remains strong and with confidence in the future despite the tighter financial conditions this year. S&P 500 Q3 EPS is down 1.9% q/q but given the weakness among US banks q/q it is too early to say whether this will end up being the conclusion when the entire S&P 500 has reported earnings. Japanese yen paying no heed to jawboning efforts The US dollar moved lower on Monday, but that was no respite for the Japanese yen, which was the only G10 currency that weakened further on Monday, continuing to test the intervention limits of the authorities. USDJPY rose to 149.08, printing fresh 32-year highs. Bank of Japan Governor Kuroda was out overnight noting that the BoJ is watching the market and that JPY weakening drives inflation, but that inflation would eventually fall. He was also defiant when a lawmaker suggested he should resign, saying he had no plans to quit. While intervention expectations rose, the yen remains weak, with EURJPY, for example, hitting new cycle highs and the highest level in nearly eight years. Natural gas prices continue to fall in Europe … with the Netherlands 1-month forward contract falling more than 10% yesterday and at its lowest level since late June as EU storage is essentially fully and weather has been mild thus far this fall. Germany announced that it would keep its three remaining nuclear plants in operation until at least mid-April, cancelling their planned mothballing for now, although there are still no strong signs of a strategic rethink from Germany on the future of nuclear power. NY Fed manufacturing headline lower on mixed components The NY Fed manufacturing survey for October fell to -9.1, contracting for a third consecutive month and coming in below the expected -4.0 and the prior -1.5. While survey data remains hard to trust to decipher economic trends, given a small sample size and questioning techniques impacting results, it is worth noting that more factories are turning downbeat about future business conditions which fell 10 points to -1.8 and was the second weakest since 2009. Also, the prices paid measure rose for the first time since June, echoing similar results as seen from the University of Michigan survey. The U.S. housing market bubble is deflating According to the latest data released by the real estate company Redfin, the U.S. housing market is going through a severe drop in prices in several major cities. From May 2022 to October 2022, the drop in sale prices is the most pronounced in Oakland (minus 16 %), San Jose (minus 14 %), Austin (minus 14 %), Ogden in Utah (minus 11 %) and San Francisco (minus 9 %). The decrease is the most important in California and Texas where home prices jumped sharply in the aftermath of the Covid outbreak. So far, the decrease in prices is positive news for inflation and for home buyers, as the affordability index was at historical levels a few months ago. But this could seriously increase the ongoing economic slowdown. Note that we will see important indicators on the US housing market this week – more below. What are we watching next? US Housing Market Data Housing markets are very interest rate sensitive and thus generally a leading indicator on the direction of the economy. Financing for US house purchases is mostly done on a 30-year fixed mortgage basis, meaning that most of the impact from rising rates, a global phenomenon, is on new purchases in the US. (This contrasts with the floating rates that are popular elsewhere – note the Australian RBA’s and Bank of England’s concerns on housing impact from sharp rate rises). Today we get the Oct. NAHB Housing Market survey, one of the more leading US indicators on housing demand and a survey that has been in freefall in recent months – dropping from 83 in January to 46 last month and expected Earnings to watch Today’s earnings focus is Netflix, Johnson & Johnson, and Lockheed Martin. Headwinds have been building for Netflix since the pandemic growth sprint and analysts expect revenue growth to have slowed down to 5% y/y in Q3 and EPS of $2.22 down 23% y/y and down 12% q/q. Johnson & Johnson is expected to see flat revenue growth in Q3 which given other consumer staples companies might be a bit too pessimistic and we believe there is a good chance that Johnson & Johnson can surprise to the upside given what we know about the US consumer. Today: Charles Schwab, Johnson & Johnson, Goldman Sachs, Intuitive Surgical, Lockheed Martin, Truist Financial, Netflix Wednesday: ASML, Elevance Health, Tesla, IBM, Lam Research, P&G, Abbott Laboratories, Atlas Copco Thursday: China Mobile, China Telecom, ABB, Danaher, Investor, Philip Morris, Union Pacific, CSX, AT&T, Blackstone, Marsh & McLennan, Yara International, Nordea, Volvo, Ericsson, Freeport-McMoRan, Dow, Snap Friday: CATL, American Express, Schlumberger, Verizon Communications, HCA Healthcare, Sika Economic calendar highlights for today (times GMT) 0900 – Germany Oct. ZEW Survey 1215 – Canada Sep. Housing Starts 1315 – US Sep. Industrial Production 1400 – US Oct. NAHB Housing Market Index 1600 – ECB's Schnabel to speak 2130 – US Fed’s Kashkari (voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-18-2022-18102022

Caixin Services PMI Data Has Helped The Chinese Yuan (CNH)

Japanese Yen (JPY) Has Been At Its Lowest Since 1990

Kenny Fisher 19.10.2022 14:22

USD/JPY continues to inch upwards and is trading at 149.69, up 0.31%. Yen closing in on 150 The yen hasn’t managed a winning session since October 4th and it’s looking likely to breach the symbolic 150 level, perhaps before the week is over. The yen hasn’t traded at such low levels since 1990 and a turnaround from its prolonged slide doesn’t appear likely. The Bank of Japan has been under pressure to rethink its ultra-loose policy, as the yen has plummeted and inflation has climbed above the Bank’s 2% target. Earlier today, BoJ member Seiji Adachi poured cold water on hopes that the BoJ will change course, saying that risks to the economy and volatile financial markets precluded any shifts towards monetary tightening. Governor Kuroda echoed this stance, saying that the weak economy required massive stimulus. The BoJ has fiercely defended its yield curve control, maintaining a cap of 0.25% on 10-year government bonds. What about the yen’s downturn? With the BoJ defending its policy, the ball is in the court of the Ministry of Finance (MoF). The MoF dramatically intervened in late September to prop up the yen after it fell below 145, but the move did little more than slow the yen’s descent for a few days. Another intervention is possible, but it would have to be on a larger scale to have any substantial effect on the exchange rate. Finance Minister Suzuki has warned that the government would “properly respond” in the currency markets, but increasingly, the verbal bullets out of Tokyo are being viewed as blanks. Japan releases Core CPI for September, which is expected to rise to 3.0%, up from 2.8% in August. Inflation has been moving steadily higher, but the release is unlikely to have any effect on the BoJ’s monetary stance. . USD/JPY Technical USD/JPY is putting pressure on resistance at 149.81. Above, there is resistance at 151.32 There is support at 149.09 and 147.58 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Things May Soon Get Better In The Chinese Markets

Bank of Japan performed another FX intervention. BoJ seems to be determined to protect Japanese yen

Conotoxia Comments 24.10.2022 13:57

On Friday, September 21, during the late afternoon hours in Europe and, in turn, the evening hours in Japan, there was a sharp plunge in the USD/JPY exchange rate. Quotations plunged from around 151.50 to 146 yen per dollar. The market was expected to see another intervention by Japanese authorities after the yen had previously weakened to levels last seen 32 years ago. Is the yen sinking in strength? Japanese Finance Minister Shunichi Suzuki said Monday that the government is trying to confront currency speculators as the yen continues to fluctuate widely. The systematic weakening of the currency prompted another Bank of Japan intervention on Friday. Suzuki assured that the ministry is monitoring the currency market, BBN reported. In turn, Japanese Deputy Finance Minister for International Affairs Masato Kanda added that the government "will continue to take appropriate measures against excessive disorderly movements in the market." Source: Conotoxia MT5, USD/JPY, H1 Statements by Japanese authorities Masato Kanda also told reporters that Japan cannot tolerate speculators who significantly alter currency rates and have a negative impact on people's lives and the global economy. Meanwhile, Japanese Prime Minister Fumio Kishida issued a new warning on Saturday against excessive yen movements in the currency market, saying the country will not hesitate to take "appropriate" measures when necessary. In turn, Bank of Japan Governor Haruhiko Kuroda said the central bank must support Japan's economic recovery from the pandemic. The BOJ would do everything to achieve stable inflation supported by wage growth. The rapid weakening of the yen is becoming a factor in lifting inflation, according to quotes published by Bloomberg. Will the Bank of Japan fight the Fed? It appears that the main factor that may be behind the yen's weakening in recent months is the divergence in the monetary policy pursued by the Fed and the Bank of Japan. The Fed has opted for an unprecedented pace of interest rate hikes, while the Bank of Japan persists with loose monetary policy. As a result, the U.S. dollar is increasing its interest rate in favor of the Japanese yen, and capital seems to be flowing to where it can get more interest. Source: Conotoxia MT5, USD / JPY, MN. Nonetheless, current Japanese actions seem to indicate that the finance ministry would try to chase away those who gamble on further JPY weakness. If this is indeed the case, it seems that Japan believes the Fed is indeed close to moving away from the pace of 75 bp hikes every meeting. With the BOJ poised to maintain ultra-low policy at this week's meeting, the only hope for lasting relief for the yen should come from the other side of the Pacific. If that doesn't happen, however, it seems that the only result Japan might achieve, would be a decline in foreign exchange reserves. Did you know that CFDs allow you to trade on both falling and rising prices?Derivatives allow you to open buy and sell positions, and thus invest when quotes rise as well as fall. At Conotoxia, you can choose from CFDs on more than 100 currency pairs. Wanting to find a CFD on USD/JPY, for example, you just need to follow 4 simple steps: To access Trading Universe - a state-of-the-art hub of financial, information, investment and social products and services through a single Smart account, register here. Click "Platforms" in the "Invest&Forex" section. Choose one of the accounts: demo or live On the MT5 or cTrader platform, search for the CFD currency pair you are looking for and drag it to the chart window. Use the one-click trading option or open a new order with the right mouse button. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.21% of retail investor accounts lose money when trading CFDs with this CFD provider. Consider whether you understand how CFDs work and whether you can afford the high risk of losing your money. Read the article on Conotoxia.com

Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

Enrique Díaz-Álvarez talks Forex market highlighting euro, pound, Japanese yen and more

Enrique Díaz-Álvarez 07.11.2022 14:48

Currency market volatility continues to rise, and signs are emerging that the dollar rally is running out of steam. The Federal Reserve delivered a massive hike and a more hawkish than expected message, while other central banks begin to fret about the impact of higher rates on their respective economies. However, the dollar failed to rally and in fact fell against most G10 currencies, with the notable exception of sterling, which was hobbled by an uber-dovish Bank of England. The star of the week, and also the year so far, was undoubtedly the Brazilian real, a favourite of ours, which put in another scorching rally on the back of the peaceful transfer of power to what looks to be a moderate Lula administration. All eyes turn now to the critical October CPI inflation report out of the US (Thursday). Headline prices will probably drop further as energy prices continue to moderate, but the key will be once again the more persistent core rate. UK third-quarter GDP growth (Friday) may be important for sterling. Beyond economic news, it will be important to see whether signs of China easing its COVID policies are confirmed. As this is written, signs are emerging that last week’s rally in Chineses assets may have been premature. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 07/11/2022 British pound The Bank of England hiked rates by 75 basis points last Thursday as expected, but then surprised markets with one of its periodic pivots, this time a dovish one. The Bank of England appears to be taking a blasé view of inflation and focusing on recessionary risks instead. The reference to markets overestimating the terminal rate was unusually blunt, and sterling did not like it one bit, losing significant ground against every major currency worldwide. Third-quarter GDP growth data will be in focus this week. The MPC warned last week that the UK economy may already be in a recession, and this week data is indeed expected to show that contraction on a quarterly basis. This is, however, a backward looking number, and we expect sterling to react as much or more to the US inflation data out this week. Euro Another month, another blow out inflation report out of the Eurozone. This one came just a few days after the muddled attempt at a dovish pivot from the ECB at its meeting the previous week, thereby contributing to the developing credibility gap at the institution. In addition to double digit headline inflation, sticky core inflation continues to march higher. Figure 2: Euro Area Inflation Rate (2013 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 On the plus side, the worst fears about a winter energy crisis continue to fade. On the negative side, early Monday morning reports from Asia suggest that hopes for an easing of Chinese lockdowns may have been premature, and hence the recovery of European exports to China may be further delayed. This week’s main event in the Eurozone will be a number of ECB official speeches, including President Lagarde. US dollar The hopes for a Federal Reserve pivot to a more dovish stance failed to materialise last week, and in fact Chair Powell indicated that rates may have to go even higher than markets were pricing in before the meeting. Bonds fell, as did stocks, but the dollar failed to follow the script and actually ended the week slightly down in trade-weighted terms following Friday’s nonfarm payrolls data. The labour market report was mixed, but still consistent with a very tight market that is yet to feel the impact of monetary tightening in any significant way. Figure 3: US Nonfarm Payrolls (2021 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 The inflation report this week is expected to show another easing of headline annual price pressures on the back of lower energy costs. However, the key will be the core index that strips out the volatile food and energy components. The Fed needs to see a downward trend in these numbers before it can think of pausing hikes in interest rates, and is unlikely to see that in this report. Japanese yen The yen was one of the better performers in the G10 last week, ending modestly higher on the US dollar. The currency remains by far the worst performing major this year, though recent intervention efforts by the Bank of Japan appear to have put a temporary floor under the yen. According to Japan’s Ministry of Finance, intervention totalled more than ¥6 trillion last month, by far the largest ever. The 150 mark on the dollar seems to be a line in the sand for the BoJ, so we would expect fresh intervention to prop up the currency should the yen make another move towards this level. Tentative signs that the Bank of Japan is open to tweaking its monetary policy stance also provided a bit of assistance to JPY. During a speech mid-week, Governor Kuroda noted that changing the bank’s yield curve control policy could be an option should inflation pick-up. Japanese inflation remains far more contained than in most other countries, though it is expected to test three decade highs in the coming months, which could force the BoJ’s hand. Swiss franc EUR/CHF ended last week little changed, and the pair continues to hover below parity. The abundance of domestic economic data had little impact on the franc. Soft prints, for the most part, continue to point to a slowdown ahead. An indicator of consumer confidence, for instance, plunged to its lowest level since its inception in 1972. Retail sales, however, continue to show healthy consumer activity, expanding by another 0.9% in September. This resembles the situation in many other economies, where sentiment indicators and hard data are at odds. There’s not much on tap from Switzerland this week. Speeches by SNB chairman Thomas Jordan and fellow member Andrea Maechler could prove the most noteworthy. Last week, chairman Jordan suggested that further rate hikes may be needed in Switzerland, confirming our view that another rate increase is on the way in December. Australian dollar The Reserve Bank of Australia mostly met expectations during its meeting last week. Interest rates were raised by another 25 basis points to 2.85%, the second in consecutive meetings, having become the first major central bank to revert back to ‘standard’ sized hike in October. Governor Lowe struck a balanced tone in his presser, keeping the door open to additional hikes of a larger magnitude, as it waits to gauge the impact of its tightening cycle on domestic activity. The growth forecast for next year was downgraded, though there was an upward revision to its inflation forecast. All in all, there were no real surprises of note, and AUD largely tracked global risk sentiment and news out of the US. Meanwhile, news out of the Australian economy last week was mixed, with surprises to the upside in business activity and housing data offset by Friday’s soft retail sales print. This week is set to be a relatively quiet one in Australia, so we expect the dollar to be driven largely by goings on elsewhere. New Zealand dollar A stronger-than-expected labour report helped propel the New Zealand dollar to the top of the FX performance tracker last week. Employment rose strongly in the third quarter (+1.3%), following three quarters of essentially flat net employment gains, with the participation rate also up more than anticipated. News that China plans to stick by its zero-covid policy led a bit of a retracement in the dollar during Asian trading this morning, although a general improvement in market risk sentiment has kept the currency well bid. Developments out of China may be the main driver of NZD this week, as the domestic economic calendar is relatively light. We also think that expectations for the RBNZ’s next meeting in a couple of weeks time will remain key. Markets are torn between a 50bp and 75bp hike, though surprises to the upside in this week’s PMI and/or inflation expectations data could tip the balance in favour of the latter. Canadian dollar Friday’s stellar employment report out of Canada helped trigger one of the most violent rallies in CAD witnessed since the extreme volatility of the global financial crisis in ‘08-’09. The employment change number blew all expectations out of the water, as 108k net jobs were created last month, above the 21k consensus and the fastest pace of job creation since February 2020. Investors reacted by immediately raising expectations for Bank of Canada policy tightening, with markets now seeing a two-in-three chance of another 50bp rate hike in December. Figure 4: Canada Employment Change (2021 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 A speech by BoC governor Macklem (Thursday) could be key in shaping the aforementioned rate expectations, and confirm whether this is indeed enough to delay a dovish pivot. Should the Bank of Canada follow in the footsteps of the Fed in prolonging its hiking cycle, then CAD would likely be dragged higher along with the US currency against most majors. Swedish krona The Swedish krona appreciated against the euro last week, extending the rally in SEK to almost 2% against the common currency since the recent peak in mid-October. The latest data out of Sweden continues to be mixed. The manufacturing PMI released last week decreased to 46.8 in October, pointing to the most significant contraction in factory activity since May 2020. However, the services PMI increased to 56.9 from a more than two-year low of 55.1 in the previous month. eptember industrial production data, which will be released this Wednesday, will complete the picture of the economy’s performance, although it has to be said that this data point runs on somewhat of a lag, and is not expected to have too much impact on the currency. Norwegian krone Norges Bank has become the latest G10 central bank to begin slowing its tightening cycle. At its meeting last week, interest rates were raised by only 25 basis points, below the 50bps expected by markets. This weighed on the Norwegian krone, which fell to its lowest level in two years against the euro, although it has since recovered some of these losses. According to its communications, Norges Bank anticipates further hikes ahead, but at a slower pace due to cooling in some areas of the economy and expectations of lower inflationary pressures. This decision is at odds with core inflation, at an all-time high 5.3%, and a labour market that is almost at full employment. In the words of Norges Bank, a larger rate hike would have been needed had only these two variables been taken into account, but the board has put more weight on risks to growth and a tightening in financial conditions. The October inflation rate, to be released on Thursday, is expected to continue its upward trend. This could cause the terminal base rate to be revised upwards, which would likely support the krone. CNY Traders certainly couldn’t complain about a lack of volatility last week. The yuan ended the week higher against the broadly weaker dollar, and the drop in the USD/CNY pair on Friday was among the biggest on record. Looking beyond the FX market, last week was extraordinarily positive for equities, with the key indices rallying sharply on rumour-fuelled hopes that China may soon embark on a path to exit its controversial zero-Covid policy. On Saturday, however, officials quashed speculation, stressing that China would ‘unswervingly’ stick to zero-Covid. Chinese equities have extended their gains today, but this could tell more about their relative cheapness than the validity of reopening hopes. Just before the weekend, China’s new Covid cases surged to six-month highs. Rising infection numbers don’t bode well for the economic outlook, and domestic consumption has already taken a hit, as shown by last week’s soft PMI numbers. Looking ahead, news on the covid front and October’s inflation data (Wednesday) could prove market moving this week. Economic Calendar (07/11/2022 – 11/11/2022) To stay up to date with our publications, please choose one of the below: ðŸ“© Click here to receive the latest market updatesðŸ‘‰ Our LinkedIn page for the latest newsâœï¸ Our Blog page for other FX market reports ðŸ”Š Stay up to date with our podcast FXTalk Source: US dollar rally stalls in spite of hawkish Federal Reserve | Ebury UK

Steady BoE Rate Expectations Amid Empty Event Calendar in the UK

Saxo Bank Podcast: Protests In China, Lower Yields, Lower Crude Oil, Apple Risks A Further Haircut On The Risk And More

Saxo Bank 28.11.2022 12:24

Summary: Today we look at how the market is absorbing the news of widespread protests in China against Covid policies there, from lower yields to lower crude oil prices. That combination offers strong support for the Japanese yen, while Apple risks a further haircut on the risk of widening production disruptions. It is worth noting that corn prices in China are diverging from prices elsewhere, also on Covid policy disruptions. Elsewhere, we consider the status of "de-globalization" (or is it re-globalization?), and look at incoming earnings and macro calendar events for the week ahead. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it. Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-nov-28-2022-28112022

The US Dollar Index Is Producing A Reasonable Bullish Divergence

Saudi Arabia And Hong Kong End Their Currency Pegs To The USD

Saxo Bank 06.12.2022 09:28

Summary: Recognising the ongoing weaponisation of the USD by the US government, non-US allied countries move to leave the USD and the IMF to create an international clearing union (ICU) and a new reserve asset, the Bancor (currency code KEY), using Keynes’ original idea from the pre-Bretton Woods days to thumb its nose at the practices of the US in leveraging its power over the international monetary system. While less than a fifth of international trade is destined for the US, over a third of international trade is invoiced in USD and nearly 60 percent of global foreign exchange reserves are USD. The ban on transactions with Russian sovereign entities in February 2022 after Russia’s invasion of Ukraine sent shockwaves across countries not allied militarily with the US as the magnitude of the ban far exceeded sanctions on Iran, Venezuela and other countries in recent decades. These countries wonder whether their US assets—and even EUR, JPY and GBP assets—could be subjected to freeze orders imposed by the US Treasury and other US allies overnight. Many have speculated that the Chinese renminbi might become the new reserve currency, but China has shown no interest in abandoning cross-border capital controls. Another important aspect hampering the use of CNH in trade is that many non-US allies are wary of China’s rise in influence and power. Rather, a natural solution for China and its many trading partners, particularly energy and other commodities exporters, would be to find a new non-national currency reserve asset upon which to trade. They find inspiration in British economist John Maynard Keynes’ playbook for reconstructing a post-World War II international monetary system without a hegemon. In an epochal conference convened in Astana, Kazakhstan, leaders from OPEC+ countries, mainland China, Hong Kong, India, Brazil, Pakistan, Central Asia countries, and tens of African Union countries gather to establish an ICU based on a new accounting unit and reserve asset: the Bancor (currency code KEY). The KEY can only be held by member central banks and is used as an accounting unit to settle international trades and as a reserve asset. The new KEY is indexed to a basket of traded commodities with crude oil having the largest weight. The currencies of member countries are backed by the KEY at fixed exchange rates and are adjusted according to relative current account shifts among member countries. All the ICU member countries of the newly created monetary union withdraw from the IMF. Saudi Arabia and Hong Kong end their currency pegs to the USD. Market impact: Non-aligned central banks vastly cut their USD reserves, US Treasury yields soar and the USD falls 25 percent versus a basket of currencies trading with the new KEY asset. Source: OPEC+ and Chindia walk out of the IMF - Saxo Outrageous Prediction | Saxo Group (home.saxo)

Supply Trends Resurface: Analyzing the Impact on Market Dynamics

AUD/JPY Pair Has The Potential To Depreciate In The Near Future

InstaForex Analysis 14.12.2022 08:34

On the 4 hour chart, AUD/JPY cross currency pairs has : 1. The deviation between price movement with CCI Indicator. 2. The appearace of Ascending Broadening Wedge Pattern. Based on two things above, then AUD/JPY has the potential to depreciate in the near future where the level of 91.94 will be the main target to be tested if it turns out to be penetrated, it is very likely that AUD/JPY will continue its decline to the level of 91.08 but because tonight there will be the release of the predicted US Fed Fund Rates to make market movements volatile, please pay attention to the 93.30 level because if this level can be exceeded then all the downward scenarios previously described will cancel by itself. Relevance up to 05:00 2022-12-15 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/115733

Japanese yen: in April 2023 Governor Kuroda retires

Japan: CPI inflation expected to reach 3.9% year-on-year

ING Economics 16.12.2022 12:46

China loan rates are unlikely to be adjusted next week. Expect a rate hike from Bank Indonesia In this article China prime rate not expected to change Inflation reports out from Japan and Singapore Taiwan trade data BI to hike rates to help support IDR Source:Shutterstock China prime rate not expected to change China’s loan prime rate is one of the highlights for next week. We expect rates for both the 1Y and 5Y rates to remain unchanged at 3.65% and 4.30%, respectively. Credit costs have not come down and this may be one of the concerns that prevent banks from cutting rates. However, there is still a small chance that banks could lower the 5Y loan prime rate to share the government's policy trend of supporting the economy. Inflation reports out from Japan and Singapore Japan’s CPI inflation will be reported next week and is expected to rise even further, reaching 3.9% year-on-year in November. Utilities should be the main reason for the rise, suggested by last week’s Tokyo CPI inflation data. However, despite the recent accelerating inflation, the Bank of Japan is unlikely to change its easing stance and will not give any hint of any policy tweaks in the near future. As a result, another uneventful BoJ meeting is expected next week. Meanwhile, Singapore’s inflation will likely dip for another month but stay quite elevated at 6.5%YoY. Meanwhile, core inflation could remain flat at 5.1%YoY which will keep the Monetary Authority of Singapore on guard, although we do not see an immediate need for additional central bank action ahead of its planned meeting in April 2023. Taiwan trade data Also set for release next week is Taiwan export orders. Orders should continue to contract due to slower growth in the US and Europe amid a still-uncertain growth pick-up in China. BI to hike rates to help support IDR Lastly, Bank Indonesia will likely hike by 25bp. BI will need to sustain rate hikes but softer-than-expected headline inflation could mean that the central bank also slows the pace of its tightening. BI may also need to hike rates to support the rupiah which has faced some pressure after the recent strong support provided by sterling export growth appears to be fading fast. Key events in Asia next week Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Results Of The March Meeting Of The Bank Of Japan Are Rather Symbolic

Japan: Former Finance Ministry official has came up with the idea of a "slow shift" in monetary policy

Jing Ren 19.12.2022 10:22

Japan's inflation rate is finally starting to tick up. It's expected that the country will report a further increase in inflation in November to 3.9% from 3.7% prior. But, before that information is made available, the BOJ is expected to meet to decide its monetary policy stance. Normally this would be an issue for a central bank, having to make a rate decision without the latest inflation figures. But the long-standing consensus is that the BOJ won't change policy, at all, and keep its now decades-long extreme easing policy. So, if the interest rate isn't going to be a surprise, what could move the markets? Well, that's preparing for what's coming next year. A change in leadership Kuroda, known as an ultradove, will step down at the end of his term in April. The consensus is that since rates have been negative for the entirety of his mandate, it's unlikely he will change the situation just as he's about to go out the door. But, that doesn't mean he won't help set things up for whomever replaces him. And that could start coming out as soon as the next meeting. Read next: Netflix (NFLX) slumped 8.63%, as a media report said the video streaming firm is refunding advertisers after missing views targets| FXMAG.COM For a long time, it's been rumored that the most likely replacement for Kuroda would be Hiroshi Nakaso. He's a former Finance Ministry official, and is seen as a lot more hawkish than the current governor. In the past, he's already issued proposals on how the BOJ could exit its extraordinary easing policy. A change in outlook Nakaso has proposed a slow shift in policy, with small steps to bring inflation down. That could be something of a challenge, since many other central banks have raised dramatically to head off skyrocketing inflation. Japan has managed to avoid that situation, so far, but inflation is near double the target rate and keeps rising. Which has been increasing pressure on the BOJ to do something. One of the ways that the BOJ could relieve that pressure is to let it be known that it is considering some of the "soft" measures to lift rates, but not actually do any changes. Given how long the BOJ has been stuck in one policy, it could be enough to "re-anchor" inflation expectations. What about the weaker yen? One of the things that was driving inflation was the weakening yen earlier in the year. It got so bad that the Japanese government had to step in a couple of times. But since expectations that the Fed was about to level off in its rates started to cement in the mind of the markets, the yen has recovered a little. This has given the BOJ - and particularly Kuroda - more room to keep rates low at least for a while. But, if the trend with the currency could reverse, that could cause complications for the BOJ. One of the ways to deal with that would be to suggest the BOJ was looking at easing off on yield curve control. That's a policy that would be expected to be enacted if Nakaso were to become governor. But, whether the BOJ judges it an opportune moment to let that slip now or safe that card to play in the new year, is still an open question. That could be the determinant of whether the yen continues to drift in it's current direction, or starts to recover against the dollar on expectation of the new policy.

UK GDP Already Falling And Continuing To Do So For This Calendar Year, Copper Is Still Within A Tightening Range

Bank of England decision wasn't unanimous as one member voted for a 75bp hike with two other opting for inaction

Enrique Díaz-Álvarez 19.12.2022 16:35

We’d been warning for some time about the large gap between market expectations for future ECB rates and the inflationary reality. The central bank swung clearly to our view at its meeting last week, warning of 50bp hikes for as long as is necessary and forcing European rates higher across the curve. The Federal Reserve was also hawkish, and the Bank of England maintained its unblemished track record of muddled messaging and general confusion. The euro benefited the most, while sterling, emerging market currencies and risk assets generally reacted badly to the news that the two most important central banks continue to focus exclusively on reining in inflation back to targets. The week before Christmas tends to be on the dull side in financial markets, as traders wind down for the year. In fact, little news of note will come out next week, beyond the PCE inflation report in the US on Friday. However, the market is still digesting the hawkish surprises from last week’s central bank meetings so we still expect an interesting week in currency markets. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 19/12/2022 GBP While rates in the UK were hiked by 50bps as markets expected, there was a three-way split among Monetary Policy Committee members, with one member voting for a 75bp hike and two more voting for no change in rates. This was, at the margin, a dovish split, but on the other hand there seemed to be yet another swing in Bank of England communications, this time towards hawkishness and acceptance of higher market expectations of future hikes. Read next: EUR/USD Pair Looks Reasonably Well Supported | The Japanese Yen Galloped Higher In The Morning| FXMAG.COM Overall a muddle message that resulted in an underperforming currency as sterling finished the week right near the bottom of the G10 currency rankings. No major news will be released this week, so expect the pound to move off events elsewhere. EUR The ECB sent markets an unmistakably hawkish message last week, validating our view that there was a massive gap between expectations of future hikes and the inflationary realities in the Eurozone. President Lagarde warned of 50bp hikes, harsher and earlier quantitative tightening, and a higher terminal rate for the ECB. Another positive factor for the euro were the December PMIs of business activity, all of which improved measurably from the previous month. The worst-case scenarios for an energy crisis look increasingly remote, and China’s pivot away from zero-COVID policies only adds to the bullishness (relatively speaking) on the Eurozone economy. However, the common currency has already had a blistering rally of over 10% since its late-September low and perhaps a pause is to be expected in the lead up to the Christmas holiday. Figure 2: G3 PMIs (2020 – 2022) Source: Refinitiv Datastream Date: 19/12/2022 Aside from China, Japan has been one of the few countries in the world to adopt an easing bias in the current cycle, so a move away from this at a time when most central banks are delivering dovish pivots would be unambiguously bullish news for JPY. The BoJ will be announcing its latest policy decision on Tuesday, though we see very little chance of any policy changes, or tweak to the bank’s forward guidance. CHF The Swiss franc outperformed most G10 currencies last week, although it ended slightly lower against the euro. Last week’s Swiss National Bank meeting largely followed the script, and had little impact on the franc. As expected, the SNB raised its policy rate by 50 basis points to 1% and reiterated its pledge to intervene in the FX market as necessary. President Jordan confirmed that the bank has indeed sold foreign currency in the past few months and that it may intervene on both sides of the market. The bank’s conditional inflation forecast was little changed from September and the SNB continues to pencil in inflation of 2.4% in 2023. Moreover, the bank expects growth to decelerate from around 2% this year to 0.5% in 2023. Even though price pressures in Switzerland have moderated of late, the fight against inflation is not over and the bank signalled that it may hike rates again. We expect the SNB to maintain its hawkish stance in the near-term, but also think that it won’t be long until the bank considers ending the hiking process. With barely any news from Switzerland on tap this week, the franc may trade off events elsewhere, though volatility may be limited. AUD The Australian dollar was one of the underperformers in the G10 last week, with heightened uncertainty surrounding the covid situation in China keeping gains for AUD in check. While news of a possible move away from zero-covid should be keeping the currency well bid, reports of jumps in caseloads have soured optimism. Economic news out of Australia last week was mixed, with a strong jobs report offset by another drop in the composite PMI, which remains in contractionary territory. Most economists, ourselves included, expect Australia to avoid recession in the coming months, though a slowdown appears inevitable, particularly in light of the acute uncertainty abroad. The latest RBA meeting minutes will be released on Tuesday. Markets see a relatively low possibility of another rate hike at the next meeting in February, so we could see a bout of AUD strength if one were to be alluded to in tomorrow’s minutes. NZD Strong third quarter GDP data perhaps contributed to an outperformance in the New Zealand dollar relative to its antipodean counterpart last week. The New Zealand economy expanded by 2% on the previous quarter, more than double expectations, and by 6.4% year-on-year (5.5% consensus). The reaction in markets to the news was, however, rather limited, as economists believe that this jump in activity was driven largely by one-off factors, notably the reopening of borders in August. We suspect that volatility in NZD will be low this week as we approach the typically subdued Christmas period. Focus in the New Year will revert back to RBNZ monetary policy. The bank is expected to be the most active in the G10 next year, which may provide some scope for a dovish surprise. Figure 4: New Zealand GDP Growth Rate (2015 – 2022) Source: Refinitiv Datastream Date: 19/12/2022 CAD A lack of major domestic news caused CAD to put in a middling performance last week. The modest uptick in global oil prices should be supporting the Canadian dollar, although the Bank of Canada’s dovish policy stance has made gains hard to come in recent months. Inflation and GDP data out on Thursday and Friday respectively could receive some attention this week, though the BoC has indicated that it may have already ended its tightening cycle, which could mean that these data points become slightly less relevant. That said, economists are pencilling in a four-month high in the headline inflation numbers that, if confirmed, could raise the possibility of another 25bp hike in the first quarter of next year, even if we think this is doubtful. SEK The ECB’s hawkishness sent the krona to its lowest level in almost two months against the euro last week, although Sweden’s November inflation data perhaps prevented a more aggressive move lower in the currency. The annual inflation rate increased to 11.5% in November, its highest level since February 1991, following a 10.9% surge in October, while core inflation increased to 9.5%. The continued rise in inflation supports our view that the Riksbank will likely need to raise interest rates further during the next few meetings. This could support the krona, as most other major central banks appear to be nearing the end of their tightening cycles. November retail sales will be released this Thursday. Apart from that, there are no events that are expected to move the currency, and as we approach the festive period we expect market movements to abate. NOK The slight rebound in Brent crude oil prices, and last week’s rate hike by Norges Bank, allowed the Norwegian krone to post modest gains against the euro last week. As expected, Norges Bank raised rates by 25bps last week, lifting its key rate to 2.75%. The bank announced that it expects to continue hiking rates further at the next meeting, and that it expects rates to be close to 3% in 2023. As for the macroeconomic outlook, the bank expects inflation to remain higher than expected for a longer period of time, with the economy set to slow down more than initially expected. As inflation remains well above target, we now expect Norges bank to carry out two additional rate hikes of 25 basis points at the January and March meetings. However, this will depend entirely on the data available until then. The December unemployment rate will be released this Friday, although there are no other events that are expected to move the currency aside from that. CNY The Chinese yuan ended last week roughly in the middle of the emerging market currency dashboard, and just a touch lower against the US dollar. Initial optimism about China inching away from zero-COVID appears to be turning into caution as the country is battling through its first winter wave of covid. China’s chief epidemiologist Wu Zunyou expects two more to come, with the latter ending in mid-March. This casts a shadow on the near-term economic outlook – data in the last few days has certainly not helped allay this pessimism. Hard data published last week was overall weaker-than-expected. Perhaps the most disappointing was retail sales, which showed a slight contraction year-to-date. Following discussions at the Central Economic Work Conference last week, authorities telegraphed that economic stability is their top priority for next year, and also stressed a pursuit of steady progress. The messaging was in line with recent signals from authorities, and confirms they’ll be focused on reviving poor domestic demand and encouraging an expansion of the private sector. This week we’ll continue to focus on covid news, albeit we will also keep an eye on monetary policy. China’s medium-term lending facility rate was kept unchanged last week, albeit the PBoC injected a net 150 billion yuan into the banking system via the facility (after we consider maturing loans). On Tuesday, we await the decision on 1- and 5-year loan prime rates, albeit no change is expected there. Economic Calendar (19/11/2022 – 23/12/2022) To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Read the article on Ebury

John Hardy to FXMAG: The UK economy faces significant head-winds from supply side limitations

John Hardy 19.12.2022 17:22

Christmas is near and the economic calendar looks quite unattractive, however, Bank of Japan decides on interest rate and in the UK, GDP is released. Naturally, in Japan an unchanged rate seems to be cemented, but it's still not sure what's ahead. In the UK market consensus points to a slight shrink of the economy and again it's about the near future. Today, we're happy to share John Hardy's (Saxo Bank) thoughts. Bank of Japan is bound to keep the rate unchanged this week, but it is said policy shift is near. Are you of the opinion doves may go away in the first quarter? John Hardy, Head of FX Strategy at Saxo Bank: The Bank of Japan will want to move very cautiously next year as it, and the government, hate when "excess" JPY volatility shakes markets and the outlook for Japan's large exporters. Current BoJ Governor Kuroda's term will end in April, just after the end of Japan's financial year on March 31, and he will not likely preside over any notable shift in policy. There is less pressure at the moment for the Bank of Japan to do anything at all, now that global yields have eased back significantly and the market is ignoring the Fed's latest hawkish forecasts for next year. If inflationary pressures are seen persisting after Kuroda's exit, the new leadership will inevitably have to move to tighten policy, but will try to do so in a slow controlled fashion, with as much pre-announcement of the steps it will take as possible to avoid significant volatility. JPY volatility risks will prove most significant if inflation remains higher than many expect next year, a scenario we think has a high risk, if probably beyond Q1. Read next: Ole Hansen: a scenario of much lower oil prices remain remote given the support from OPEC+ production cuts and the US beginning to buy back| FXMAG.COM UK economy is expected to decrease significantly, as we approach the end of the year how do you see the near future of the UK economy and what would BoE consider as a gauge ahead of next interest rate decision? John Hardy, Head of FX Strategy at Saxo Bank: The UK economy faces significant head-winds from supply side limitations (shortage of labor and high cost-of-living increases from Europe's energy crisis) and the outlook is made worse by the fiscal austerity from Sunak-Hunt after the chaos triggered by the Truss-Kwarteng "mini-budget". The Bank of England wants to slow down its hiking regime as it sees incoming economic weakness that will be made worse by government pulling spending. Generally, fiscal austerity and a slowdown in BoE tightening may lead to a weaker pound sterling.

Japanese yen: in April 2023 Governor Kuroda retires

Kenny Fisher 19.12.2022 20:39

The Japanese yen has started the week in positive territory. In the European session, USD/JPY is trading at 136.22, down 0.38%. The yen is coming off a busy week, as USD/JPY traded in a 350-point range but closed the week almost unchanged. Will Japan change its inflation stance? The markets are keeping an eye on April 2023, when Bank of Japan Governor Kuroda retires and a new governor is appointed. This has raised speculation that the changing of the guard could lead to policy changes at the bank. There was a report today that the BoJ and the government could revise their decade-old statement, which pledges to achieve the 2% inflation target “at the earliest date possible”. This has resulted in the BoJ maintaining its radical stimulus programme and keeping interest rates ultra-low, at a time when other major central banks are busy raising rates in order to curb inflation. This policy was initiated in 2013, when Japan’s economy was marked by deflation. With consumer prices rising and a weak yen contributing to inflation, the statement could be out of date and the new BoJ governor may feel the timing is right to revise the statement, perhaps making the inflation target more flexible. There is rising speculation that the new governor could tweak yield curve control, which has kept a cap on 10-year Japan’s government bonds and fueled the yen’s sharp descent this year. For now, however, it is likely to be business as usual – the BoJ winds up a two-day meeting on Tuesday and is not expected to make any changes to monetary policy. Read next: Russian Drones Attacked Kyiv Again | Most respondents do not want Musk| FXMAG.COM USD/JPY Technical USD/JPY is testing support at 136.48. This is followed by support at 134.78 There is resistance at 137.64 and 138.43 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY dips on possible policy tweak - MarketPulseMarketPulse

Traders assume interest rates in Japan and Switzerland could steadily go up next year

Conotoxia Comments 19.12.2022 23:12

The U.S. Federal Reserve, the Bank of England, the Bank of Australia and New Zealand, as well as the European Central Bank and the Bank of Canada, are among others the central banks of the world's major economies that have already begun the cycle of interest rate hikes and are possibly to be close to completing it in the first or second quarter of 2023. In contrast, the situation seems to be different for the Bank of Japan and the Bank of Switzerland. We could see quite well how monetary policy could affect currency rates in 2022. The Fed, by starting aggressive monetary tightening, was able to make the U.S. dollar more attractive thanks to the higher interest rates its holders received. The Fed started the cycle, and the European Central Bank followed suit with some time lag. For the moment, this lag is estimated to be about six months. This could mean that the ECB will not complete its monetary tightening until two quarters later, after the Fed has done so. The effects of this shift could be observed in the EUR/USD exchange rate. Source: Conotoxia MT5, EURUSD, H4 The unprecedented pace of rate hikes in the U.S. may have helped the dollar until September, October, when discussions began about slowing the pace of USD interest rate increases. At that time, there was also discussion of what direction the European Central Bank should take, which for the moment is declaring hikes of 50 bps each and higher rates than the market had previously expected (>3%). What about the CHF and JPY? The above description may approximate the events in central banking in relation to the exchange rate where, if one theme ends (the near end of rate hikes in the US), the game begins for the next one (the later and higher end of the cycle in the Eurozone). According to data from the interest rate market, traders seem to assume that interest rates in Japan and Switzerland could go steadily upward in 2023. This, in turn, could mean that once the U.S. theme, then the eurozone, is over, the markets could move into the tightening game in countries with previously lowest interest rates in the world. Change in rhetoric in Japan, how does the yen exchange rate react? This morning, the Japanese yen strengthened 0.6% to 135.8 per USD after reports that Prime Minister Fumio Kishida plans to revise a 10-year agreement with the Bank of Japan, which says the central bank will reach a 2% inflation target "at the earliest possible time." The government is seeking to make the price target more flexible, which could broaden the BOJ's policy options for adjusting to economic developments. BNP Paribas Japan's chief credit strategist Mana Nakazora, a potential candidate for deputy governor of the Bank of Japan next year, also told Reuters recently that the central bank should revise its statement to give itself more room to adjust interest rates, according to tradingeconomics. The bottom line is that interest rate hike cycles seem to be staggered in different economies around the world. As a result, currency rates may also react accordingly with some time lag. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Japanese yen and Swiss franc - currencies of 2023? (conotoxia.com)

Ralph Shedler's Technical Analysis Of The USD/JPY Pair

Bank of Japan announces yield target to 0.0-0.50% range, but rate differential remains significant

Alex Kuptsikevich 20.12.2022 14:58

The Bank of Japan made a surprise move on Tuesday morning, extending the permissible yield range of 10-year government bonds. The decision caused the yen to strengthen by more than 3%, and the Nikkei225 index lost as much as 4% before recovering almost half of its initial decline. The central bank of Japan said at the end of its regular meeting that it would switch from a 0.25% yield target to a 0.0-0.50% target range instead. As yields had been held at 0.25% solely due to BoJ purchases, the range extension immediately sent yields to the upper end of the range. This decision meant that the BoJ would print fewer yen to buy government bonds for the FX market, strengthening the currency. Strictly speaking, the Bank of Japan has made monetary policy less accommodating. However, the difference with key rates of other countries remains disastrous, as it is the only one keeping rates negative with an active QE phase. On the other hand, the signal from the softer central bank itself is definite and could be a trial balloon for a fundamental policy reversal. Bank of Japan meetings are no longer boring. We also pay attention to the timing of the changes. The powerful interventions of the Japanese Ministry of Finance in November stopped the USDJPY rising and confirmed the reversal in the pair thanks to a decisive move down on a break-down of the 50-day moving average. Read next: The Bank Of Japan's Decision To Allow 10-Year Government Bonds Caused Turmoil In The Financial Markets, USD/JPY Trading Below 133| FXMAG.COM Throughout December, we saw a three-week consolidation of the pair just above the 200 SMA. The decisive move down after the extended consolidation has been reinforced by the fact that during the lull in the pair, the stop orders pulled closer to the market and are now triggered in droves. A sharp pullback of the pair under its 200 SMA often signals the reversal of the long-term trend. We had similar signals earlier in the EURUSD and the GBPUSD. In addition, the fall of the USDJPY below 133 was below the 61.8% retracement of the entire momentum of the pair from the beginning of 2021 to the peak in October 2022. Market participants' conviction of a hawkish reversal of Bank of Japan policy could trigger a new round of decline in the pair with a technical target near 127. This is where the 50% level of the mentioned last rally and the support area in May of the year gone by are concentrated.

Analysis Of The AUD/USD Commodity Currency Pair's Price

The AUD/JPY Cross Currency Pair Will Have The Potential To Be Corrected

InstaForex Analysis 21.12.2022 08:58

It seems that the AUD/JPY cross currency pair will try to test the support area in the near future at the range 87.70 - 87.28. If this level is strong enough to halt its decline, AUD/JPY will have the potential to be corrected, rally up to the 88.84 level as the main target. the area 89.35-89.91 as the second target with a note that the support area level 87.70-87.28 is able to halt its decline, but if the opposite happens the support area is not strong enough to hold its decline, then the upward rally scenario described earlier will cancel itself. Relevance up to 05:00 2022-12-22 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/116119

Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Japanese yen gained, New Zealand dollar decreases because of larger-than-expected trade deficit

Jing Ren 21.12.2022 08:35

USDJPY breaks major support The Japanese yen soared after the BoJ unexpectedly relaxed its yield cap. The previous rebound quickly had turned into a bull trap at 137.80 under the 20-day moving average. The sharp fall below 134.50 is a sign of liquidation, invalidating the recovery attempt. The August low of 130.50 is a critical floor to test the bulls’ resolve and its breach may pave the way for a bearish reversal in the new year. As the RSI sank into oversold territory, the former demand zone next to 135.00 has turned into a supply one. NZDUSD struggles for support The New Zealand dollar edges lower over a larger-than-expected trade deficit in November. The bears have faded last week’s bullish momentum and pushed the kiwi back below 0.6400. This level has since become a fresh resistance which suggests strong pressure ahead. Previous lows around 0.6300 coincide with the 20-day moving average and an attempt to break below puts the pair at the risk of a deeper correction, with 0.6200 as a possible target. A close back above 0.6400 would keep buyers in the game. XAUUSD grinds resistance A retreating US dollar boosted the appeal of bullion. Despite the metal’s choppy price action, the bulls have been looking to consolidate their gains above August’s high of 1805. With sentiment shifting to a brighter side, more buyers may place follow-up bids as the RSI drops back to the neutral area on the daily chart. This could be confirmed by the price bouncing off the 20-day moving average (1775) then the psychological tag of 1800. A close above the recent high of 1823 could attract momentum buyers and trigger a rally to 1860. Read next: Indonesia Has Potential In The Development Of Solar Energy| FXMAG.COM

Saxo Bank Podcast: The Bank Of Japan Meeting And More

The Rally In The Japanese Yen (JPY) Will Help Moderate The Relative Inflation Risks For Japan

Saxo Bank 22.12.2022 08:57

Summary: Risk sentiment bounced yesterday after December US Consumer Confidence came in far stronger than expected, jumping to an eight-month high. And yet, US Treasury yields fell gently all along the curve yesterday, in part as the same US confidence survey showed inflation expectations dropping more quickly than expected and on a strong 20-year US treasury auction. In FX, the Aussie has rebounded sharply on hopes for stimulus measures in China and a friendly diplomatic tone in recent talks between Australian and Chinese leaders. Note: This is the final Saxo Market Quick Take until Monday January 2, 2023. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.5% yesterday closing above the 50-day moving average as positive earnings from Nike helped lift sentiment yesterday and provided a positive assessment of the US consumer. Equity trading will slowly enter hibernation as the holiday period approaches so expect little price action today and tomorrow. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on stimulus rhetoric and talk of shortening quarantine The Hang Seng Index rallied 2.4% and CSI 300 climbed 0.4% as of writing, after China’s State Council, the People’s Bank of China, and the China Securities Regulatory Commission separately released meeting readout or statements to pledge to implement the decisions from the recent Central Economic Work Conference to boost the economy, support the property sector, and the internet platform companies. Adding to the risk-on sentiment is market chatter about the shortening of quarantine to three days. Mega-cap China internet stocks surged 3% to 6%. Leading retail and catering stocks jumped by 2% to 11%. FX: choppy markets as USD starts day on a weak footing Some gentle back and forth in FX yesterday as the USD put on a show of rallying, while most of the action has been in the crosses and the greenback has eased back lower after a strong session for risk sentiment yesterday and lower US treasury yields helping USDJPY back lower after its traumatic sell-off and broad JPY rally on Tuesday’s surprise tweak of BoJ policy. The biggest mover to the upside has been the Aussie, which is enjoying the more friendly diplomatic tone with China and has suddenly rallied in the crosses, especially in AUDNZD, on more rhetoric overnight from China on its intent to boost growth. Crude oil (CLG3 & LCOG3) rally extends on US inventory data Crude oil closed at the highest level since December 5 after the US DoE inventory reports showed a nearly 6M barrel draw on crude oil stocks, while gasoline inventory levels rose nearly 2.5M barrels, a half million more than expected, and distillates inventories fell –242k vs. A rise of 1.5M barrels expected. Gasoline and distillate stocks have been generally building of late, but the latter remains slightly below the inventory range of the past 5 years. Gold (XAUUSD) and silver (XAGUSD) remain near recent highs ... after surging in the wake of the Bank of Japan policy tweak on Tuesday and despite yields easing lower yesterday in the US. BOth 2020 and 2021 saw gold ending the year on a strong note and then sharp follow-on rallies in January were quickly reversed. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) remained subdued despite surge in US Consumer Confidence US Treasury yields eased lower all along the curve yesterday despite a large and unexpected surge in US Consumer Confidence as that same survey’s drop in inflation expectations may have received more attention. Later in the day, a strong US 20-year auction, where bidding metrics were the firmest since this spring. End-of-year portfolio rebalancing may obscure the next bigger move for treasuries until we roll into the New Year. What is going on? Mixed U.S. data: weaker home sales, higher consumer confidence, lower inflation expectations Economic data were mixed. The 1-year-ahead inflation expectation in the Conference Board Consumer Confidence survey softened from 7.1% in November to 6.7% in December, the lowest since September of 2021. On the other hand, Headline consumer confidence as well as the present situation and expectations components rose in the Conference Board Consumer Confidence survey. The headline consumer confidence improved to 108.2, (vs consensus 101.0; Nov: 101.4), the highest level since April this year. Elsewhere, the annualized rate of existing home sales fell -7.7% in November, the 10th consecutive month of declines as the historic surge in US mortgage rates this year continues to pressure the US housing market. Micron shares down 2% as glut in memory chips continues The US memory chip manufacturer delivered last night a positive surprise on FY23 Q1 (ending 1 December) adjusted EPS at $0.04 vs est. $-0.88 and announced a 10% headcount reduction to reduce costs. The real negative surprise was the Q2 revenue outlook of $3.6-4bn vs est. $3.9bn and the Q2 adjusted gross margin of 6-11% vs est. 17.8% suggesting significant pricing headwinds compared to market expectations. Micron is also drastically reducing its 2024 capex plans. China and Australia seek to improve the relationship between the two countries During a phone call to mark the 50th anniversary of the official diplomatic relationship between China and Australia, China’s President Xi told Australian Prime Minister Anthony Albanese that China would seek to “promote a sustainable development of the China-Australia comprehensive strategic partnership”. Meanwhile, Australian Foreign Minister Penny Wong told reporters that China and Australia agreed to continue high-level dialogue on issues including the removal of China’s trade sanctions on Australian goods. What are we watching next? Japan’s November Inflation data up tonight After an historic move in the JPY this week, the market will be watching the latest batch of Japan’s CPI data, which has surged to multi-decade highs recently and is expected in at +3.9% YoY for the headline and +2.8% YoY ex Fresh Food and Energy. The rally in the JPY by some 12% from its lows of two months ago will help moderate the relative inflation risks for Japan. US PCE inflation data for November out tomorrow This is arguably the last interesting macro data point out of the US until the first week of the New Year. The PCE data is expected to show that core inflation will drop sharply to 4.6% YoY vs. 5.0% in October, while the headline is expected in at 5.5% versus 6.0% in October. Hotter than expected inflation readings will be an interesting test for markets in coming months as the market has a strong view that the Fed is poised to halt rate hikes as soon as Q2 of next year and will be cutting by year end, despite the Fed “dot plot” projections suggesting the Fed will have a policy rate at the end of next year of above 5% (versus 4.25%-4.50% now). Earnings to watch The earnings calendar is winding down for the year, with payroll and HR-services company Paychex reporting today before the market opens and struggling US used car seller and servicer CarMax, which is trading near its lows for the year, likewise reports before the market open today. Today: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1100 – Turkey Rate Announcement 1330 – US Weekly Initial Jobless Claims 1530 – US Weekly Natural Gas Storage Change 2330 – Japan Nov. CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Source: Financial Markets Today: Quick Take – December 22, 2022 | Saxo Group (home.saxo)

Japan's Ministry Of Finance (MoF) Plans To Sell 190 Trillion Yen

TeleTrade Comments 22.12.2022 09:08

Citing a draft of the plan, Reuters reported on Thursday, Japan's Ministry of Finance (MoF) plans to sell 190 trillion yen ($1.44 trillion) worth of Japanese government bonds (JGB) in the fiscal year beginning April 1, with cuts in the amount of short-term debt sold. Separately, Reuters noted that “private sector advisers of Japan's top economic council on Thursday called on the government to step up talks on how to ensure wages rise faster than inflation.” Related reads Japan’s PM Kishida: Will host a special session of council on economic, fiscal policy early next year USD/JPY Price Analysis: Gearing up for another break of 131.00 on impending bear cross

Canadian dollar becomes weaker in the wake of inflation print, consumer confidence supports greenback

Jing Ren 22.12.2022 08:40

USDCAD hits resistance The Canadian dollar softened as November’s inflation reading showed signs of slowing down. On the daily chart, the uptrend remains intact and a bullish MA cross indicates solid support and a potential acceleration to the upside. However, the pair is still grinding the supply area around 1.3700 as the pressure builds up. A breakout would lead to a test of November’s peak at 1.3800, which would be a step closer to a bullish continuation. On the downside, 1.3530 next to the 30-day moving average is the first support. USDCHF tests critical floor The US dollar steadies as consumer confidence climbed to an eight-month high in December. Still, the pair has given up all the gains from its rally earlier this year, which shows a lack of commitment to keep the dollar rolling. The mood is still downbeat as the pair drifts lower and is capped by a series of lower highs, the latest being at 0.9370 right under the 20-day moving average. Last April’s low of 0.9210 has attracted some bargain hunters but its breach could trigger a new round of sell-off to 0.9100. USOIL grinds higher WTI crude edges higher over a larger-than-expected draw in US inventories. The commodity has so far found support at a 12-month low also the psychological handle of 70.00. Then a brief retracement saw follow-up bids over 73.50, suggesting solid interest from the buy side. A break above the recent high of 77.70 would open the path towards the daily resistance at 82.50 where renewed selling could be expected. Its breach, however, would put the oil price back on track. 75.80 is a fresh support in case of weakness. Read next: Netflix Wants You To Pay For Sharing Your Password With Others| FXMAG.COM

USD/JPY: There could be monetary policy shifts before the end of Kuroda's tenure

Kenny Fisher 22.12.2022 16:09

The Japanese yen has edged higher on Thursday. In the European session, USD/JPY is trading at 132.09, down 0.27%. The dust has settled after Tuesday’s dramatic events, when the yen shot up 3.7%. This followed the Bank of Japan’s shocking announcement that it would widen its yield curve control on 10-year bonds from 25 bp to 50 bp. The markets were completely blindsided, which could very well be what the BoJ was hoping for. The markets hadn’t expected any policy moves until after BoJ Governor Kuroda ends his term in April, but now there is talk of major policy moves before then, such as raising interest rates out of negative territory. The BoJ releases minutes later today, but these are minutes of the November meeting. Still, with all of the drama that the BoJ has produced this week, investors will be keeping an eye on this release, looking for clues about future policy. National Core CPI next What will be of more interest to the markets is National Core CPI for November, which will also be released later today. The index is expected to inch up to 3.7%, up from 3.6% in October. Japan’s inflation rate is much lower than the US or the UK, but price pressures have nonetheless put the squeeze on households and businesses, which became accustomed to decades of deflation. With economic conditions improving and inflation rising, there has been speculation that the BoJ might consider major policy moves in the short-term, such as exiting from its stimulus programme. The BoJ showed this week that it was willing to make significant moves, and more tightening could be on the way. Read next: Credit Suisse Sold Building In Geneva, Visa Is Building Success At The Expense Of Small Retailers | FXMAG.COM USD/JPY Technical USD/JPY has support at 131.13 and 130.15 There is resistance at 132.83 and 134.12 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen steady ahead of CPI - MarketPulseMarketPulse

Japan's inflation hit 3.8% in November and is expected to jump another 0.2% next month

ING Economics 23.12.2022 09:58

Consumer price increases speed up but look to be nearing their peak. Meanwhile, market expectations of further tightening increase. Bank of Japan Governor Haruhiko Kuroda 3.8% Consumer price inflation % YoY Lower than expected Consumer inflation is nearing its peak In November, headline CPI inflation rose 3.8% YoY (vs 3.7% in October and 3.9% market consensus). The government’s travel subsidy programme partially eased the pressures on service prices, yet continued price hikes in utilities pushed up overall inflation. We expect consumer prices to hit 4.0% in December but to slow from next January, for the following reasons: (1) The government plans to provide electricity subsidies from January (estimated to reduce electricity bills by 20%), (2) nuclear power is expected to increase next year and to also likely lower the burden on electricity bills,(3) the JPY will likely remain strong for a while, (4) global energy prices are expected to stabilize, (5) spring salary negotiations will not likely catch up with real wage increases, and (6) higher market interest rates are expected to eventually curb inflation. Consumer inflation accelerated, mainly due to cost-push factors Source: CEIC BoJ watch After the Bank of Japan’s unexpected policy tweak earlier this week, the market apparently no longer relies exclusively on what the Bank of Japan mentions to predict the BoJ’s future policy actions. Governor Kuroda may have rescued the effectiveness of YCC policy in the financial markets, but in return, it has hurt the credibility of the BoJ and continues to elevate market speculation and uncertainty on future policy direction. We still expect the BoJ’s policy rate to remain unchanged in 2023 - the BoJ is unlikely to move until it meets its mandate of inflation targeting. Governor Kuroda will lead policy decision meetings in January and March before he finishes his term in April, and we expect the BoJ to take a wait-and-see stance on how the recent adjustment will affect financial markets. As mentioned above, Japan’s unusually high inflation looks temporary and should see a decline next year - we think the BoJ will have time to take its next step. The policy pivot should come with proper procedures - we think that policy review should come after the new Governor comes on board and then we will have a clearer view of the BoJ’s next move. Read this article on THINK TagsCPI inflation Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank of Japan stays on hold but policy adjustment is coming

Judging from ING expectations, Bank of Japan may hike the rate in the end of 2023 or even in 2024

ING Economics 27.12.2022 16:39

The labour market continues to recover slowly but the sudden drop in retail sales should be temporary. We think the Japanese economy will recover modestly next year, but the Bank of Japan's policy normalisation (end of negative policy rate) is still a long way off 2.5% Jobless rate Lower than expected -1.1% Retail sales %MoM sa Lower than expected Labour market continues to recover but no clear sign of wage growth The jobless rate edged down to 2.5% in November (vs 2.6% in October, 2.6% market consensus) while the job-to-application ratio was unchanged at 1.35. Labour market conditions continue to tighten but it is not strong enough to lead wage growth, which is sought by the Bank of Japan. Also, the jobless rate has fallen, but it was mainly because the number of workers that dropped out fom the labour market was higher than that of employment. We think that service employment in the tourism and hospitality sectors are likely to rise in the future, but manufactuting employment is expected to decline due to weak manufacturing and investment activities. Labour participation rate declined in November Source: CEIC Retail sales dropped quite sharply In a separate report, retail sales unexpectedly dropped -1.1% month-on-month seasonally adjusted in November (vs 0.2% in October and 0.2% market consensus), for the first time in five months. Apparel sales fell the most (-7.5%) mainly due to mild weather, while motor sales increased (3.4%) in November. Looking ahead, we expect retail sales to rebound on the back of government subsidies for fuel and a revival of tourism. But, considering the high inflation conditions, the recovery is expected to slow slightly compared to the previous quarter. Read next: According to investor and billionaire, David Tepper, Fed will keep raising rates| FXMAG.COM Bank of Japan Watch Market expectations are growing for policy change by the Bank of Japan. We also agree with that to some extent. But, as mentioned in our previous reports, we still believe that the Bank of Japan won't be in a hurry to end its negative interest rate policy. Prime Minister Kishida also noted that policy reviews between the government and the central bank are not being considered at this point, and it is more important who will lead the Bank of Japan when current Governor Kuroda steps down in April. As we enter 2023, Japan's inflation may heat up a little more, but without wage increases, inflation is not expected to be more than 2% in upcoming quarters. Thus, the spring salary negotiation next year is the most important to watch for further meaningful policy change for the Bank of Japan. We think once the new govenor is appointed, then the policy review will follow in the second quarter of 2023. Another tweak in yield curve control is possible in the first half of 2023, but a rate hike is expected in late 2023 or early 2024. Read this article on THINK TagsRetail sales Labour market Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

USD/JPY: Bracing for the second half US recession

USD/JPY pushes higher to reach one-week highs at 133.35

FXStreet News 27.12.2022 16:08

The US dollar pushes higher and reaches week highs above 133.15. BoJ Kuroda discards any near-term exit from easy policy. The dollar trims losses following a soft market opening. The US Dollar seems to be shrugging off the previous soft tone, with the USD/JPU pushing higher on Tuesday’s European session to breach recent highs at 133.15 and hit fresh one-week highs near 133.40. BoJ Kuroda discards a near-term exit of easy policy The Governor of the Bank of Japan, Haruhiko Kuroda dismissed on Monday any chance of a near-term exit from the bank’s ultra-expansive monetary policy, increasing negative pressure on the Japanese yen. Such speculation has been going on in the markets since the bank relaxed its yield curve control. On the other hand, the US dollar is trimming losses against its main rivals following a soft week opening amid the risk appetite triggered by the Chinese Government’s decision to scrap quarantine for inbound travelers. In a thin post-Christmas market, Japanese figures have been mixed, with employment data showing slightly better than expected readings, while retail consumption eased to 2.6% in November, below the consensus 2.8% and the 4.4% reading seen in October. In the US calendar, the focus will be on the US Goods Trade Balance, Housing prices, and the Dallas Fed Manufacturing Index, although the impact on currencies is likely to be limited.

Japan: widening bond yield isn't about a prologue to the end of loose monetary policy

Kenny Fisher 27.12.2022 23:41

US and Japanese markets are open on Tuesday, but trading remains thin after the Christmas holiday. There are some key Japanese events on the calendar, although US releases are all tier-2 events. In the North American session, USD/JPY is trading at 133.41, up 0.44%. Retail Sales slower in November There are a host of events out of Japan today. Retail sales rose for a ninth consecutive month in November, buoyed by the tourist trade after Japan opened its borders. Still, the gain of 2.6% y/y was well off the 4.4% gain in October and 4.8% in September, and below the consensus of 3.7%. Household and consumer consumption account for more than half of economic growth, so the downtrend is clearly worrying. Japan’s economy contracted in Q3, as a poor global outlook, the slowdown in China and a weak yen put a squeeze on economic growth. Read next: Inflation continues to rise in Japan, although the levels pale in comparison to what the US, the UK and the eurozone are experiencing. The Bank of Japan’s preferred inflation gauge, BOJ Core PCI, accelerated for a ninth straight month in November, rising to 2.9% y/y, up from 2.8% and above the consensus of 2.7%. Last week, Japan’s Core CPI rose 3.7% y/y in November, its highest level since 1981. Inflation is moving higher as firms continue to pass along higher costs to consumers, unable to absorb the rise in energy, food and raw materials. The rise in inflation hasn’t budged the BoJ, with Governor Kuroda saying that inflation would fall back below the 2% target in 2023. Kuroda stated on Monday that the widening of the yield curve band was not a prelude to an exit from the Bank’s ultra-loose policy. We’ll get more details of that dramatic move later today, with the release of the BoJ Summary of Opinions from last week’s policy meeting. The report should make for some interesting reading. USD/JPY Technical 133.62 is a weak resistance line. Above, there is resistance at 134.12 There is support at 132.80 and 131.83 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen dips, inflation rises - MarketPulseMarketPulse

The current USDJPY structure suggests that the formation of a global cycle impulse could have been completed not so long ago. Then the fall of the exchange rate and the formation of a new bearish trend began

Jing Ren 30.12.2022 09:18

It is assumed that a bearish double zigzag of the primary degree â“Œ-â“-â“Ž may form in the market. To date, the actionary wave â“Œ and the intervening wave â“ may have been completed. Thus, in the near future we can expect the development of the final actionary wave â“Ž, which may take the form of a double zigzag (W)-(X)-(Y), and end near 127.93. At that level, wave â“Ž will be equal to wave â“Œ. Alternatively, it is assumed that in the bearish double zigzag, only the first actionary wave â“Œ is completed, and the intervening wave â“ is still under development. Read next: Japan Is Trying To Maintain Cover For LNG Vessels In Russian Waters, How Digital Money Could Look Like According To The IMF| FXMAG.COM Perhaps the wave â“ will have the form of a zigzag (A)-(B)-(C), as shown in the chart. In the near future, the price growth may continue in the sub-wave (C) to 138.75. At that level, wave â“ will be at 38.2% along the Fibonacci lines of wave â“Œ.

This week seems to be resilient, but Japanese yen fill in a gap

Kenny Fisher 02.01.2023 22:04

The Japanese yen is in positive territory on the first trading day of the new year. US and Japan markets are both closed today, and the yen will likely continue to remain calm in holiday-thinned trading. Currently, USD/JPY is trading at 130.65, down 0.34%. Markets keep an eye on BoJ There are no tier-1 events out of Japan this week, but investors will be nevertheless keeping a close eye on the surging Japanese yen. The currency had a long slide for most of 2022 and fell below 151 in October, its lowest level in 24 years. This forced the Ministry of Finance to intervene in the currency markets. The yen has made a remarkable comeback since then, rising about 11%. The Bank of Japan shocked the markets in December when it widened the yield curve band from 0.25% to 0.50%. The move sent the yen sharply higher and has raised speculation that the Bank of Japan could be planning to exit its massive stimulus programme, although the BoJ has denied it has any such plans. The Bank of Japan holds its next meeting on January 18th. What made the BoJ move so dramatic is that the markets were expecting the BoJ to remain in cruise control until BoJ Governor Kuroda’s term ends in April, after a decade at the helm of the central bank. BoJ policy could well change, depending on the new governor, but Kuroda has demonstrated that he is not shy about making policy moves at the end of his term and the markets will watching for further measures which could shake up the Japanese yen. The yen may have bounced back over the past two months, but USD/JPY has still gained 13.7% in 2022, which is the yen’s worst performance since 2013. The driver behind the yen’s descent was the BoJ’s ultra-loose policy, which capped 10-year yields at 0.25%, contributing to a constantly widening US/Japan rate differential. The BoJ’s tweak which widened the yield curve band to 0.50% has given the yen a boost, but we’ll have to wait to see if the yen can hold onto these recent gains. Read next: First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM USD/JPY Technical USD/JPY faces resistance at 131.66 and 132.55 There is support at 129.76 and 128.41 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen's rally continues - MarketPulseMarketPulse

Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

FOMC Minutes Were Hawkish, All Eyes On US Jobs Data, Weaker Energy Gives Hope

Swissquote Bank 05.01.2023 12:06

Released yesterday, the FOMC minutes were hawkish enough to get the S&P500 erase early gains, but not hawkish enough to get the index to close in the red. The index closed the session 0.75% higher. Nasdaq gained 0.50%. UD Data Today, we will see what the ADP report tells about new hirings in December. Analysts believe that the US economy may have added around 150’000 new private jobs last month. Note that the latter is not a good indication regarding what’s to come on Friday. Last month, the ADP printed a weak 127’000 figure, while the NFP came in at 263’000. Therefore, even the avalanche of layoff news from big companies, and a soft ADP print may not be enough convince that the US jobs market is cooling. Energy In energy, weaker nat gas prices, combined to the past few days’ recession fears, and news that OPEC output increased in December thanks to the recovery in Nigerian supply from outages – despite the OPEC+ will to cut output to keep prices sustained - pulled the price of American crude 5% lower yesterday. Forex In the FX, the Australian dollar is surfing on the positive Chinese vibes, while the US dollar index couldn’t extent the early week gains, and we are about to see a death cross formation on the daily chart. Read next: Samsung Suffers From Weakening Demand, Amazon Will Increase The Total Number Of Layoffs To Over 18,000| FXMAG.COM The EURUSD is bid around 1.0550, as Cable sees buying interest below 1.20 despite its worse economic fundamentals compared to other G7 economies. One of the most popular trades of the moment is long the Japanese yen against EUR, USD and pound. Watch the full episode to find out more! 0:00 Intro 0:31 FOMC minutes… hawkish as expected 2:58 All eyes on US jobs data 5:54 Weaker energy gives hope, but oil could hold support above $70pb 7:45 Chinese stocks shine, as Aussie gets decent boost from China reopening 10:04 Long yen is among the most popular trades of the momet! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #minutes #US #jobs #ADP #NFP #data #USD #EUR #JPY #AUD #China #Covid #reopening #natural #gas #crude #oil #Alibaba #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Forex: US dollar against Japanese yen amid volatility and macroeconomics

Kenny Fisher 05.01.2023 20:17

The Japanese yen is sharply lower on Thursday. In the North American session, USD/JPY is trading at 133.90 down 0.93%. What a difference a few days can make. The yen was cruising on Tuesday, as it broke below the 130 level for the first time since May. Since then, the dollar has gone on a tear, pushing the yen close to the 134 line. The yen has been showing volatility since the last week of 2022, and it’s a sure bet that the Ministry of Finance and the Bank of Japan, which dislike sharp movements by the yen, will be watching to see if the downtrend continues. Read next: Precious metals: Gold retreats as traders await tomorrow's jobs report| FXMAG.COM In the US, the focus in the latter part of the week has been on employment data, with all eyes on Friday’s jobs report. On Wednesday, JOLTS Job Openings dipped slightly to 10.46 million, and the ISM employment index rose into expansion territory. This was followed by more positive data today – unemployment claims fell to 204,000, down from 223,000. As well, the ADP employment report rose to 225 thousand, up sharply from 127 thousand. The data points to a strong labour market, and this is an important factor in the Fed being able to continue raising rates and count on the economy being able to withstand the tightening. Fed minutes reaffirm hawkish stance The Fed minutes were hawkish, but this shouldn’t surprise anyone, given that Jerome Powell pushed hard against the markets at the December meeting and said rates were not going down anytime soon. The minutes echoed what the Fed has been saying for months, that more evidence was needed to show that inflation was on a “sustained downward path to 2 per cent”. The minutes noted that several members warned against “prematurely loosening monetary policy”. The markets haven’t aligned with the Fed, forecasting a funds rate peak at 4.5%-4.75%. The Fed, on the other hand, expects rates to hit 5% or higher. The Fed has spent a lot of energy pushing back against market speculation about a U-turn in policy, and the minutes contained a warning to the markets not to underestimate the Fed’s resolve to maintain high rates in order to curb inflation. USD/JPY Technical USD/JPY has support at 133.48 and 132.13 There is resistance at 134.56 and 135.85 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen's slide continues - MarketPulseMarketPulse

UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

ISM Services PMI And Factory Orders Help The AUD/JPY Price To Remain Firmer

TeleTrade Comments 09.01.2023 08:42

AUD/JPY clings to mild gains around three-week high. Australia Building Permits slumped in November, Tokyo markets are off for Coming-of-Age Day. China-linked headlines propel risk-on mood amid a sluggish start to the key week. Inflation numbers from US, China and Japan appears crucial for clear directions. AUD/JPY seesaws around the highest levels in three weeks as it makes rounds to 91.00 during Monday’s sluggish Asian session. In doing so, the cross-currency pair takes clues from the markets’ risk-on mood to grind higher. However, a holiday in Japan joins downbeat Aussie data and hawkish concerns from the Bank of Japan (BOJ) to challenge the AUD/JPY bulls. That said, Australia’s Building Permits dropped to -15.1% YoY in November versus -6.4% prior. Further details suggest that the MoM prints also declined to -9.0% from -5.6% prior (revised from -6.0%), as well as the -1.0% market forecasts. On the other hand, comments from Japanese Prime Minister (PM) Fumio Kishida also seem to probe the AUD/JPY pair’s upside momentum. “While communicating closely with markets, the BOJ needs to make its policy more flexible with an eye on an eventual normalization of monetary policy,” said Japan PM Kishida. The market’s risk profile remains firmer as China reopens national borders after a three-year pause. On the same line could be the early signals suggesting China’s heavy shopping during the festive season, as well as comments from People’s Bank of China (PBOC) Official suggesting optimism surrounding China’s growth conditions. Read next: The U.K. Economy Is In Trouble, Fall Of GDP Is Expected!| FXMAG.COM It should be noted that Friday’s downbeat prints of US wage growth, ISM Services PMI and Factory Orders also add strength to the risk-on mood and help the AUD/JPY price to remain firmer. Amid these plays, Wall Street closed positive while the US 10-year Treasury yields dropped 16 basis points (bps) to 3.56%, the lowest levels in three weeks. It’s worth noting that the S&P 500 Futures print 0.20% intraday gains by the press time. Looking forward, inflation data from Tokyo, China and the US will be important for the AUD/JPY pair traders to watch for clear directions as upbeat sentiment jostles with hawkish bets on the Bank of Japan (BOJ). Technical analysis Although the resistance-turned-support line defends AUD/JPY bulls around 89.80, a two-month-old descending trend line near 93.00 challenges the upside momentum.

Forex: On Friday US dollar against Japanese yen increased by 0.9%

According to Yomiuri newspaper, Bank of Japan will have a look into the side effects of loose monetary policy

Kenny Fisher 12.01.2023 15:58

The Japanese yen has awoken from this week’s slumber and is sharply higher on Thursday. In the European session, USD/JPY is trading at 130.96, down 1.16%. BOJ may be planning review of policy The BOJ has been in the headlines since the December meeting when it widened the band around its 10-year bond yield target. The move caught the markets flat-footed and the yen gained a staggering 3.8% the same day. The central bank meets on January 17th and 18th and investors will be keeping a close eye on the meeting. There have been reports that the BOJ will raise its inflation forecast at the meeting, and the Yomiuri newspaper reported today that the BOJ will review the side effects of its ultra-loose policy and could take measures to address distortions in the yield curve. The yen has soared in response to this latest report, as any steps towards normalization are bullish for the yen. Will the upcoming meeting be as dramatic as what we experienced in December? That would be a high bar to reach, but the meeting should be treated as a market-mover. Read next: GM, Ford, Google And Solar Producers Would Work Together To Set Standards For Increasing The Use Of VPPs| FXMAG.COM There is a feeling of optimism ahead of today’s US inflation report. The forecast is for inflation to continue to fall, which is exactly what investors want to hear. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. If inflation, particularly the core rate, falls as expected, the US dollar will likely lose ground, as the Fed would have good reason to slow the pace of tightening and could afford to be less hawkish in its stance. USD/JPY Technical 132.13 has strengthened in resistance following the yen’s strong gains. 133.28 is the next resistance line. 131.68 and 129.49 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen jumps on BoJ report - MarketPulseMarketPulse

Japanese yen rose, Canadian dollar increases, Gold gained on the back of the US CPI print

Jing Ren 16.01.2023 08:05

USDJPY falters over Japan’s rising inflation The Japanese yen extended gains as accelerating inflation may pressure the BoJ to act soon. One of the major themes of 2023 could be Japan finally normalising its monetary policy. Consumer prices have been rising steadily nationwide, with the latest CPI in Tokyo reaching 4%, above the central bank's 2% target for seven months in a row. The US dollar’s reversal from its 32-year peak against the yen suggests that the market believes that inflation is not transitory and has shrugged off Governor Haruhiko Kuroda’s dovish statements. Last May’s lows around 126.50 is the next support and 134.50 is the immediate resistance. USDCAD struggles on improved risk sentiment The Canadian dollar recovers as markets go risk-off. Domestically, a strong December jobs report gives reason for another rate increase by the Bank of Canada, with a 25 bp hike priced in by the market. However, overall sentiment since the start of the year may carry the risk-sensitive loonie. Outflows from the safe haven US dollar means that higher beta counterparts can enjoy a sustained recovery. Meanwhile, the price of oil, one of Canada's major exports, has settled in the green for a few days in a row, offering an effective support to the currency. November’s low at 1.3230 is a key support and 1.3680 is the first resistance. Read next: Lowering The Price Of Electric Vehicles Is Supposed To Be Tesla's Unusual Strategy To Generate Demand In The US Market| FXMAG.COM XAUUSD outperforms softer dollar Bullion strengthened as the US dollar slipped post-CPI. Traders have been repositioning themselves for a more dovish Fed in the coming months, starting with a 25 basis points hike in February. A cool-off in US CPI at a steady pace would eventually make the central bank reconsider its policy stance. The only billion dollar question is when. The US dollar’s sluggish performance has put gold on a springboard. As the dollar bulls locked in profits, traders are wondering whether the current correction would slide into a reversal, which in turn would benefit the precious metal. The price is pointing towards 1930 with 1830 as a fresh support. US 30 bounces as falling CPI rekindles pivot hope The Dow Jones 30 rallies as the market raises its bet of a policy pivot soon amid softer inflation. Despite the Fed’s repeated insistence not to lift the tightening prematurely, investors wager on seeing the terminal rate soon, which says a lot about policymakers’ credibility. A steady fall in consumer prices in December further cemented hopes of a dovish turn by the central bank, possibly at its February meeting. The prospect of interest rates plateauing means that equity markets may see the light at the end of the tunnel, or at least that is what the bulls want to believe. 34800 is the next hurdle and 32800 the first support. Key data release (GMT time) Tuesday, 17 January 07:00 ILO Unemployment Rate Harmonized Index of Consumer Prices 13:30 BoC Consumer Price Index Core Wednesday, 18 January 03:00 BoJ Interest Rate Decision BoJ Press Conference 07:00 Consumer Price Index 13:30 Retail Sales Thursday, 19 January 00:30 Unemployment Rate Friday, 20 January 13:30 Retail Sales

Bitcoin price may be stealing the show soon. We could say that this week Bank of Japan decision draws more attention than usually

Craig Erlam 16.01.2023 22:57

A relatively muted start to the week amid lighter expected trade due to the US bank holiday, with Europe and much of Asia posting small gains. It’s been quite a frantic start to the year so investors may be capitalizing on the opportunity to catch their breath. They won’t have long given the flurry of central bank speak as policymakers gather in Davos this week and as earnings season heats up in the US. There’s certainly an increasing sense of optimism about 2023 as we make our way through the opening month of the year. The economic data has been kind, to say the least, which is not something we were afforded for the vast majority of the year just gone. The question now is whether earnings season will enhance that new sense of hope or spoil the party before it really gets going. Companies have until now been reluctant to let staff go which has kept the labour market tight even as certain economic indicators weaken and inflation dampens the outlook for demand and costs. A bad earnings season could undermine hopes of a soft landing that looks more possible now than it has for many months. Commentary from central bankers will also be closely monitored this week, as it always is at this time of year for the famous gathering in Switzerland. But this time it comes amid much better data from the US and when policymakers have been reluctant to deviate from their hawkish position. We saw signs of change last week, culminating in 25 basis points being heavily priced in for February. Could we finally see the full dovish pivot? The end of YCC? One standout event this week will be the BoJ meeting, amid plenty of speculation around the yield curve control tool and whether it’s time to abandon it. The central bank has been very active in the market trying to protect the upper boundary around 0.5% on the 10-year JGB but the market is continuing to push back. Last month’s tweak, rather than buying the central bank time, appears to have massively intensified the pressure on the BoJ and we may learn this Wednesday whether the time has come to tweak it again or abandon it altogether. Is bitcoin making a comeback? The biggest winner in all of this may be cryptos which have had a rough few months in the aftermath of the FTX collapse. A boost in risk appetite has triggered a surge in bitcoin which spent the final weeks of last year languishing between $16,000 and $17,000. It is up more than 25% since the turn of the year, breaking back above $20,000 this morning in the process. Whether this is a sign of it bottoming out and experiencing a resurgence or just a brief rebound isn’t clear but there are clearly still some very bullish traders out there. It should make for an interesting few weeks. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Eyeing Davos and earnings - MarketPulseMarketPulse

Japan: Even a change in YCC made by Bank of Japan may boost Japanese yen

Kenny Fisher 16.01.2023 23:01

USD/JPY is in positive territory on Monday. In the North American session, USD/JPY is trading at 128.50, up 0.52%. The yen had an excellent week, climbing over 3% and trading at levels not seen since May 2022. Will BoJ deliver more policy moves at meeting? The Bank of Japan holds a two-day policy meeting on Tuesday and Wednesday in what could be one of the highlights of the week. BOJ meetings were traditionally sleepy affairs that usually maintained the Bank’s policy settings. That has changed and the December meeting roiled the markets after the BoJ unexpectedly widened the band around 10-year JBs to 0.50%, up from 0.25%. The dramatic move has raised speculation that the BOJ could be planning additional policy changes at the upcoming meeting. The 0.25% cap on 10-year yields was breached on Friday and again today. The central bank has responded by buying over 2 trillion yen worth of JGBs but there is talk that the Bank could further widen the band to 0.75% or even abandon its yield curve control (YCC) policy completely. The yen has gained 14% against the US dollar since November, adding pressure on the BoJ to tighten its ultra-loose policy. If the BOJ does scrap the YCC, it would likely be viewed by the market as similar to a rate hike, which would push the yen higher. The BOJ will also release an updated inflation forecast, which is expected to be revised upwards. Market participants should be prepared for volatility from the yen after the BOJ announcements on Wednesday. In the US, consumer confidence gained strength in December. UoM Consumer Sentiment jumped to 64.6, beating the forecast of 60.5 and above the November reading of 59.7. Inflation expectations for 2023 decreased to 4.0%, down from 4.4%, although long-term expectations inched higher. USD/JPY Technical USD/JPY is testing resistance at 128.40. Above, there is resistance at 129.40 127.07 and 125.92 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY ends nasty slide - MarketPulseMarketPulse

Federal Reserve splits highlighted by May FOMC minutes

2023 predictions: Euro - all significant factors that pressured the common currency lower against the US dollar in 2022 don’t seem to disappear upon entering 2023

Santa Zvaigzne Sproge 13.01.2023 16:07

A year of steep interest rate hiking is behind us. Same time year hardly anybody could have predicted all the factors which made central banks increase interest rates to that high levels making Forex market fluctuate almost all year long. To say the least, in 2022 we've discussed EUR/USD reaching parity! After such a turbulent time, what can we expect from eurodollar, Swiss franc against US dollar, USD/JPY and other Forex pairs? Let's see what are Conotoxia's Santa Zvaigzne-Sproge's predictions for 2023 on the Forex market. What do you expect from the euro and pound in 2023? Euro - all significant factors that pressured the common currency lower against the US dollar in 2022 don’t seem to disappear upon entering 2023 - the worsening of the euro zone's outlook amid the deepening energy crisis and relatively timid interest rate hikes despite the excessive inflation may continue to hold the euro currency around parity with the US dollar. Pound sterling - although recovered slightly from the disastrous fiscal policy announcement that pushed the currency to a record low of 1.04 USD, the pound is not expected to recover to before-2022 levels. Large external financing needs, lower interest rates relative to other major economies, and increasing undersupply of the workforce may hold the pound sterling back. What can we expect from EUR/USD, CHF/USD, USD/JPY, CNY/USD? What macroeconomic and geopolitical factors will be crucial for currencies in 2023? All the above-mentioned currencies are highly affected by the monetary policy of the corresponding central bank as well as the Fed (due to the currency pair involving USD). The Federal Reserve is still maintaining (and expected to maintain until at least mid-2023) a hawkish policy of increasing interest rates and lowering the money supply leading to a stronger US Dollar. For a deeper analysis of the US Dollar from such viewpoints as the reserve currency and petrodollar as well as other valuable insights see Conotoxia Ltd. Yearly Outlook available here. <- put link once posted. EUR/USD: Strong US Dollar in combination with the worsening economic outlook and geopolitical uncertainties in the eurozone may continue to pressure the currency pair to trade around parity. CHF/USD: As the world, and in particular, the eurozone, may enter a recession in 2023, the Swiss economy, with its sizable current account surplus and having its inflation at a much more controlled level (3% in Switzerland vs 7.1% in the US and 10.1% in the EU in November) is possible to attract funds as they flow away from riskier markets giving additional strength to the Swiss currency. Read next: 2023 predictions: At the moment, we see numerous factors that have a negative impact on S&P 500 and Nasdaq Composite – lowering money supply in the US and increasing interest rate environment to name a few | FXMAG.COM USD/JPY: Next year may come with perceptible changes in the Bank of Japan’s dovish policy as its current governor’s term is coming to an end on 8 April 2023. The yen may see increased levels of speculation and volatility as the market awaits a potentially more hawkish governor. Pressure on the Japanese Yen may be posed by the worsening trade balance: Japan has been reporting a trade deficit of over 2 trillion JPY each month since August 2022 (the only time before a deficit above 2 trillion JPY was reported in January 2014). USD/CNY: Chinese currency has been appreciating against the US Dollar recently due to the easing of the zero Covid policy but is still under uncertainty as due to the reopening of its economy, China has been experiencing a surge in new Covid cases and hospitalization numbers, which may eventually push China to rethink its policy stance.

The AUD/JPY Currency Pair Is Moving In A Downward Trend

InstaForex Analysis 18.01.2023 08:14

It can be seen clearly on the daily chart that the AUD/JPY currency pair is moving in a downward channel which means the bias is still bearish but currently it is corrected upwards especially since the emergence of the Bullish 123 pattern which was followed by the appearance of the Ross Hook where this level will be tested in the near future. tested by AUD/JPY so that if the 91.76 level is successfully penetrated above it then AUD/JPY in the next few days has the potential to appreciate up to the 93.50 level as the main target and the 95.03 level will be the next target to be tested but please pay attention to the emergence of the AUD Ascending Broadening Wedge pattern /JPY has the potential to fall back to its main bias (Bearish) where if the 86.97 level is penetrated below then all scenarios of an upward rally that have been described previously will become invalid. Relevance up to 05:00 2023-01-21 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/117807

USD/JPY Pair Remains Priced As One Of The Most Volatile Currencies

ING Economics 18.01.2023 10:01

In keeping its key rate and yield curve control policy unchanged at today's meeting, the Bank of Japan probably wanted to convey a message to the market; don't fight the BoJ. After the decision, the Japanese yen plunged to the 131 level while the 10Y JGB yield reached 0.38%. We think market volatility can continue for a while yet Bank of Japan Governor Haruhiko Kuroda -0.1% Policy balance rate As expected 0.0% 10-year JGB yield target As expected BoJ watch The next BoJ meeting will be held on 9 and 10 March, the last of which will be led by Governor Haruhiko Kuroda. His successor's nominee will be submitted to the parliament around 10 February and thus we will know who will replace him by then. We think it will be difficult to make a major policy change at his last meeting, and so the next move should be taken after the new governor comes on board. Although Governor Kuroda emphasised today that there is no need to widen the yield range further and yield curve control is sustainable, this view could change under the new governorship. As such, we think that today's comments will only be valid until early April. We maintain our view that the BoJ will keep its negative policy rate and yield curve control policy by the end of 2023, for now. We expect the new governor to first adjust the BoJ's forward guidance and then call for a policy review, but we will revisit our BoJ policy outlook once we know who is the next governor. The BoJ downgraded its GDP outlook The Bank of Japan also released its latest forecast for economic activity and prices today. The BoJ trimmed down its GDP outlook for FY22 from 2.0% year-on-year to 1.9% and from 1.9% to 1.7% for FY23. Meanwhile, in the case of CPI, the FY22 forecast is slightly raised from 2.9% to 3.0%, but the FY23 forecast remains unchanged at 1.6%. The new set of forecasts indicates that the BoJ will continue to pursue its 2.0% "sustainable" target as the recent higher-than-usual CPI is only transitory and will soon pass the peak. We believe that risks to growth are skewed to the downside based on recent weak activity and forward-looking data thus the economy is not ready for a reduction in stimulus yet. A lower growth outlook Source: BoJ USD/JPY: A volatile bear trend The BoJ’s decision to leave its policy tools unchanged clearly disappointed an FX market positioned for further adjustment. Arguably the market had got ahead of itself, where the recent run-up in two-year yen swap rates to 0.30% suggested that a rate hike might even be on the table in the not-too-distant future. These swap rates have now dropped back to 0.15%, taking the yen with them. USD/JPY remains priced as one of the most volatile currencies in the G10 FX space and notably delivers on those expectations of volatility. One week realised volatility is being delivered at 20% versus the priced levels of 19%. We expect that volatility to continue, especially in the March/April window when Governor Kuroda will hand over the reins of the BoJ governing board. USD/JPY has been at the vanguard of the broad dollar decline since October – helped in part by the $70bn of FX intervention undertaken by Japanese authorities. We expect further broad dollar weakness this year as Federal Reserve easing expectations build in the second quarter. This should probably mean the current USD/JPY correction stalls in the 132.50/133.00 area, with outside risk to 135. We have an end 1Q23 target of 128 and our current year-end target of 125 should probably be closer to 120. JGB: No change in YCC means more JGB purchases, but slow foreign spillover Even after the BoJ’s failure to lift the YCC cap on 10Y JGB yields once more after its December move, it seems the widely held view in the market is that that cap will have to be lifted, or removed altogether, at some point this year. Even after today’s drop, 10Y JPY swaps still trade around 0.80%, well above the JGB cap, and we expect them to return to the 1% area soon. Trading JGBs has become a risky endeavour with shorts prohibitively expensive and longs liable to get run over by another surprise move by the BoJ. Delaying further changes to YCC will likely force it to continue purchases The BoJ has reportedly bought JPY 34tn of JGBs since its decision to lift the cap from 0.25% to 0.50% in December. Delaying further changes to YCC will likely force it to continue purchases even if selling pressure slows in the coming days. Cornering the JGB market even more does not sit well with the stated aim of improving JGB market functioning in our view, but it seems a willingness to shield broader markets and the economy from too abrupt a move has taken precedence. Japanese investors were net sellers of foreign bonds for most of 2022 Source: Japanese Ministry of Finance, ING We think the short-covering seen in Treasuries and Bunds today overstates the spillover from BoJ decisions into foreign markets. As JGB yields rise, and rate differentials narrow, we think Japanese investors will increasingly favour domestic bonds over foreign ones. This should occur progressively, however. Net selling of foreign bonds already started in 2022 and only amounted to $14bn equivalent per month. This will add up over time, but this is not enough to change the trajectory of the US and European bond markets on their own. Read this article on THINK TagsJPY JGB yields Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The Euro-Area Economy Is Performing Better Than Many Anticipated

Ipek Ozkardeskaya 18.01.2023 11:41

Holy Bank of Japan! The Bank of Japan (BoJ) kept its below-zero interest rate and its faltering yield curve control policy unchanged. No-action sent the Japanese 10-year yield tumbling by up to 14 bp – that's almost a 30% plunge. The dollar-yen spiked above the 131.50 level, losing more than 2.50% against the greenback. The BoJ revised its GDP lower for this year, but kept its inflation forecast unchanged at around the 3%. And yet, the producer price inflation in Japan spiked above the 10% in December. It feels like the BoJ doesn't want to face the reality, and isn't acting according to the market's needs. Anyway, I think that traders will continue defying the BoJ's YCC strategy and try to break its back, but we will likely see more volatility in the yen, as the policymakers keep fighting the market – perhaps not to lose face? On the currency front, we can't rule out the possibility of an advance above the 133 level, the minor 23.6% Fibonacci retracement on Oct to January retreat. The negative trend in USDJPY will remain intact below the 136 level, the major 38.2% retracement level. Yen selloff supports the dollar index. If the yen changes direction, the impact on the dollar index will also be felt – and it will be positive. The dollar index is stronger this morning. The EURUSD is below the 1.08 mark, and could extend losses toward the 1.0630, the lower end of the actual positive trending channel. And yet, the ZEW data released yesterday showed that investor expectations for the German economy jumped to the highest level in almost a year and German Chancellor Olaf Scholz said that he is sure Germany will avoid recession this year, thanks to China's reopening and growing confidence that the energy-price squeeze is easing. And now that the Euro-area economy is performing better than many anticipated in the face of record inflation and the energy crisis, the European Central Bank (ECB) is expected to raise the rates by 50bp in February and in March, and by another 25bp in May or in June. That should throw a floor under the euro weakness and may not let the euro slide too low against the dollar. Across the Channel, Cable does particularly well, since Britain revealed a near-record pace of 6.4% in wages growth between September and November year on year. The latter will unlikely ease the anger of those striking for a better pay – headéine inflation in Britain came in at 10.5% in December, as core inflation didnt ease as expected - dwarfing the near-record pay rise. The latest numbers will only force the Bank of England (BoE) to deliver yet another rate hike next month to avert a further wage-price spiral. And that's positive for sterling. S&P500 struggles finding buyers above 4000 Confusion and lack of direction best described yesterday's sentiment in the US. US futures were pointing at a negative start, then turned higher in early trading as we heard a lot of talk about "green shoots" and "bright spots" in the economy when Chinese Vice Premier talked in Davos yesterday saying that he expects China's economy to return to normal this year. The S&P 500 shortly traded above the 4000 level, but reality soon hit the fan with mixed earnings from Goldman and Morgan Stanley, and brought the top sellers in. And the top sellers kept selling into the 4000 level to the end of the session. Finally, the index closed the session 0.20% lower, spot on the 2022's down-trending channel top and above the critical 200-DMA. But the first set of earnings doesn't support a sustainable move above that 200-DMA level. If we dive into the latest bank earnings, Goldman Sachs and Morgan Stanley earnings were mixed. Golman reported a 69% drop in Q4 profit as the slump in deal-making and its wealth management business weighed on Q4 results. Goldman shares closed the session almost 6.50% lower. Morgan Stanley was also hurt by weakness in deal-making, but the wealth management and trading revenue grew. The shares closed almost 6% higher. Note that Morgan Stanley set aside $85 mio for credit losses compared to only $5 mio a quarter ago, as proof that the bank is not optimistic about what's to come this year, either. Therefore, the 6% rally was certainly a bit exaggerated.

Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening

Santa Zvaigzne Sproge 17.01.2023 14:28

Santa Zvaigzne-Sproge (Conotoxia) answered some questions regarding recent macroeconomic events. FXMAG.COM asked Santa about China's GDP, Eurozone inflation and Bank of Japan. This week China's GDP is published - what do you expect from the economy, which suffered from COVID for a very long time all the 2022? China’s GDP has suffered considerably in 2022 due to the Covid-19 pandemic and the zero-Covid policy in its aftermath pushing the country’s growth below its target of 5.5%. The Chinese economy may not return to 2-digit growth numbers in the foreseeable future but returning to its target growth rate may be entirely plausible. The People’s Bank of China left the one-year MLF rate unchanged at 2.75% and injected less money into the economy as expected, meaning that the officials may not expect the need for more aggressive support to the economy at this moment. Besides China’s GDP, it may be useful to keep an eye on the developments within its tech sector. China’s government has been targeting all major technology companies with new regulations since 2020 with an aim to curb the country’s private enterprises. There are signs that the Chinese government may be changing its policy in order to boost growth this year. For example, last week, Alibaba’s affiliate company Ant group finally received long-awaited approval for capital expansion of its key consumer finance unit. Read next: GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting| FXMAG.COM Furthermore, the US ban on semiconductor chips and chipmaking devices export to China has motivated it to expand its national chipmaking companies, such as SMIC, offering various support packages to the industry. Russian oil’s recoil from the EU boosted its exports to China, allowing it to purchase its oil at a considerable discount. Overall, once China takes hold of the pandemic, it may be on a favorable path for further growth. Provided Eurozone inflation comes at less than 10% on Wednesday, would you expect ECB to go for a series of 25bp rate hikes? Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening. With the key rate of 2%, ECB may still have plenty of room for further rate hikes (possibly even 50bp), in addition to the asset purchase program commencing in March 2023. Bank of Japan which has recently hinted at a monetary policy pivot, decides on interest rate this week. Will they escape ultraloose approach this very week? It is reasonable to assume that the Bank of Japan may take some steps in the direction of tightening its monetary policy. However, considering BoJ’s general dovish stance, widening its yield curve tolerance band may be a more plausible (and softer) scenario in comparison to abandoning it altogether. The surging yen for the last couple of months deepens the already large trade deficit by hurting exports and boosting imports. It is important to acknowledge that any type of action recognized as a tightening of the monetary policy may encourage further appreciation of the Japanese Yen and hurt its stocks. We may expect more perceptible changes in the BoJ’s monetary policy in the second quarter of 2023 once a new governor is elected. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Japanese yen: judging from Kenny Fisher's words, Bank of Japan action is not about "if"

Kenny Fisher 19.01.2023 22:31

The Japanese yen has edged higher on Thursday, after showing strong volatility a day earlier. In the North American session, USD/JPY is trading at 128.48, down 0.32%. There was plenty of anticipation ahead of the Bank of Japan meeting on Wednesday, with speculation that the central bank would follow up on the December meeting and change its policy settings. In the end, the BoJ defied market expectations and maintained policy. After the announcement, the yen dropped as much as 2.6% but pared most of those losses. The BoJ may have got the last laugh (for now) against speculators with its non-move, but that doesn’t change the big picture. A shift in the BoJ’s ultra-loose policy appears to be a matter of when rather than if, given that inflation is hovering at its highest level in 41 years. The markets expect to get another confirmation that inflation is rising, with the release of Tokyo CPI later today. The headline figure is expected to climb to 4.4% in December, up from 3.8% in November, while the core rate is projected to accelerate to 4.0%, following a 3.7% gain. The BOJ has insisted that inflation is transitory, but this stance is becoming harder to defend as inflation continues to rise and shows no sign of peaking. Read next: European Central Bank's President Christine Lagarde warns, but...| FXMAG.COM Mixed US data US numbers were a mix today. Unemployment claims sparkled, falling from 205,000 to 190,000 and beating the forecast of 214,000. The US labor market remains robust and is a critical factor in enabling the Fed to remain hawkish and continue raising interest rates. The manufacturing sector, however, is looking dismal. The Philly Fed Manufacturing Index came in at -8.9, its seventh decline in the past eight months. This follows a dismal read from the Empire State Manufacturing Index earlier this week, which fell to -32.9 in December, down from -11.2 in November. USD/JPY Technical USD/JPY is testing support at 128.40. The next support line is 127.13 There is resistance at 129.40 and 131.33 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Yen edges higher ahead of Tokyo CPI - MarketPulseMarketPulse

Analysis Of The AUD/JPY Currency Pair Scenarios

InstaForex Analysis 25.01.2023 08:00

On the daily chart of the AUD/JPY currency pair it can be seen that the CCI indicator has managed to pass the -100, 0, & 100 levels, this means that buyers have dominated so that in the next few days AUD/JPY will try to break the Equal High level of 91.87 so that if the AUD/JPY level If this is successfully penetrated upwards, AUD/JPY will have the potential to test the 92.88 level as its main target and the 94.20-95.62 area as the next target. However, with the emergence of the Ascending Broadening Wedge pattern, please pay attention to the downward correction movement, especially those that exceed the 88.65 level because if this level is successfully penetrated then all Bull scenarios that have been previously described will become invalid and cancel by themselves. Relevance up to 01:00 2023-01-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/118151

Jason Sen comments on Forex pairs - AUDUSD, NZDUSD, EURJPY and more

Jason Sen 07.02.2023 10:41

US core inflation hits 5.5% and it's the second lowest reading since November 2021

Like geopolitics in general, it's unlikely that American politics will strongly affect the dollar in 2023

Michael Stark 14.02.2023 12:05

After hearing from Michael Stark from Exness about stock market, precious metals and crypto, it's time to discover his views on the Forex market - euro, pound, US dollar and pairs. What do you expect from euro and pound in 2023? The euro's recovery against the dollar seems likely to continue. While the situation for the economy in the eurozone isn't rosy by any means, it seems to be a lot less bad now than had been expected over the last couple of quarters. The ECB also probably has some way to go on rates and is likely to go above 3.5%, even if not for very long.The outlook seems to be more negative for the pound given that inflation in the UK is higher and overall economic conditions, particularly the job market, are weaker compared to the EU and the USA. Whether that actually translates into another sustained downtrend for the pound is an important question because the dollar index probably also has more room to fall in the next few months. What can we expect from EUR/USD, CHF/USD, USD/JPY, CNY/USD? What macroeconomic and geopolitical factors will be crucial for currencies in 2023? In general, the dollar's losses are likely to continue to some degree against most other currencies unless there's some significant change in the outlook for inflation or monetary policy. The possible exception is dollar-yen because the Bank of Japan's interventions and general comments and statements have been more unpredictable than usual so far in 2023. There's also April's change in leadership at the BoJ which might bring a shift in policy.The focus for most participants in forex markets this year will probably remain on economic conditions, specifically possible early signs of the severity of the recession, such as job data, PMI and similar. However, monetary policy and inflation are still on the radar too given that the ECB and others are gradually catching up to the Fed. Read next: Bartosz Milczarek, CEO at Cryptiony: Customers settle the crypto tax in annual returns, so our business model is also based on annual subscriptions | FXMAG.COMIt's difficult to predict how geopolitics will develop this year, but a sudden denouement in the Russo-Ukrainian war seems very unlikely in the next few months at least. Increasing tension between China and Taiwan is always a possibility but this probably wouldn't have a strong effect on forex markets. What macroeconomic and geopolitical factors will be crucial for the dollar in 2023? As noted earlier, the main focus for the dollar is the possible recession and how severe it might be, or indeed whether it will occur at all. The Fed's slowing down of rate hikes and decreasing rates of inflation are also important, with the main question here specifically how long the Fed can sustain rates around 5% or more given the size of the USA's national debt.Presidential elections coming up next year are likely to be in focus later in 2023, specifically whether President Biden will stand for reelection and who will challenge Donald Trump for the Republican nomination. Like geopolitics in general, it's unlikely that American politics will strongly affect the dollar in 2023 unless there's some major surprising event but developments might give hints on what to expect next year.

Australian dollar against US dollar decreased amid weak China CPI data

Analysis Of Movement Of The AUD/JPY Cross Currency Pairs

InstaForex Analysis 23.02.2023 08:09

Although this time on the daily chart AUD/JPY cross currency pairs is moving in a channel that dips downwards which means that the main bias is still bearish but currently AUD/JPY is experiencing a correction rallying upwards which is marked by the appearance of the Bearish Continuation Ascending Broadening Wedge pattern even though the Bullish 123 pattern has appeared which is followed by the appearance of several Ross Hooks (RH) , while the level that will be tested in the near future is the 92.98 level. If this level is successfully penetrated and as long as it does not return to its initial bias and goes below the 90.74 level, AUD/JPY in the next few days has the potential to test the 93.58 level as its first target and the 94.37 area level. -95.22 as the second target if the momentum and volatility are enough to support Relevance up to 05:00 2023-02-28 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/120035

How to turn volatility into opportunity? Stephen Dover from Franklin Templeton offers some judicious perspective

Jason Sen talks forex pairs - Aussie against US dollar, NZD/USD, Euro to US dollar and more - February 23rd, 2023

Jason Sen 23.02.2023 10:16

AUDUSD lower as expected this week to hit very strong support at 6800/80. A low for the day exactly here. Longs need stops below 6760. A break lower is a sell signal of course, targeting 6725/20 today. First resistance at 6850/60 - shorts need stops above 6880. Target is obviously 6800 for profit taking. NZDUSD made a high for the day at resistance at 6240/50 as we trade sideways. Shorts need stops above 6275. A break higher can target 6320/25. Expect strong support at 6185/75. Longs need stops below 6150. A break lower is a sell signal. AUDJPY stuck in an 8 day range , holding within the range of 14th February, which was 9164 - 9304 - so we at least need a breakout of this range to see some movement. Support at 9195/75. Longs need stops below 9155. A break to the downside can target 9080/70. Targets are 9230 & 9270. A break above the 200 day moving average at 9310/20 should be a buy signal targeting 9375/80. USDJPY longs at buying opportunity at 134.10/133.90 worked perfectly as we edge slowly in the right direction to reach 135.22. If we continue higher this week (I do believe we are resuming the longer term bull trend as you know) look for 135.45/55 then 136.00. However yesterday's inside day is not helpful at this stage! A buying opportunity again at 134.10/133.90. Longs need stops below 133.75. Much better support at 133.20/00. Longs need stops below 132.75. EURJPY held 20 pips above support at 142.95/75 then finally hit my target of 144.00/20, with a high for the day exactly here. Further gains are possible to 4 month trend line resistance at 144.60/70. First support at 143.10/142.90 with a low for the day exactly here yesterday. Longs need stops below 142.70. A break lower sees 143.05/15 act as resistance to target 142.40, perhaps as far as 142.00/141.90 for profit taking on shorts. NZDJPY remains in a tight sideways range - only useful for scalpers. Resistance again at 8450/80. A break above 8510 therefore should be a buy signal. Shorts at 8450/80 can target 8400/8390 & 8370/60, perhaps we can fall as far as 8310/8290 eventually. Read next: The Real Estate Market In China Has A Chance To Revive, Indonesia Economy Is More Resilient| FXMAG.COM EURUSD broke support at 1.0690/70 as expected for sell signal targeting 1.0600. At last we hit this target, with a low for the day exactly here, but outlook remains negative. Although there is minor support at 1.0590/1.0570. So a break below 1.0560 is the next sell signal. Gains are likely to be limited with minor resistance at 1.0650/60. Shorts need stops above 1.0670. A sell opportunity today at 1.0700/1.0720. Shorts need stops above 1.0735. A break higher can target resistance at 1.0770/80. USDCAD tests 4 month trend line resistance at 1.3570/90. Shorts need stops above 1.3610. A break higher is a buy signal targeting 1.3700. Shorts at 4 month trend line resistance at 1.3570/90 can target 1.3535 & 1.3490/80 for profit taking. Dollar Index breaking above a 3 month bear trend line with completion of a bull flag - so I think we have another buy signal for the dollar as longs as we hold the trend lines at 103.60/40. Immediately targets for the dollar index are 105.15 & 105.80. EURCAD I am going to wait to see if a head & shoulders forms. A high for the day exactly at the 50 day moving average at 1.4440/50 helps this pattern to develop as I stated yesterday, therefore so far this pattern is starting to play out. A break below support at 1.4230/20 will be the sell signal targeting 1.4150 & 1.3980. CADJPY now has a small double top as we trade sideways for a week. We made a low for the day exactly at support at 9830/20. A break below 9920 can target a buying opportunity at 9840/20. Longs need stops below 9800. GBPUSD longs at strong support at 1.1960/40 worked with the bounce from 1.1920 hitting the target & minor resistance at 1.2020/30 for profit taking. A high for the day at strong resistance at 1.2130/50. Our shorts here can target 1.2070, perhaps as far as 1.2030/20 for profit taking. Strong support again at 1.1960/40.

Japan's inflation data is released quite soon. Future BoJ Governor, Kazuo Ueda speaks tomorrow

Marc Chandler 23.02.2023 15:16

February 23, 2023 $USD, Currency Movement, ECB, EMU, Federal Reserve, Japan, Mexico, South Korea Overview: The prospect that the Federal Reserve tightening cycle continues into early Q3 is underpinning the greenback today against most of the G10 currencies. The dollar bloc is the notable exception, and they are posting minor gains, perhaps encouraged by the firmer equity markets. The minutes of this month’s FOMC meeting appear to show wide support for quarter point hikes going forward and there did not seem to be much discussion of the conditions that would allow for the central bank to pause, which the market had expected around by the end of Q2. The euro has been sold below $1.06, while the greenback is holding just below JPY135 ahead of a big day tomorrow in Tokyo, which seen national inflation figures and BOJ Governor nominee Ueda questioned in the Japanese parliament. A hawkish hold by the Bank of Korea, signaling the risk that the pause is short lived, is helping the South Korean won lead the emerging market currencies today, but the Mexican peso continues its dramatic advance and is trading at new five-year highs today. Asia Pacific equities were mostly lower following yesterday’s losses in the US. However, Taiwan and South Korea bucked the trend. Europe’s Stoxx 600 is holding on to minor gains. US equity futures are firmer, and the S&P 500 is looking to snap a four-day skid. Benchmark 10-year yields are mostly a little higher. The 10-year US Treasury yield is up a couple basis points near 3.94%, while European rates are 1-2 bp points higher. Italy’s 10-year yield is slightly softer. UK Gilts are under the most pressure as the 10-year yield rise four basis points. Gold recorded an outside down day yesterday and is consolidating little changed near $1827 in the European morning. April WTI fell to a two-week low yesterday near $73.80 and is also consolidating today. API reportedly saw another large build of US crude stocks for the ninth consecutive week. If confirmed by the EIA later today, it would point to US crude inventory near a 21-month high. Natgas is pinned near its lows. Asia Pacific There are three important events in Japan tomorrow. First, the national January CPI figures will be reported. The Tokyo CPI out earlier warns of new cyclical highs for the national figures, north of 4% for the headline and core rate (excludes fresh food). There is good reason to suspect this could prove to be the cyclical high as government subsidies, falling energy and wheat prices, and the appreciation of the yen on a trade-weighted basis dampen price pressures. Second, the weekly Ministry of Finance portfolio flows will be reported. As we have noted, after selling around $180 bln of foreign bonds last year, Japanese investors have been net buyers in the first six weeks of the year (~$19.5 bln). The rise in the US 10-year yield this month recoups the decline seen in January, leaving the yield nearly flat net-net since the end of last year. The cost of hedging for six months is practically unchanged from the end of last year (2.6% vs. 2.5%, forward points as a percentage of spot). Third, the nominee to replace BOJ Governor Kuroda Ueda, will appear before the Diet. He is unlikely to break new ground or commit to any course of action, though he may endorse a policy review and reiterate his view that the Japanese economy still needs monetary support. He may be asked about the wage hikes recently announced by two large auto companies. South Korea's central bank stood pat as widely expected but gave a strong signal that another hike will likely be forthcoming, supporting global theme of higher for longer. The key 7-day repo rate was left at 3.5%, but five of the six board members agreed that there may be scope for another hike after pausing. Last month, only three board members shared that opinion. One member dissented from today's decision in favor an immediate quarter-point hike. The central bank shaved its growth forecast for this year to 1.6% from 1.7%. The South Korean economy contracted in Q4. It also pared its inflation forecast to 3.5% from 3.6%. Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM The dollar remains in a narrow range against the Japanese yen as it continues to hover around JPY135. Today's range through the European morning is roughly JPY134.70-JPY134.95. A convincing move above JPY135 would target the JPY136.50 area next. A further rise in US interest rates and/or clear signal from Ueda tomorrow of no immediate intention to raise rates or exit yield-curve control may be the impetus. The Australian dollar briefly dipped below $0.6800 yesterday but is holding above it today. The 200-day moving average is slightly above $0.6800 and the Aussie has not closed below it since early January. A move above the $0.6850-65 area is needed to lift the technical tone. The greenback continues to grind higher against the Chinese yuan. It has only fallen once since February 9 and that was on this past Monday. It reached almost CNY6.90 today, its highest level since January 4. The next technical target may be around CNY6.9340. The reference rate was set at CNY6.9028 (vs. median projection of rCNY6.9024 in Bloomberg's survey), suggesting no protest yet from the PBOC. Lastly, we note the South Korean won is up about 0.6% to lead the emerging market currencies after the hawkish hold by the central bank. Europe While the shift in market expectations for the terminal Fed funds rate has been the key driver of the dollar's recovery this month, the terminal rate for the European Central Bank has also crept higher. At the end of 2022, the implied policy rate for the end of 2023 in the overnight index swaps market, was 3.44%. It now is near 3.65%. This means that the backing up of US short-term rates has not translated into as much of a widening of its two-year premium over Germany, as one might have expected. The US premium peaked early last August near 277 bp. Even in early November, the premium was still above 260 bp. It fell sharply and reached 145 bp a couple of days before the strong January US employment and service ISM were reported on February 3. The rate differential peaked a few days later a little more than 185 bp. It has been hovering around 175 bp for the bast two weeks (+/- 3 bp). Incorporating the delayed Germany CPI figures fueled an upward revision to the aggregate eurozone January inflation estimate. The headline rate stands at 8.6%, up from 8.5%. The core rate was revised to 5.3%, a new cyclical high, from 5.2%. The stronger than expected flash PMI reported earlier this week and today's revised inflation report will strengthen the hawks at the ECB, some of whom seem to want to pre-commit to another 50 bp hike. A move of that magnitude has already been signaled for the mid-March meeting. The following meeting is May 4. The pullback in the euro may also bolster their case. The euro briefly slipped below $1.06 yesterday in the volatile reaction to the FOMC minutes. Yet, the $1.0605 settlement was the lowest of the year. It has been pushed lower in the European morning to record a low slightly above $1.0585. The next important chart area is closer to $1.05 (and then $1.0460). However, the intraday momentum indicators are oversold and the strength, or indeed, the lack thereof, of the bounce may help shape day traders’ strategy. A move above $1.0630 may be needed to help stabilize the tone. Sterling continues to trade within Tuesday's range (~$1.1985-$1.2145). Resistance is seen near $1.2130, where the 20-day moving average is found. It has not traded closed above that moving average since February 1. Its intraday momentum indicators are also oversold, and initial resistance is seen in the $1.2060-80 area. America Today's look at Q4 22 US GDP is not so important for market participants. Weekly initial jobless claims will cover the same week as February employment surveys and may draw more attention. That said, the 517k rise in January nonfarm payrolls was a bit of a fluke. The early call for February is that job growth slowed to 200k, which if true would the slowest since the end of 2020. The Atlanta Fed's GDPNow tracker will be updated tomorrow, but the results of Bloomberg's latest (Feb 14-20) survey of (66) economists were reported yesterday. The median forecast for Q1 growth has been revised to 0.5% from flat and a contraction is still seen in Q2 (-0.5% vs. -0.6%) and Q3 (-0.1% vs. -0.3%). Also, the median forecast for CPI was raised to 4% from 3.7% previously. The Fed's Bostic and Daly (non-voters) speak today, while several speak on tomorrow (Jefferson, Mester, Bullard, Collins, and Waller). The FOMC minutes failed added little new insight, except that "almost all" members thought downshifting to a 25 bp hike was appropriate, meaning that the hawkishness of Mester and Bullard (and possibly Kashkari) did not find broader support. While it would seem to reduce the likelihood of a re-acceleration next month, the market seems to see the rate hike cycle extending into July. Mexico reports the bi-weekly CPI for the first half of February. The 0.35% (headline) and 0.39% (core) median projection in Bloomberg's survey is still too high for the central bank, even though it will allow the year-over-year rates to decline slightly. The minutes from the February 9 central bank meeting, which surprised the market with a hawkish 50 bp hike will be released. The overnight rate stands at 11% and the swaps market sees potential to 11.75% in 25 bp increments over the next six months. The US dollar is trading inside yesterday's range against the Canadian dollar (~CAD1.3515-CAD1.3570). A break of yesterday's lows, perhaps encouraged by the S&P 500 snapping a four-day fall, could signal a test on the CAD1.3480-CAD1.3500 band of support. It takes a break of CAD1.3450 to signal anything important. The US dollar stalled near MXN18.48 yesterday and has been sold to new five-year lows today, slightly below MXN18.30. There is little meaningful support ahead of MXN18.00, though we suspected some support may be found around MXN18.25. Disclaimer

ECB enters final stage of tightening cycle

Bank of Japan capped the 10-year on-the-run bond at 0.5%, Eurozone money supply growth last month was weaker than expected

Marc Chandler 27.02.2023 15:07

February 27, 2023 $USD, Canada, China, Currency Movement, Eurozone, Federal Reserve, Germany, Japan, Mexico, Northern Ireland protocol, UK Overview: After last week's flurry of activity that saw the US dollar extend its recovery, it has begun off the new week largely consolidating in relatively narrow ranges. The Australian and New Zealand dollar's remains softer, and the Swiss franc is virtually flat, but the other G10 currencies, led by sterling are posting small gains. A break-through on the Northern Ireland protocol, which has been rumored for a more than a week may be announced shortly. The news stream is light and conducive to the consolidative tone, but the dollar's recovery does not seem complete. Despite weekend protests against AMLO's downsizing of the electoral watchdog and rising tensions with the US over its steel exports, the Mexican peso is the strongest of the emerging market currencies, outside of the Russian rouble and is near the five-year highs set last week. Asia Pacific equities were mostly lower after the pre-weekend losses in North America and Europe. Europe's Stoxx 600 has recouped its decline from the end of last week, and US index futures are trading with a firmer bias. Benchmark 10-year yields are firmer, mostly 1-3 bp higher in the US (near 4.84%) and Europe. UK Gilts are an exception and are five basis points higher near 3.65%. Gold is flat near $1811. It is off about 3% over the past two weeks. April WTI is also flat near $76.30. It has fallen by around 4.5% over the past couple of weeks. News of the US 200% tariff on Russian aluminum (and derivatives) seem to be having little immediate impact. Asia Pacific The BOJ caps the 10-year on-the-run bond at 0.50%. The generic yield has not settled below there since February 9. The presumed near governor of the Bank of Japan, Ueda spoke for the second day before the Diet. He did not add much to what he said last week. He is prepared to adjust monetary policy when inflation is sustainably above 2%. Yet, Ueda agrees that despite the headline being more than twice as high, it is not sustainable as it reflect cost-push inflation and not strong demand. Moreover, he expects inflation to begin falling. Tokyo's January CPI at the end of the week will be the first test of this hypothesis, which we share. It is a very good indicator the national figures. We identified three forces that should begin easing Japanese price pressures: government subsidies, falling energy prices, and the appreciation of the yen on a trade-weighted basis. During the 2008-2010 Global Financial Crisis, a common meme was to draw comparisons between the US/Europe and Japan. While Japan had already been there in terms of expanding the central bank's balance sheet as the zero-bound of interest rates were approached. It was not, though, the first country to adopt a negative policy rate. That dubious honor goes to Denmark in 2012. A op-ed in the Financial Times, citing bank research, suggests it is now China who is turning Japanese. Of course, the collapse of Japan's property bubble more than three decades ago still seems to be the go-to comparison. Japan and China (along with several countries in East Asia) shared a common development model, which in political economy is known as export oriented. Import substitution, the other major model was favored after WWII, but the experience of several Latam countries that were arguably large enough to try it, further encouraged East Asian model of export-driven industrialization. The scale that China must operate on given its size is overwhelming. And it would be regardless of its political structure. One key difference is what comes next. Japan has a lost decade. China most likely will not. The IMF projects Chinese will expand by 5.2%, which is also the median forecast of economists in Bloomberg's survey. We suspect that if they are wrong, it is on the low side. Coming from the annual National People's Congress (starting March 5) new economic targets will announced. The dollar is consolidating the pre-weekend gain that carried it to about JPY136.50 and is in a little more than half of a yen range above JPY136.00. The JPY136.65 area corresponds to the (38.2%) retracement of the dollar's decline since the multiyear high set in late October near JPY152.00 and the 200-day moving average is near JPY137.15. A break of JPY136.00 could see a pullback toward JPY135.35-50. That said, we like it higher and suggest potential toward JPY140.00. The Australian dollar is seeing last week's 2.2% drop extended. It had begun last week testing the $0.6900-20 area and today slipped slightly below $0.6700. The low for the year set on January 3 a little above $0.6685. The lower Bollinger Band is around $0.6705. The selling pressure does not appear exhausted, and the $0.6720-40 area may now cap upticks. The dollar is snapping a four-day advance against the Chinese yuan, and it is only the second decline since February 9. The pullback is only after the greenback poked above CNY6.9730, a two-month high. The PBOC set the dollar's reference rate at CNY6.9572, well above the pre-weekend fix of CNY6.8942. This reflects the dollar's rally after the mainland's regular session ended on Friday. The fix was tight to market expectations (CNY6.9570). The yuan has fallen by about 2.9% here in 2023, which is a middling performance in Asia and among emerging market currencies. Europe Part of the narrative that helped feed the euro's recovery, especially its latter phase, from the multi-year low in late September (~$0.9535) to the early February high (~$1.1035) was reduced left-hand tail risk (dramatic negative outcome). The relatively warm winter, conservation, lower energy prices eased fears. Now as the market is pricing the outlook for Fed policy, the economic outlook in Europe is less certain. Initially, Q4 22 German GDP was expected to be flat. It came in at -0.2%. At the end of last week, it was revised to -0.4%. Consumption and capital spending were weaker than projected. Although the flash February composite PMI jumped back above the 50 boom/bust level for the first time since last June, and the confidence measures have been tracking improvement, the economy may still be contracting. The median forecast in Bloomberg's survey projects a 0.4% contraction this quarter. The German 2-year yield rose nearly 12 bp before the weekend and after GDP report and is up a few more basis points today. The yield has risen by 50 bp in its three-week advance. Read next: EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained| FXMAG.COM The data highlight of the week is the preliminary February CPI. Given the base effect, the 0.5% monthly rise will allow the year-over-year headline rate to ease to 8.2% from 8.6%. Recall in February 2022, the eurozone's CPI rose by 0.9%. More significantly, in March 2022 consumer prices surged by 2.4%. As this drops out of the 12-month comparison, the headline rate will fall sharply. The more pressing problem comes from the core rate, which reached a new cyclical high in January of 5.3%. The median projection in Bloomberg' survey is for it to be unchanged in February. Eurozone money supply growth last month was weaker than expected (3.5% vs. 3.9% median forecast in Bloomberg's survey and 4.1% in December) and business confidence reports were softer than expected. However, the euro is stabilizing in a narrow range after making a marginal new low closer to $1.0530. It has approached $1.0570. Resistance may extend to $1.0580. There are options for around 1.65 bln euros that expire today at $1.05. There is another set of options (~1.3 bln euros) that expire there tomorrow. A break-through on the Northern Ireland protocol may be announced shortly but the prospects do not appear to be lending sterling much support. It is holding below $1.20 after taking out the pre-weekend low by a few hundredths of a cent as it frayed the 200-day moving average (slightly below $1.1930). The intrasession momentum indicators are over-extended, warning of the follow-through buying in North America may be limited. America The strength of personal consumption last month (1.8% in nominal terms and 1.1% in real terms) coupled with firmer than expected deflators strengthen the conviction of the direction the market was already moving. The two-year note yield jumped almost 12 bp to rise above 4.80%, for the first time since 2007. The swaps market pushed a little closer to a 5.50% terminal Fed funds rate. Good economic news is still seen as negative for the equity market and the major US indices fell by at least one percent ahead of the weekend. The 2-10-year inversion is testing the area (a couple basis points around -85 bp) that held in early December and earlier this month, which is the most in more than 40 years. On the other hand, of note is Fed Chair Powell's preferred measure the three-month bill yield compared with its 18-month forward rate. It is about 21 bp inverted but is has climbed steadily as the economic data strengthened. It has been around -100 bp before the January employment report. We expect the next batch of high-frequency data to provide evidence for our hypothesis that the market is getting carried away by the recent reports. The next batch of data begins today with the January durable goods orders. Due to the volatility of commercial aircraft orders, the headline rate is seen falling by 4% after a 5.6% rise at the end of last year. However, excluding aircraft and military, capital goods orders are expected to have fallen for the third consecutive month and the fourth time in the past five months. Although auto sales likely slowed and the ISM services, which provided a 1-2 punch with the jobs report on February 3, the market may need to see the next employment report (March 10) to take the January-fluke hypothesis more seriously. Canada reports Q4 current account figures. A deficit in line with the Q3 shortfall of C$11 bln is expected. It would translate into about an CAD18 bln deficit for the year. It recorded a nearly C$20 bln merchandise trade surplus. It will feed into the Q4 GDP estimate due tomorrow. Still, the Canadian dollar may see marginal impact from the report. It is consolidating last week's losses that saw the greenback climb to CAD1.3665. It had begun the week near CAD1.3440. Mexico reports its January trade balance. Last year, Mexico recorded a trade deficit of about $26.5 bln. It has run a small deficit in 2019 and large surplus in 2020. The deficit returned in 2021. Recall that January 2022, Mexico posted a record deficit of nearly $6.3 bln. Note that Mexico's steel exports to the US have become a potential flashpoint, and there were large demonstrations over the weekend against the dilution of the electoral watchdog. The dollar's surge saw it test MXN18.50 at the end of last week. It has come back offered and is probing the MXN18.35 area. The greenback appeared to carve out a little shelf near MXN18.30-MXN18.33 last week. Stops below there still seem vulnerable. Disclaimer

Andrey Goilov about future BoJ Governor's speech: Ueda noted that the Bank of Japan will take a long time to revise its monetary policy

Andrey Goilov 28.02.2023 11:23

Last week Kazuo Ueda tesitfied, so FXMAG team wondered what are analysts' assessments of the speech by the next Governor of the Bank of Japan and what was important, surprising in it and what kind of monetary policy in Japan can be expected. Here's what we get from Andrey Goilov, analyst at RoboForex. Andrey Goilov (RoboForex): The Bank of Japan's comments are broadly in line with the regulator's current policy. On the other hand, they are disappointing for those investors who were hoping for a change in the BoJ's view on monetary policy. Ueda noted that the Bank of Japan will take a long time to revise its monetary policy. In fact, this is a confirmation of the current rate.The CB did not give a clear signal that could give grounds to changing the medium-term monetary policy. A "hawkish" tone would have allowed the yen to strengthen through increased speculative interest. However, this did not happen. The JPY remains vulnerable, and the USDJPY pair is clearly moving towards 137.00. Read next: Swissquote's Ipek Ozkarderskaya points to 1.0470/1.0475 as the next key level to watch in EUR/USD| FXMAG.COM Visit RoboForex

EUR/USD Pair Has Potential For The Downside Movement Today

Japan's industrial output dropped by 4.6% in January. German unemployment increased by 2k

Marc Chandler 01.03.2023 13:12

March 01, 2023 $USD, Australia, Canada, China, Currency Movement, EMU, Germany UK, Japan, Mexico, US Overview: Many investors may be skeptical of the accuracy of Chinese data, but its stronger than expected February PMI animated the animal spirits and bolstered risk-taking appetites. Asia Pacific equities jumped, led by the 4.2% rally in Hong Kong and a 5% surge in the index that tracks mainland shares. Among the long bourses Australia and Singapore slipped, and South Korean markets were closed for a national holiday. Europe's Stoxx 600 is posting a small gain and US index futures are trading higher. European 10-year yields are mostly 5-6 bp higher, though UK Gilts are bucking the move and the 10-year yield is a little softer. The US 10-year Treasury yield is firm near 3.94%. The dollar is broadly lower. The New Zealand dollar is leading the charge with a 1% gain, followed by the euro, which is up around 0.75% near $1.0665. Sterling is little changed and at the bottom of the G10 performers today. Nearly all the emerging market currencies are higher, save the Russian rouble and Taiwanese dollar. The Mexican peso rose to new five-year highs and the Chinese yuan is posting its largest gain of the year. Gold posted a key upside reversal yesterday and is extending its gains today. It is reached a five-day high near $1838. April WTI initially is trading inside yesterday's range and is pulled between the China re-opening meme and the continued build of US supplies, which API estimated rose for the tenth consecutive week. Asia Pacific China's February PMI jumped more than expected, strengthening the recovery meme, and bolstering risk appetites more broadly. The manufacturing PMI rose to 52.6 from 50.1, which is highest in a decade. The non-manufacturing PMI increased to 56.3 from 54.4, just below the high set in November 2020. This saw the composite rise to 56.4 from 52.9, a new high. The Caixin manufacturing PMI was somewhat less impressive, rising to 51.6 from 49.2 and is seen reflecting a subdued export performance. Yesterday, Japan reported a stunning 4.6% drop in January industrial output. Only one economist in Bloomberg's survey of 28 economist had anticipated a larger contraction. The final February manufacturing PMI stood at 47.7, up from the flash estimate of 47.4, which was the weakest since August 2020. It has not posted a monthly increase since last March. In January it was 48.9, unchanged from December 2022. Australia's economy expanded by a solid even if not spectacular 0.5% in Q4 22. That follows a 0.7% expansion in Q3. Although Q4 growth was a little less than expected, the year-over-year rate was in line at 2.7%. Separately, Australia reported its newly minted monthly inflation report. January prices slowed to 7.4% year-over-year from 8.4% at the end of last year. This was a larger drop than expected, and initially weighed on the Australian dollar. The RBA sees it falling to 4.8% by the end this year. The median forecast in Bloomberg's survey is not as sanguine as sees a 5.4% pace. Lastly, the final February manufacturing PMI came in at 50.5, up from the flash reading of 50.1. This is the third consecutive month that it hovered around 50 without break below. The dollar was turned back from the JPY137 area yesterday and settled near JPY136.15. The heavier greenback tone saw it slip marginal through yesterday's lows to almost JPY135.60 today. The intraday momentum indicators are stretched and nearby support around JPY135.40-50 may hold, with the help of firmer rates in Europe and the US. The Australian dollar is recovering smartly after making a marginal new low (since early January) near $0.6695. It has risen through yesterday's high (~$0.6760) and a close above there could be a bullish key reversal. Nearby resistance is seen around $0.6800. Initial support is around $0.6750. The Chinese yuan surged after the PMI reports. The dollar peaked Monday near CNY6.9730 reached CNY6.8790 today, a six-day low. It is the third day the greenback has fallen, which halted a four-day rally seen last week. Today's loss, if sustained, would be the largest this year. The PBOC set the dollar's reference rate slightly below expectations (CNY6.9400 vs. CNY6.9411, the median forecast in Bloomberg's survey. Europe The eurozone's final manufacturing PMI was unchanged at 48.5. Germany's was revised lower to 46.3 from 46.5. It was at 47.3 in January and the February reading was the first decline in four months. The French reading was also revised down to 47.4 from the flash reading of 47.9. In January it was above 50 (at 50.5) for the first time since last August. Italy's manufacturing PMI jumped to 52.0 from 50.4 and was better than expected. The same is true of Spain, where the manufacturing PMI rose to 50.7 from 48.4. It is the highest since last June. Separately, Germany reported a 2k rise in unemployment last month. The market had looked for aa 10k decline, and January's 22k fall was halved. The unemployment rate was unchanged at 5.5%. German states have reported the February CPI figures and the national estimate will be out shortly. The EU harmonized measure is seen rising by 0.5% month-over-month for a 9.0% year-over-year increase, after a 9.2% rate in January. Recall Spain and France surprised on the upside yesterday. The aggregate report for the eurozone is due tomorrow. The UK's February manufacturing PMI ticked up to 49.3 from the preliminary estimate of 49.2 and 47.0 in January. While still in contraction territory, it is the best reading since last July. The UK also reported stronger than expected consumer credit and mortgage approvals than expected. Although recession expectations are widespread, many are beginning to question it and at least one large bank now says a recession has been averted. Read next: Some McDonald's Locations Don't Promote Hip-Hop Stars' New Meal| FXMAG.COM After a poor close yesterday (on its lows near $1.0575), the euro has popped back and is trading at a five-day high in Europe near $1.0660. Some buying may be related to the 1.5 bln euro options expiring today at $1.06. Initial resistance around $1.0685 may cap upticks given overbought momentum indicators. That said, a close above it would lift the technical tone. Large options at $1.06 and $1.07 expire Friday. Sterling also was turned back yesterday and settled on its lows (~$1.2020), but unlike the euro, has found little new demand. It bounced to almost $1.2090 and held below yesterday's high (~$1.2145). It risen above the 20-day moving average but failed to close above it. It is found today slightly above $1.2060. There are options for nearly GBP500 mln at $1.20 that expire today. America Yesterday's battery of US data is unlikely change economic views. The December house prices are too dated for most, and the January trade deficit was only a little bigger than expect, and the weaker wholesale inventories were partly blunted by the stronger retail inventories and other better-than-expected January reports. The data for February, which included the Chicago PMI, the Conference Board's consumer confidence, and the Richmond Fed's manufacturing survey, were all weaker than expected. The Richmond Fed's business condition measure and the Dallas Fed's service activity report were still in contraction territory, even if a little less so than January. Today's highlights are the final manufacturing PMI and the ISM manufacturing survey. Both are expected to remain below 50 as they have since last October. A warm January bodes well for construction spending, which is seen rising by 0.2% after a 0.4% decline in December. Lastly, auto sales will trickle in through the day, perhaps preventing them from having the impact commensurate with their significance. Auto sales have typically slow in February (last eight consecutive years) and the median forecast in Bloomberg's survey sees auto sales slowing to a 14.7 mln seasonally adjusted annual pace, from 15.74 in January, which were the highest since May 2021. Canada sees the February manufacturing PMI. It is not typically a market-mover. That said, it fell for the last five months of 2022 before rising back above 50 in January for the first time since last July. The US dollar closed firmly yesterday, but remained within the range set on Monday, which was within Friday's range. Last's Friday's high, which was the greenback's best level since early January, was near CAD1.3665 and the January high was closer to CAD1.3685. The US dollar has come back offered today, with the risk-on sentiment. However, it is holding above yesterday's low (~CAD1.3560), and this has to be taken out to be meaningful. Note that there are options for $500 mln at CAD1.3580 that expire today. Mexico's economic calendar is more complicated. Sure, February's manufacturing PMI and IMEF surveys will be reported. But two other reports may be more important. First, Mexico reports January worker remittances. There is a clear seasonal pattern for strength in December and weakness in January. Worker remittances have emerged as a key source of capital inflows into Mexico and have been stable to higher, and sufficient to cover the trade deficit. The proper comparison for the January figure (expected ~$4.5 bln) is not December (~$5.4 bln) but January 2022 ($3.9 bln) and January 2021 (~$3.5 bln). The dollar posted a fresh five-year low against the peso yesterday near MXN18.2820. The losses were extended today to almost MXN18.24 before the greenback recovered in the European morning to almost MXN18.30. A nearby cap is seen in the MXN18.33-MXN18.35 area. A push above MXN18.40 would likely trigger stops. Disclaimer

Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

Patrick Reid on Kazuo Ueda's testimony: the speech did not give any clues away and kept many of us guessing

Patrick Reid 02.03.2023 11:59

Last week next Bank of Japan Governor, Kazuo Ueda, testified, so we've been wondering what are analysts' assessment of the speech, what was important, surprising in it and what kind of monetary policy in Japan can be expected? Last time we heard from Andrey Goilov (RoboForex) and today Patrick Reid (Adamis Principle) provided us with his view on that speech. Patrick Reid (Adamis Principle): The speech did not give any clues away and kept many of us guessing. You can clearly see this in the reaction to USDJPY as it did not sell off. The big meeting on everyone's radar is the monetary policy one 10th March. I see YYC to be increased to at least 75bps with a potential to 100bps at the next meeting with an additional chance of YCC to move to a shorter duration. The shorter duration This could cause USDJPY to actually rally at disappointment. Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| FXMAG.COM

According to Oanda's Kenny Fisher, Kazuo Ueda will be under pressure to tweak the YCC

Kenny Fisher 06.03.2023 22:51

The Japanese yen is drifting at the start of the week. In the North American session, USD/JPY is trading just under the 136 line. Japan’s wage growth expected to slow Japan will release Average Cash Earnings for January later today. The wage growth indicator surged 4.8% y/y in December and is expected to slow to 1.9% in January. The sharp jump in December was likely a one-time bump, driven in large part by December bonuses. Wage growth is a key factor in the Bank of Japan’s ultra-loose policy. Governor Kuroda has said that he will not tighten policy, despite rising inflation, until there is evidence that inflation is being driven by wage growth rather than external factors such as commodity prices. Kuroda will chair his final policy meeting on March 10. Barring a huge surprise, Kuroda is expected to maintain policy and not make any changes to the yield control curve (YCC). Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM BoJ Governor-elect Kazuo Ueda takes over from Kuroda in April and has stated has his confirmation hearings that current policy is appropriate. Still, Ueda will be under pressure to tweak the YCC which continues to cause bond market distortion and he could make a change in policy as early as his first policy meeting in April. Federal Reserve Chair Powell will testify before Congress on Tuesday and Wednesday, and inflation will be the hot topic. The Fed’s aggressive rate-hike cycle has led to inflation dropping for seven straight months, and Powell acknowledged last month that the “disinflation” process had finally started. What has complicated matters is a string of better-than-expected releases, notably a sizzling nonfarm payrolls of 517,000 in January. Consumer spending has remained strong and Friday’s ISM Services PMI came in at 55.1 in February, which indicates strong expansion. How will the Fed respond to an economy that is performing better than expected? The markets hope to get some answers this week from Powell’s testimony on the Hill. USD/JPY Technical 136.06 is a weak resistance line, followed by 136.86 135.02 and 134.22 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Will wage growth shake up the yen? - MarketPulseMarketPulse

Further Downside Of The AUD/JPY Cross Pair Is Expected

TeleTrade Comments 09.03.2023 08:37

AUD/JPY renews seven-week low as China prints downbeat CPI, PPI for February. Convergence of two-month-old ascending trend line, 50% Fibonacci retracement challenge bears amid oversold RSI (14) line. Recover remains elusive unless crossing 91.75 hurdle; MACD teases buyers. AUD/JPY sellers attack the short-term key support around 90.20 after China released downbeat inflation data early Thursday. Also weighing on the cross-currency pair are the headlines suggesting challenges to sentiment emanating from US President Joe Biden’s budget proposal for 2024, up for publishing on Friday. As per the latest inflation data from the National Bureau of Statistics of China, the headline Consumer Price Index (CPI) dropped to 1.0% YoY versus 1.9% expected and 2.1% prior while the Producer Price Index (PPI) also declines to -1.4% from -0.8% previous readings and -1.3% market consensus. Also read: China CPI in at 1.0% vs 1.9% expected, AUD unchanged With the downbeat inflation numbers from Australia’s key customer China, as well as the risk-off mood, AUD/JPY bears poke a convergence of the two-month-old ascending trend line and 50% Fibonacci retracement level of the pair’s January-February upside, near 90.20. It’s worth noting that the oversold RSI (14) joins the looming bull cross on the MACD to challenge the quote’s further downside. Also acting as an important nearby support is the 90.00 round figure. Should the quote breaks the 90.00 mark, the odds of witnessing a slump toward the 61.8% Fibonacci retracement level surrounding 89.55, also known as the golden ratio, can’t be ruled out. Meanwhile, AUD/JPY rebound needs validation from the 38.2% Fibonacci retracement level surrounding 90.90. However, a convergence of the 200-SMA and a 12-day-old descending resistance line, around 91.75 at the latest, appears a tough nut to crack for the AUD/JPY buyers. AUD/JPY: Four-hour chart Trend: Further downside expected

One of Ueda's main priorities is to achieve the Bank of Japan's 2% inflation target, which has eluded the central bank for years

Ramesh Mungara 09.03.2023 12:46

Yesterday it was Jerome Powell's turn to testify, but last week that was the future BoJ Governor, Kazuo Ueda, who made a speech. We asked Ramesh Mungara (VT Markets), to share his assessment of the speech by the next Governor of the Bank of Japan and tell us, what was important, surprising in it and what kind of monetary policy in Japan can be expected. Kazuo Ueda, the newly nominated governor of the Bank of Japan, delivered his first speech on March 4th, outlining his priorities for the central bank. Ueda, who is known for his conservative approach to monetary policy, emphasized the importance of maintaining price stability and ensuring financial stability in Japan. Ueda's speech touched on several key issues facing the Japanese economy, including the country's aging population and low birth rate, which have contributed to sluggish growth and deflationary pressures in recent years. He also highlighted the challenges posed by the COVID-19 pandemic and the need for continued monetary and fiscal support to support the recovery. Kazuo Ueda's priorities One of Ueda's main priorities is to achieve the Bank of Japan's 2% inflation target, which has eluded the central bank for years. Ueda emphasized that achieving this target would be crucial in breaking the cycle of deflation and boosting consumer and business confidence. He acknowledged that the central bank may need to adjust its policy framework to achieve this goal, including potentially increasing the level of bond purchases or introducing new tools such as yield curve control. Another area of focus for Ueda is financial stability. He emphasized the importance of monitoring and addressing potential risks in the financial system, including the impact of low interest rates on financial institutions and the potential for asset bubbles to form. He also stressed the need for effective communication with market participants and the public to ensure that the central bank's actions are understood and support the stability of the financial system. Read next: Fed Chair testimony summary: Powell emphasized that the final decision has not been made and it would largely depend on the jobs data coming out on Friday | FXMAG.COM Ueda also touched on the role of the Bank of Japan in supporting the government's efforts to address the challenges facing the economy. He emphasized that the central bank would continue to work closely with the government and other stakeholders to ensure that monetary and fiscal policy are coordinated and effective in supporting the recovery. Ueda's experience and expertise will be crucial in guiding the central bank through the challenges facing Japan's economy in the years ahead Overall, Ueda's speech highlighted his commitment to maintaining stability in the Japanese economy and his willingness to adapt the Bank of Japan's policy framework to achieve its goals. While his conservative approach to monetary policy may draw criticism from some quarters, Ueda's experience and expertise will be crucial in guiding the central bank through the challenges facing Japan's economy in the years ahead.

Gold Trading Analysis: Technical Signals and Price Movements

US dollar stronger against all the G10 currencies, apart from... against Japanese yen

Marc Chandler 15.03.2023 15:34

March 15, 2023 $USD, Australia, China, Currency Movement, ECB, Inflation, Japan, UK, US Overview: The capital markets remain unsettled. Asia-Pacific bourses rose, but European markets are sharply lower, with the Stoxx 600 off 1.3%, giving back the lion's share of yesterday's gains and US equity futures are lower. Benchmark 10-year yields are off 3-9 bp in Europe, with widening core-periphery yields. The yield on the 10-year US Treasury is off a dozen basis points to about 3.56%. Two-year yields are also sharply lower, led by the 15-16 bp decline in Germany and France (Italy's two-year yield off a couple basis points). The two-year US yield is down seven basis points to 4.18%. The US dollar is firmer against all the G10 currencies but the Japanese yen. The Norwegian krone and euro are under the most pressure, off about 0.5%. After the yen, the Canadian dollar is off the least (~0.20%). Most emerging market currencies are under pressure, and the Mexican peso is bearing the brunt after yesterday's recovery. The peso is off a little more than 1.1%, and the Hungarian forint and South African rand are close behind. Gold is recovering from a pullback to around $1886 and is back above $1900. Demand concerns appear to be weighing on crude oil, and the May WTI contract is pinned near the trough seen yesterday around $71. Asia Pacific As widely expected, China left its key one-year medium lending facility rate steady at 2.75%, though lending volume was stronger than expected, though slightly slower than previously (CNY481 bln vs. CNY499 bln). The series of real sector data reported supports ideas that the world's second-largest economy is on the mend after the initial disruption as Covid policies were reversed. Retail sales rose 3.5% year-over-year in the Jan-Feb period from -1.8% in December, in line with expectations. Industrial output accelerated to 2.4% from 1.3%, just missing expectations. Fixed asset investment was somewhat stronger than expected, rising 5.5% from 5.1% in December. The slump in property investment continued but at a slower pace (-5.7% year-over-year after contracting 10% in December). Surveyed unemployment ticked up to 5.6% from 5.5%. Ironically, the Chinese economy is recovering as the US economy is hit with a new shock. The financial stress is disruptive but is also likely to tighten lending, which was already underway, according to the recent survey of senior loan officers. Australia reports its February jobs figures first thing tomorrow. It has lost jobs over the past two months but is expected to recoup them in February. It lost nearly 32k jobs in December-January, and the median forecast in Bloomberg's survey calls for a 50k increase. Recall that Australia reported a net loss of 43.3k full-time posts in January. The Reserve Bank of Australia meets next on April 4 and the market has all but given up on a rate hike. At the end of February, the futures market had about an 80% chance of a hike discounted but is has been trending lower. The current cash target rate is 3.60% and the swaps market sees it as the peak. As US rates have stabilized, the dollar reached a three-day high against the Japanese yen near JPY135.10. That is the halfway point of the dollar's decline from last week's high near JPY138 to this week's low near JPY132.30. The next retracement target is JPY135.75, while initial support is now around JPY133.80-JPY134.00. The Australian dollar extended yesterday's recovery but was turned back as it approached Monday's high a little shy of $0.6720, where around A$925 mln of options will expire today. It made new session lows in the European morning and a break of $0.6660 could see $0.6600-20. The greenback rose for a second day against the Chinese yuan but remained below Monday's high (~CNY6.9185). Still, the US dollar firm and approaching the 200-day moving average (~CNY6.9045). The PBOC set the dollar's reference rate a little lower than expected (CNY6.8680 vs. CNY6.8696). Europe The market is feeling more confident that the ECB will stick to the 50 bp hike tomorrow that it had signaled before the US financial crisis. In the middle of last week, the swaps market showed high confidence of a half-point move. It fell to about 55% chance on Monday and recovered to almost 74% yesterday and is closer to 83% today. A 50 bp hike would bring the key rate to 3.0%. The terminal rate is seen near 3.50%, which would allow for two additional quarter-point moves. Barring a major surprise on the Chancellor Hunt's spring budget, next week's Bank of England meeting looms large (March 23) and ahead of is the February CPI (March 22). Press reports suggest the new efforts will be focused to blunt the hit coming to businesses in the form of higher taxes and a loss of investment incentives. Tax breaks for new capex, if successful, brings forward investment but does not boost the long-term trajectory of productive capacity. Falling energy prices and stronger tax revenues give the Hunt some room to maneuver, though it could be constrained if the Office for Budget Responsibility cuts its long-term growth forecast. Meanwhile, some half a million teachers, junior doctors, civil servants, and commuter train operators are striking today. Turning to BOE expectations, a week ago, the swaps market had a quarter-point hike fully discounted. It is now closer a little above 50%. The terminal rate was seen between 4.75% and 5.0%. It is now seen between 4.25% and 4.50%. Read next: The payrolls bump was mostly witnessed in leisure, hospitality, retail trading, government and health care| FXMAG.COM The euro reached $1.0760 before sellers got an upper end and pushed the single currency through yesterday's low (~$1.0660). The euro has met the (38.2%) retracement of its bounce from last week's that was found near $1.0670. The next retracement (50%) is by $1.0640 and then (61.8%) is closer to $1.0615. The sharp selling pressure in the European morning is stretching the intraday momentum indicators. There are 1.7 bln euros in options struck at $1.0700 and $1.0750 that expire today and the positioning/hedging around them may be contributing to the euro's pressure today. That said, the euro has traded on both sides of yesterday's range and a close below yesterday's low is a bearish technical development and would warn of the risk of a return to last week's lows near $1.0525. Sterling is faring better, though it too has a heavier bias. It remains well within Monday's range when it recorded a low near $1.2030, where there are options for GBP325 mln that expire today. It is holding above $1.2100 today, but that looks set to crack, which could spur a move toward $1.2050. America The US February CPI was in line with expectations, with the headline rate rising by 0.4% and the core by 0.5%. The year-over-year rates are at 6.0% and 5.5%, respectively. It is the lowest headline rate since September 2021. In Q2 22, headline CPI rose at an annualized rate of more than 10%. Making, a conservative assumption of a 0.5% increase on average per month in Q2 23, the year-over-year rate, and another percentage point will drop off by the end of Q2. Moreover, somewhere around the middle of the year, shelter costs will be falling (it is well appreciated now that the BLS does not use the most current data available which show some softening of rents and owner-equivalent measures). Still, price pressures remain strong outside the base effect. The last three months at an annualized pace, CPI has risen by about 4.0% and the core by around 5.2%. The CPI figures also mean that core PCE deflator is unlikely to ease much from January's 4.7% pace. Today's high-frequency reports include producer prices and retail sales. Producers prices are expected to have continued to slow. The headline pace peaked last March at 11.7%. The 12-month increase stood at 6.0% in January and likely slowed to 5.4% in February, the least since March 2021. The core measure topped at 9.7% in March 2022 and is seen near 5.2% last month, which would be the lowest since May 2021. Retail sales is the more important of the two reports. It covers a little more than 40% of personal consumption expenditures. The 3% jump in January was a bit of a fluke, helped by unusually warm weather and, arguably, the Social Security cost-of-living adjustment. The median forecast in Bloomberg's survey forecast a 0.4% decline in February. The core measure, which excludes auto and gasoline station sales, building materials and food services, used in some GDP models, is also expected to fall after rising 1.7% in January. The Empire State manufacturing survey is also on tap. It is among the first reports for March. It tends not to elicit much of a market response, but it is expected to have softened, with the median forecast in Bloomberg's survey looking for -7.8 after -5.8 in February. The diffusion index has not been positive since last November, which itself was the first positive reading since April. Two days after the Fed, FDIC, and Treasury acted to stem what they thought was a systemic risk, the market still does not appear confident. However, since all depositors will be made whole at the two failed banks, there is not a flight from deposits in general, but reports suggest money-center banks are drawing deposits from others. Still, even assuming one accepts the official moves, they seem to be incomplete. First, the Federal Reserve had the discretion to apply more rigorous regulatory oversight to banks below the $250 bln threshold. This discretion that was not exercised should have led to an independent inquiry not led by Fed Governor Barr, the Vice Chair of Supervision. Of course, there will be other investigations, including congressional hearings. Second, when granting forbearance, the government should insist on an equity stake in some fashion from those who benefit, like they did in the large banks and auto companies, which ultimately showed a profit. The KBW bank index plunged 15.75% last week. The government's announcement was Sunday, and the index gapped lower on Monday. It traded sideways yesterday and closed around 8.5% lower since the government's action. The US dollar found support near CAD1.3660 and is trading with a firmer bias today. The initial corrective target is around CAD1.3730 and then CAD1.3760. There are options for about $890 mln at CAD1.3725 that expire today. The intraday momentum indicators are overbought. The Mexican peso recovered smartly yesterday as market participants swooped to buy what had been their favorite currency this year. After reaching almost MXN19.18 on Monday, it approached MXN18.5560 yesterday. The US dollar has steadied today and is approaching MXN18.78, meeting the minimum retracement target. The next is closer to MXN18.8550. Disclaimer

FX Daily: Confidence crisis sparks wrong kind of dollar rally

ING Economics 16.03.2023 10:43

FX markets will be nervously assessing the overnight news that Credit Suisse has tapped a new Swiss National Bank facility for CHF50bn. Expect confidence to remain fragile - not least because pressure on US regional banks is unresolved. And the ECB faces a very difficult decision today, where market conditions are interfering with plans to hike 50bp USD: Policy makers scramble to restore confidence Despite much discussion of the unique problems facing the US regional banking system after SVB's failure, pressure in the banking sector did cross the Atlantic yesterday and asked questions of the European banking system. All eyes are on the health of Credit Suisse (CS) - one of the world's 30 Global Systemically Important Banks (G-SIBs). Late yesterday CS did receive the support it was looking for from Swiss authorities and overnight announced it had tapped a CHF50bn liquidity line from the Swiss National Bank (SNB). It also announced it planned to buy back some of its senior debt at 'attractive' levels. The travails of CS are of a very different nature to that of SVB, but the trigger for yesterday's CS sell-off was a remark from one of its top investors over capital injections - SVB's problems crystallised last week when it struggled to raise capital. The SNB has made it clear that it believes Credit Suisse is appropriately capitalised for a G-SIB. And certainly, the Financial Stability Board's creation of G-SIBs was to avoid the kind of public sector bailouts seen through the global financial crisis. The question now is whether investors will be happier that CS has access to liquidity or will continue to focus on the CS business model and the trend in capital levels. Pressure on a G-SIB has understandably unnerved global financial markets, which are clearly trading at stressed levels. Implied option volatility in the US Treasury market is now above that seen in March 2020 and dollar funding markets continue to show signs of stress. It seems unlikely that one single corporate finance event can put this genie of banking sector stress back in the bottle, but the market will be on the lookout for a series of supportive measures - perhaps some consolidation in the US regional banking sector under better-rated names? Expecting another nervous day in FX markets, we suspect investors will want to hang onto defensive trades such as long Japanese yen on the crosses and probably long dollar balances in case financial conditions deteriorate further. The market will also take its cue from the European Central Bank today. Pushing on with a 50bp rate hike will prove difficult and we should expect more volatility immediately after the 1415CET decision. Expect DXY to remain highly volatile in a 104-106 range - but the upside could come into focus (for the wrong reasons) if stress in the dollar wholesale funding market were to spike again. Chris Turner EUR: ECB will struggle to thread the needle Today’s ECB rate announcement will depend on a different set of factors than what the market – and the ECB itself – would have expected only a week ago. If recent inflation data clearly underpinned the ECB’s pledge to hike rates by 50bp in March, the ongoing turmoil in the financial sector is casting doubts on whether policymakers will raise rates at all: the OIS curve is pricing only 28bps for today’s meeting. In our ECB cheat sheet, published on Monday, we analysed four different 50bp outcomes within the dovish-hawkish spectrum, based on the ECB’s assessment of the inflation and growth outlook and above all the balance between data dependency and forward guidance. In light of yesterday’s developments, those scenarios are possible only under the condition that the ECB can feel comfortable that going ahead with tightening will not come at the cost of excessive pain for the financial sector. In other words, the ECB will be monitoring the Credit Suisse news and by extension the environment for European banks before pressing ahead with its promised hike. The time window is very narrow, and while our call is for a 50bp hike, we wouldn’t be shocked to see an ECB hold today. A 25bp move seems the least likely scenario. What about the EUR impact? If the ECB 50bp hike comes in an environment where markets are scaling back concerns on the banking sector thanks to the support from the SNB, then this may actually be read as a signal of confidence by Frankfurt on the health of the eurozone banking system, and can ultimately lift the euro. Should the ECB force a hike in a still fragile environment for the European banking sector, the impact on EUR/USD may actually be negative, as investors see this as another major risk for the financial stability in the area, while the simple repricing higher in ECB rate expectations is statistically not enough to boost the euro (as discussed in this article). Clearly, a tricky path for the ECB and we suspect EUR/USD will continue to be driven by the risk environment and the relative performance of the European financial sector. Elsewhere in European FX, Norway's krone is emerging as the worst-performing G10 currency. This is far from surprising, as the krone is the least liquid G10 currency and generally performs very poorly during tumultuous times for markets, especially when the risks are concentrated in Europe. While EUR/NOK upside has been relatively capped by the EUR’s own weakness, the USD/NOK rally has been fierce. The pair is now close to a key level, the 10.8860 September 2022 high, after which NOK would default to the weakest since the 2020 pandemic shock, when a liquidity crisis sent it on an uncontrolled spiral to touch the 11.70 level. NOK weakness remains highly likely until central banks successfully restore market confidence. Francesco Pesole GBP: Budget overshadowed by banking sector stress Chancellor Jeremy Hunt's budget delivered yesterday was generally seen to strike the right notes - albeit within the restraints he was given. It has been hard to pick out any sterling reaction to the budget given all the stress in financial markets. Instead, EUR/GBP seemed to come lower yesterday on stress in the Europan banking sector, recalling the weakness seen in EUR/GBP during the various eurozone crises of 2012-2015. Once again, the performance of the European banking sector will probably determine the EUR/GBP performance over the near term - although should the ECB be able to credibly hike 50bp today without unnerving banking stocks, EUR/GBP can push back above 0.8800. Expect GBP/USD to bounce around in a 1.20-1.22 range until this banking sector crisis calms down. Chris Turner JPY: Remaining the outperformer The return of financial crisis conditions has seen the Japanese yen return as the clear outperformer. The yen has normally played the role of safe haven currency during times like these because of Japan's large current account and net foreign asset position (years of surpluses). While Japan's current account surplus is smaller than it was because of the energy crisis, its large foreign asset position wins out. The yen will also be winning from the macro side too. The US banking crisis stands to tighten US credit conditions, hit US growth, and accelerate the timing of the Fed easing cycle. The same is true for other major central banks and, in effect, will drag global interest rates closer to the rock bottom rates in Japan. USD/JPY could easily trade under 130 should banking sector conditions deteriorate again and recent events on both sides of the Atlantic only give us greater confidence in our year-end USD/JPY forecast of 120. Chris Turner Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Technical analysis: US dollar against Japanese yen - March 16th, 2023

InstaForex Analysis 16.03.2023 15:37

Black line- support trend line (broken) Yellow rectangle- horizontal support (broken) Blue lines- bearish channel Resistance is at 134.10. Bulls need to break above this level and stay above it. Next major resistance is at 135.30. Previous support is now resistance. USDJPY remains under pressure. Price continues making lower lows and lower highs. Yesterday's high at 135.16 was a lower high and connecting it with the recent high of 137.01 we are creating a bearish channel. Price is close to breaking below yesterday's low. This would be an added sign of weakness that would imply more downside for USDJPY. As long as price is trading inside the blue downward sloping channel, we remain bearish. Resistance is at 134.10. Bulls need to break above this level and stay above it. Next major resistance is at 135.30. Previous support is now resistance. Read next: Euro against US dollar - technical analysis - March 16th, 2023| FXMAG.COM Relevance up to 14:00 2023-03-17 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/316425

Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Kenny Fisher 17.03.2023 13:15

The Japanese yen is in positive territory on Friday, trading at 133.02, up 0.56%. USD/JPY touched a one-month low on Thursday, falling as low as 131.72. How will BoJ react to the new wage agreement? The Kazuo Ueda era has begun at the Bank of Japan. Former Governor Kuroda has departed after 10 years at the helm and the markets are on alert as Ueda takes over. In his confirmation hearings, Ueda toed the line, stating that the current policy was appropriate. The markets aren’t so sure, as the Bank’s yield control curve (YCC) policy has distorted the bond markets and is in need of change. Kuroda didn’t make any moves at his final meeting earlier this month, which may have put more pressure on Ueda to tweak YCC, which would likely have a significant impact on the markets and the yen. Meanwhile, the annual Japanese rite of collective wage talks has ended, with employees getting the last laugh. Major Japanese companies, including automakers, agreed to fork over the largest pay increases since 1997, with an average wage increase of around 3%. Japan’s inflation rate of around 4% is much lower than in other major economies but is at a 42-year high and this put pressure on employers to provide hefty wage hikes. Read next: Maybe inflation isn't stealing the show as before, but for ECB it's still the key thing| FXMAG.COM How will the BoJ react to the wage agreement? Former Governor Kuroda insisted that current inflation was due to external factors such as high commodity prices and said that the BoJ would not consider tightening unless there was evidence that inflation was sustainable and being driven by wage growth. The new wage agreement could provide the BoJ with an excuse to tighten policy and even raise interest rates. Governor Ueda’s first meeting on April 28th promises to be interesting. USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Yen climbs to 1-mth high on market turmoil - MarketPulseMarketPulse

Forex: Japanese yen has been performing really well amid banking turmoil?

Enrique Díaz-Álvarez 27.03.2023 15:56

Typical market correlations broke down last week. The forced merger of Credit Suisse with UBS allayed European banking concerns temporarily. A ‘dovish hike’ from the Federal Reserve, and fears of a reduction in bank credit in the US, drove Treasury yields sharply lower. Risk assets were torn between banking concerns on the one hand and the positive impact of lower interest rates on the other, and ended the week nearly unchanged, while emerging market currencies mostly rose. The Norwegian krone was the standout for the week, driven higher by a hawkish central bank. Volatility is on the rise everywhere, particularly in fixed income markets. Activity this week will be dominated by inflation reports and (possibly) banking headlines. The Eurozone flash inflation report for March, out on Friday, will be the focus of the week. Markets are expecting yet another record high in the key core measure. The US PCE inflation report later the same day is for February, so it is unlikely to have the same impact. Aside from that, it will be mostly second-tier data from the main economic areas. GBP The Bank of England provided yet another head fake last week. A really nasty inflation surprise earlier in the week forced its hand and it delivered another 25bp hike. The rhetoric also turned hawkish, with emphasis on the recent positive growth surprises, while the guidance on rates in the statement was kept unchanged, despite the ongoing banking uncertainties. It could hardly have been otherwise: core inflation spiked and came in at an unprecedented 0.5% aboveconsensus, at 6.2%, reversing completely the modest progress of the past few months. Putting together the generally positive note of macroeconomic releases, the spike in inflation and the Bank of England’s apparent hawkish turn, we think that the path of least resistance for sterling will be up. EUR The contrast between the ECB’s hawkish rhetoric and the Fed’s dovish hike buoyed the common currency in the first half of the week, while the blowout PMI business sentiment numbers for March supported it on Friday. However, dubious rumours about Deutsche Bank and general nervousness forced it to give up its gains on Friday, which illustrates the volatility and nervousness in markets. The rumours were, however, denied by German PM Scholtz and that was enough for the euro to end the week modestly up against the dollar. Core inflation, due out on Friday, is expected to creep up to yet another all time high, and European banks appear to be in better shape than their US counterparts; so we expect no let up in the ECB’s hiking campaign, which should be positive for the euro. USD After wild gyrations over the past two weeks, markets settled on a 25bp rate hike prediction going into the Federal Reserve meeting last week, and that’s exactly what Powell delivered. However, the statement accompanying the decision, as well as the press conference, made clear that the Fed expects some degree of financial tightening as a result of the banking turmoil. This means the central bank will err on the side of caution until the extent of that tightening becomes clear over the next couple of months. Read next: German Ifo continues upward trend| FXMAG.COM In light of the Fed’s dovish rhetoric, and the sharp drop in US yields since the collapse of SVB, the gap in rates across the Atlantic, and between the US and most other G10 countries, is now closing fast. This should have bearish consequences for the US dollar, which has underperformed most currencies globally since the start of the banking turmoil. JPY As one would probably expect, the safe-haven yen has been by far and away the best performing currency since the start of the recent banking turmoil, extending its rally to more than 5% on the dollar in a little under three weeks. The yen has benefitted on a number of fronts. Firstly, the downward repricing in global rate expectations has narrowed the rate differentials between Japan and almost everywhere else, given the lack of room for BoJ cuts. Banking troubles in both the US and Switzerland have also held back the yen’s fellow safe-havens, the Swiss franc and US dollar, while JPY was trading at rather weak levels prior to the uncertainty, so has had plenty of scope for a rebound. BoJ governor Kuroda will be making one of his last public appearances tomorrow, although we think that Friday’s March inflation data will be a bigger market mover. CNY The yuan ended last week little changed against the US dollar and in trade-weighted terms, but lagged behind most of its EM and Asian peers. Xi Jinping’s visit to Russia provided little groundbreaking headlines, but it appears that the country’s growing dependence on China could support the yuan’s internationalisation push.Putin explicitly stated that the country is ‘in favour of using’ the yuan when trading with countries in Asia, Africa, and Latin America. Last week brought little economic news from China. Today’s industrial profit data, which showed a 22.9% YoY slump in the first two months of the year, adds to the argument that the recovery is not yet broad-based and demand appears to be rather fragile at this stage. Given that hard data shows a mixed picture of the recovery, the unexpected RRR cut earlier this month seems justified. Although lenders left the one- and five-year loan prime rates unchanged last week, some policy easing further down the road cannot be entirely ruled out. This week, attention will be on the NBS PMI data for March (Friday). To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Source: Lingering bank concerns drive down yields and US dollar | Ebury UK

Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

It seems that it's hard for S&P 500 to move away from $4000 area

Saxo Bank 28.03.2023 10:35

Summary: US equities are stuck in neutral, with the more yield-sensitive Nasdaq 100 index shying away from the 13,000 level once again, while the S&P 500 seems unable to move away from the 4,000 area. Most bank stocks, especially for larger banks, rallied yesterday and US treasury yields revived ahead of the March US Consumer Confidence survey today. JPY was sharply stronger overnight on a large life insurer indicating a domestic investment focus for bond holdings. What is our trading focus? US equities (US500.I and USNAS100.I): Crisis fears ease with energy and banks gaining S&P 500 futures held steady yesterday with positive sentiment coming from energy, transportation, and banking stocks indicating that the market is still relaxed about a potential incoming recession driven by tighter credit conditions. The index futures are trading around the 4,019 level this morning with the 50-day moving average at 4,029 and the 4,050 being the next big level to watch on the upside should momentum continue. We expect another quiet session with focus on the Conference Board Consumer Survey for March out at 14:00 GMT as the potential market moving event. Chinese equities (HK50.I) and (02846:xhkg): gains led by Tencent and financials Hang Seng IndexHong Kong’s Hang Seng Index climbed 0.7% as of writing, led by Tencent (00700:xhkg) up nearly 4% and a rally in financials. HSBC (00005:xhkg) and Standard Chartered (02888:xhkg) climbed more than 1.5%. Leading instant noodle maker Tingyi (0322:xhg) reported a 31% Y/Y decline in net income, seeing its share price plummeting over 11% and added to investors’ concern about the much-anticipated consumption recovery. CSI300 remains range-bounded and nearly flat. Petrochemicals were the top gainers while semiconductors and ecommerce stocks lagged. FX: JPY jumps as life insurer signals domestic investment focus, USD softens USDJPY dipped sharply overnight, perhaps in part on a large Japanese life insurer Dai-ichi Life Holdings incoming president indicating a domestic investment focus in very long Japanese Government Bonds for the company’s $260 billion in funds, saying that buying US treasuries was still too expensive due to the costs of hedging FX (as higher US rates transmit directly into the cost of the hedge, offsetting the yield gain). After USDJPY traded above 131.50 yesterday, the price action was taken as low as 130.50 overnight, dragging the USD down broadly, even as US treasury yields revived yesterday (often a JPY-negative). AUD traders will focus on the February CPI release tonight (although it is a single headline data point and not the full quarterly release that has the various core measures, etc.) Crude oil recovers half the March loss supported by supply risks and easing banking fears Crude oil retraced half the March losses on Monday with Brent finding resistance at $78.45 ahead of $79.35, the 21-DMA. WTI meanwhile popped above $72.70 with its 21-DMA offering some resistance at $73.50. Supported by optimism that the recent banking crisis is fading together with a legal dispute between Iraq, its semi-autonomous region of Kurdistan and Turkey halting around 400,000 barrels a day of seaborne exports from the Turkish port of Ceyhan. In a two-week period to March 21, speculators increased gross short positions in WTI and Brent by 106 million while cutting longs by 127 million barrels, and those decisions are now being challenged as prices recover. Gold continues to consolidate after failing above $2000 with focus on inflation Gold prices trades flat following a two-day correction after Treasury yields rose as banking sector concerns eased, however sustained dollar weakness provided an offset. The recent recovery in equities also trimmed safe-haven buying, and gold reversed lower to $1944/oz after making three failed attempts at $2000 last week. Support at $1933, the 38.2% retracement of the recent rally, may be tested if inflation data this week from US PCE to flash March CPI in Eurozone may bring the focus back on price pressure, but overall, the outlook for gold and silver remains supportive, buoyed by falling yields and safe-haven demand. Treasury yields rebounded yesterday on easing pressure on bank stocks. Fears of contagion across U.S. regional banks eased after First Citizen Bank acquired large parts of the failed Silicon Valley Bank in an auction. The odds priced in for a 25bp hike for the May FOMC increased to 50% and the implied terminal rate increased to 4.95%. The USD42 billion 2-year auction went relatively poorly, stopping at 2.8bps cheaper than the market level at the time of auction and a below-average bid-to-cover ratio of 2.44. The 2-year yield surged 23bps to 4% and the 10-year yield climbed 15bps to 3.53%. The 2-10 year curve bear flattened 7bps to -47bps. A 5-year Treasury auction is up later today. What is going on? ECB still worried about inflation; flash March CPI due this week ECB’s Schnabel noted that it is not easy to say how restrictive rates are, noting that there is no sign of weakening in the labour market, whilst also saying there are no real concerns about financial stability risks although the situation remains fragile. He had pushed to include guidance for a further rate hike at the last ECB meeting. Meanwhile, ECB's Nagel said QT should be accelerated from the summer and inflation is still too high. Focus will be on regional and Euro-wide inflation prints in Europe this week to see if inflation cools beyond the impact of energy on the headline. US regulators sue Binance and its CEO for illegally selling crypto derivatives to US retail investors The price of Bitcoin fell sharply on Monday after the US Commodity Futures Trading Commission (CTFC) sued Binance and its CEO Changpeng Zhao, alleging that the major crypto exchange illegally sold crypto derivatives, a leveraged bet on whether the price will rise or fall—for currencies including bitcoin, ethereum, litecoin, tether, and binance USD— to retail investors. The lawsuit accuses Binance employees of explicitly encouraging certain customers to use illegal VPNs for trades, while directing customers designated as important to set up shell companies in places like the British Virgin Islands and the Netherlands to avoid US trading restrictions. Carnival Q1 earnings top estimates Cruise operator Carnival reported first-quarter fiscal 2023 results, with earnings and revenues beating estimates. The company reported adjusted loss per share of $0.55, narrower than -$1.66 in the same period last year. Revenue jumped 173%, improving to 95% of 2019 levels due to strong bookings in the quarter for the North America and Australia and Europe segments. However, the outlook was conservative, and that saw the stock turn lower after over 18% gains YTD. The strong earnings performance of Carnival is reflective of a pickup in travel demand and bodes well for Saxo’s Travel and APAC Tourism equity theme baskets. Three EV companies report this week, including China’s giant BYD The EV sector has generated a lot of noise of late; from intensifying price wars among EV makers who are cutting prices, likely in part on a large drop in lithium prices, to EV purchase subsidies expiring in China last year, and new EV entrants in the market. As mentioned in our Week Ahead, this week’s earnings from China’s BYD’s, China’s Great Wall and America’s Canoo, as well as China’s lithium giant Genfeng, will set the scene for what investors can expect from the EV sector in 2023. Given BYD is the leading Chinese EV company, its Q4 results and outlook are the most heavily anticipated. Investors will get a gauge on how increased competition has affected sales, and if price drops have spurred increased sales. We will also get a gauge on how falling commodity prices (with lithium prices down 11%-47%), have potentially helped EV makers balance sheets. China’s BYD is expected to report annual net income of 17 billion yuan ($2.5 billion), a 450% jump from the prior year. What are we watching next? US March Consumer Confidence ahead – watching expectations/present situation spread The March Conference Board Consumer Confidence survey is out today, after the February headline of the survey dipped a few points to 102.90. That level is not remarkable relative to the high of 109.00 and low of 95.3 over the last 12 months, with the low posted in the context of wild spikes in gas prices last summer. However the expectations-present situation spread is very remarkable, as the February spread of –83.1 was the lowest since a brief episode back in early 2001 of a few months, as the Expectations component of the survey has deteriorated badly in recent months while the Present Situation component has held up well. A further deterioration in expectations would suggest the risk that consumers may tighten their belts Earnings to watch The memory and data storage chipmaker, Micron Technology, has outperformed the Nasdaq 100, and is up 21% this year, ahead of its quarterly results today scheduled for after the market close. Its outlook will be watched closely following the memory chipmaker’s cost-cutting efforts, from headcount reductions to executive compensation cuts, which take hold this quarter. That said, consensus expects further y/y declines in both EPS and revenue. Drug store giant, Walgreens Boots, reports before the open and could see restructuring and capital plans scrutinized, while investors could also react to the drugstore halting the sale of abortion-pills in several US states. Walgreens shares are down 14% this year. Lululemon is another key consumer stock reporting today after the close with analysts expecting revenue growth of 27% y/y and EBITDA of $836mn up from $654mn a year ago as the company continues to take market share and expanding into new categories such as shoes. Tuesday: BYD, Nongfu Spring, Micron Technology, Lululemon Athletica, Walgreens Boots Alliance Wednesday: Constellation Software, Cintas, Paychex Thursday: Kweichow Moutai, Great Wall Motor, H&M Economic calendar highlights for today (times GMT) 0845 – UK Bank of England’s Bailey to testify on Silicon Valley Bank 1230 – US Feb. Advance Goods Trade Balance 1300 – US S&P CoreLogic Home Price Index 1300 – Norway Norges Bank’s Governor Bache to speak 1400 – US Fed’s Barr (Voter) to testify before Senate panel 1400 – US Mar. Consumer Confidence 1700 – US Treasury to auction 5-year notes 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Feb. CPI Source: Global Market Quick Take: Europe – March 28, 2023 | Saxo Group (home.saxo)

Japan's inflation goes down to 2.7%. Taking it into consideration, JPY hasn't reacted vividly

Kenny Fisher 28.03.2023 11:30

The Japanese yen is in positive territory and broke below the 131 line in the Asian session. USD/JPY is trading at 131.17, in Europe, down 0.30% on the day. BoJ inflation indicator eases BoJ Core CPI, the preferred inflation gauge of the central bank, dropped to 2.7% in February, down from 3.1% in January and below the estimate of 3.5%. The decline in core inflation wasn’t all that surprising, as last week’s National Core CPI also fell sharply, due to government subsidies for utility bills which took effect in February. The yen’s response has thus been muted to the inflation release. The Bank of Japan has been very reluctant to tighten policy, and the only moves we’ve seen over the past few months have related to yield curve control, in order to prop up the yen. The BoJ has insisted that high inflation is transient and will fall to 2% later this year as the effect of high commodity prices eases. The Bank has said it would consider tightening if wages move higher, as this would be a sign that inflation is sustainable. Stay tuned as employees won substantial wage hikes at annual labour talks earlier this month. If wage growth does translate into higher inflation, the BoJ will be under pressure to tighten policy, but the new BoJ Governor, Kazuo Ueda, has not given any indications that he plans to exit accommodative policy anytime soon. BoJ Governor Kuroda spoke earlier today, with a “business as usual” message. Kuroda said that the sustainable infation target had not been met and it was too early to discuss an exit from the Bank’s loose monetary policy. The Federal Reserve announces its rate decision on Wednesday, and after a roller-coaster ride for market pricing, it’s currently close to a 50/50 toss-up. Will the Fed hike by 25 basis points or will it take a pause for the first time in the current rate-tightening cycle? The Fed was expected to raise rates by 25 bp, but the banking crisis, which has shaken up the financial markets, is a compelling reason for the Fed to stay on the sidelines and let the markets catch their breath. USD/JPY Technical There is resistance at 130.60 and 131.57 129.30 and 127.05 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY - Japanese yen tests 131, BOJ Core CPI eases - MarketPulseMarketPulse

Kelvin Wong talks JGB, US dollar against Japanese yen and more

If inflation rises faster than expected, or if the global economic outlook improves significantly, the BoJ might consider adjusting its policy course earlier than originally planned

Maxim Manturov 17.02.2023 14:31

Last year, there was a lot of discussion about Federal Reserve and Bank of Japan, whose policies have been widening all year long. This gap has been discussed for some time, so was the change of the BoJ governor. Governor Kuroda will step down soon and Kazuo Ueda will take office. There were some rumours that this change could mean a monetary policy shift. FXMAG.COM: Basing on general circumstances and the GDP print, could Bank of Japan change its monetary policy path earlier than expected? Overall, there is some consensus that the appointment of Kazuo Ueda as head of his central bank may increase the chances that the Bank of Japan will abandon its ultra-easy monetary policy and policy of controlling the yield curve and negative interest rates, which is becoming increasingly difficult to maintain at a time when inflationary pressures are rising, and other central banks are aggressively raising rates. Moreover, Japan's economy looks relatively healthy, giving the Bank of Japan an opportunity to roll back its policy of yield curve control that has been in place since 2016. However, if inflation rises faster than expected, or if the global economic outlook improves significantly, the BoJ might consider adjusting its policy course earlier than originally planned. Nevertheless, the evolution of policy depends on domestic demand and, in turn, on wage growth in line with the inflation rate, and changes are likely to take place after the appointment of a new central bank head in April. Read next: Microsoft: Bing With Artificial Intelligence And The First Mistakes And Confusing Answers| FXMAG.COM

The Japanese need to shift from a saving behaviour to a consumption model

Andrey Goilov 04.04.2023 17:38

Today we have the freshest inflation data from Japan – for February 2023. The CPI rose by 3.3% y/y, which is a decrease from the January figure. The Bank of Japan has put a lot of effort into getting prices back on track The data for March are scheduled for 21 April. Before that, there is one more important release: the household spending report for February. The forecast suggests that month by month, this figure has declined by 0.4% after January's 2.7% rise. At the same time, the year-on-year indicator might have risen by 4.7% after a decline of 0.3% previously.As we can see, the price situation in Japan remains extremely volatile. The Bank of Japan has put a lot of effort into getting prices back on track. For this purpose, it has been implementing an ultra-soft credit and monetary policy for years. However, it feels like its effect is fading. Read next: Eurozone: Inflation is driven by skyrocketing food prices. This is not just a problem in the Eurozone and EU, but the whole world| FXMAG.COM The Japanese need to shift from a saving behaviour to a consumption model. And this, in turn, implies that the people need to have confidence in the Central Bank's monetary policy and see positive economic horizons, none of which is felt yet. Visit RoboForex

UK Gfk Consumer Confidence index got better fourth month in a row

Forex Update by John J. Hardy from Saxo Bank - April 12th, 2023

John Hardy 12.04.2023 15:40

Summary: Market participants have hit the pause button, hoping that today’s US March CPI release will provide a sufficiently large surprise to drive the narrative for at least a few sessions as it is one of the last few major data points out of the US ahead of the May 3 FOMC meeting. Failing a surprise, we may remain adrift here for now. JPY bulls are certainly adrift as some JPY pairs challenge the top of the range. Our Q2 Outlook, titled The Fragmentation Game is now out.Today's Saxo Market Call podcastToday's Global Market Quick Take: Europe from the Saxo Strategy Team FX Trading focus: USD primed to react to March US CPI release today, market feels very indecisive without a strong directional surprise from the data. The market action of the last week for most USD pairs has proven woefully indecisive as most developments seem to fall short of a breakout and mean revert within the safety of the range. That’s largely been the case elsewhere as well, with a few partial exceptions - the Scandies and EURJPY - discussed below. As the market narrative is one of wondering whether the inflation and labor market data will remain sufficiently hot for the Fed to hike “one last time” in May or June (about 18 basis points priced for the May 3 FOMC and 22 basis points priced for the June FOMC meeting suggest some see the risk that the Fed holds off on a hike in May, preferring June). Ahead of May 3, we really only have today’s CPI, the March Retail Sales up on Friday, three more initial weekly claims releases and the March PCE inflation data ahead of that May 3 meeting. Woe for traders if today’s data is conflicting or perfectly in-line rather than providing an obvious strong directional indication. A strong surprise in the core month-on-month CPI data (more than 0.2% below or above the 0.4% expected) likely needed for a strong reaction function. Read next: Did you know that Warren Buffet has more than a 5% stake in Mitsui, Itochu, Mrubeni, Sumitomo and Mitsubishi?| FXMAG.COM We have the FOMC minutes up later as well, but the debate on the implications for policy from the banking turmoil in the minutes may be discounted significantly, given that the Fed has had three more weeks to digest the follow-on impact and that the market has already priced 100 basis points of Fed “easing” relative to prior expectations before the March 9 unraveling of the SVB. But as we await the short term potential for the US March CPI to move the needle, it is perhaps worth rounding up a few long term observations: Extreme Scandie weakness. Interesting to note the aggravated SEK and especially NOK weakness of late despite a constructive backdrop for risk sentiment (normally SEK positive) and the recent jump higher in oil prices (normally associated with NOK strength). What gives? Not entirely sure, but I did take a stab in my Q2 outlook piece in discussing whether the key here is simply an insufficient supply of domestic risk-free assets, in this case sovereign bonds, in which to park excess funds. This means that in the case of Norway that much of the oil and gas fund profits that are saved end up in offshore assets. Norway’s sovereign debt is a paltry 13% of GDP – down from a peak of 19% during the pandemic response. The longer term trajectory of the SEK fits quite well with the long term trajectory of Sweden’s sovereign debt as well, which is down to 18.5% of GDP (down from peak of 25+% during the pandemic response and nearly 33% back in 2015. Some enormous irony could lie ahead in which the expansion of domestic bond markets to address eventual economic weakness – particularly in Sweden due to housing distress, could mean a stronger currency via the provision of deeper local currency sovereign bond markets. Something structural to watch for even if we have no signs of this now. Sweden and Norway need to wake up – it’s bordering on a national emergency when your currency falls 15% in the space of six months as NOK has against the EUR. Chart: EURNOKThe EURNOK rally accelerated yesterday on the release of the slightly hot Norwegian CPI (in-line with expectations at 6.2% YoY at the core vs. 5.9% in Feb and hotter than expected on the headline at 6.5% vs 6.1% expected and 6.3% in Feb. Traders should note how little traction NOK has gotten from the recent jump in oil prices. Norway’s approach to addressing increased fiscal outlays in recent years has leaned far more on “raiding” the Wealth fund rather than raising the funds via the issuance of sovereign debt. A deeper low risk NOK-denominated government bond market with reasonable yields would probably go a long way to arresting the NOK’s fall and better addressing high inflation than any monetary policy move. Until then, how high can EURNOK go? The only time NOK has traded weaker versus the Euro was in the brief period of extremely low oil prices during the pandemic outbreak months of early 2020. Source: Saxo Group EURJPY extraordinarily stretched – when does the convergence trade engage? The EURJPY rally has pulled above 146.00 today, leaving only the last shreds of the range to the high of 148.40 last October, which is also the highest level since a 149.78 high of 2015. The new high is in large part a disappointment on the signal of policy continuity from new Bank of Japan Governor Ueda on Monday. But looking out over the next couple of months, I’m not sure I understand how the situation gets any more stretched than it has become for the 2-year yield spread – currently at 280 basis points and actually down from the high of 325 basis points before the recent banking turmoil. Either the BoJ begins to adjust to the rest of the world or the ECB has to back off due to mounting recession risks down the road. The difficulty is understanding the timing of this developments – something that will engage in coming weeks or not until well into the second half of this year? The first sanity check will be over the April 28 Bank of Japan meeting. Why is the China re-opening story refusing to get traction? The about-face in China’s zero Covid policy and ensuing policy signals have encouraged interest in the China “re-opening” story. And the numbers in China are responding, with huge improvements in measures of services sector activity and a pick-up in activity metrics like airline passenger traffic (frustratingly slow to come out, but domestic passenger traffic has picked back up to about 80% of pre-pandemic levels as of the end of February. The international numbers have ramped over 100% in two months through the end of February, but that end-Feb number is still down nearly 90% from pre-pandemic levels.) But key commodity prices, especially metals prices, and key currencies like AUD and NZD, have not responded meaningfully to this story. The recent very cool Chinese inflation numbers suggest room for China to pull harder on the stimulus levers, but the expression of this trade in G10 FX and in CNH is almost entirely absent. Table: FX Board of G10 and CNH trend evolution and strength.Watching and waiting here as recent market move have proven treacherous and we have an important macro data point up today from the US. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.AUDNZD neutralized the recent downside attempt after seeming divergence in the RBA/RBNZ meetings that didn’t play out in the relative rate spread. Building a new up-trend will take some doing, however. Note the NZDUSD downtrend attempt here… still a bit more range to work with and needs some confirmation from other USD pairs after the key US data. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Mar. CPI 1300 – UK Bank of England Governor Bailey to speak 1300 – US Fed’s Barkin (Non-voter this year) to speak 1400 – Canada Bank of Canada Rate Decision 1700 – US Treasury auctions 10-year T-notes 1800 – US FOMC Minutes 2301 – UK Mar. RICS House Price Balance 0130 – Australia Mar. Employment Change/Unemployment Rate Source: FX Update: Longer term observations beyond US CPI distraction. | Saxo Group (home.saxo)

USD/JPY: Bracing for the second half US recession

ING Economics 12.04.2023 16:13

FX markets currently price a 30% chance that USD/JPY trades at 120 at, or even before, the end of the year. 120 is our year-end forecast and is premised on the US going into recession and the Fed cutting rates by 100 basis points later this year Calls for US hard landing grow louder As our global macro team discusses in our latest monthly update: ‘Everything, everywhere, almost all at once’, the tighter credit conditions created by US bank failures means that the Fed has to do less tightening. We look for one more 25bp hike on May 3rd but feel that the Federal Reserve will be in a position to cut rates later this year. Do not expect the Fed to acknowledge the need for easier policy yet; it's still battling inflation. But into the second half, our house call is that clear signs of disinflation will be showing through and that the Fed will be able to respond to that slow-down. We look for three whole quarters of US GDP contraction, stretching from 3Q23 to 1Q24. We note with interest yesterday’s readings from the NFIB small business sentiment, where loan availability was seen as the worst in a decade. Certainly, declining profit growth and tighter credit conditions stand to weigh heavily on business investment trends this year. In response to last month’s US bank failures, the market is now close to pricing one final Fed hike in May before a 60bp easing cycle by the end of the year. Equally, US two-year Treasury yields are now trading around 100bp below the upper end of the Fed funds target – that is a historically deep discount and is typically seen before the US enters a recession. That discount can correct when the Fed brings the policy rate lower. USD/JPY versus US 2 year Treasury yield discount to Fed Funds Source: Refinitiv, ING USD/JPY: The key vehicle. As our chart shows, you might have expected USD/JPY to be trading even weaker, given the strong expectations of a Fed easing cycle. The reason it still trades above 130 is probably because of the expensive overnight dollar rates of 4.80% and a reluctance amongst investors to be substantially short dollars into another potential US banking crisis. Read next: Encouraging signs in US CPI, but Fed still set to hike in May| FXMAG.COM Yet USD/JPY should again prove the key FX vehicle to express views on a US recession. Here Japan’s large net foreign asset position after decades of current account surpluses leaves the yen well insulated in an environment of deleveraging – a likely outcome were financial stability risks to re-materialise. Equally, we think the market underprices the risk of the Bank of Japan shortening its Yield Curve Control policy to the five-year part of the JGB curve when it meets in June. The forward market still prices 10-year JGB yields at 0.50/55% over the next six months, and presumably, these would trade much higher and the yen much stronger should the BoJ stop targeting the 10-year JGB maturity. The FX options market currently prices a 31% chance that USD/JPY trades at 120 at or before the end of this year. We think the chances are higher (120 is our year-end forecast) and that USD/JPY will again prove the best vehicle to hedge a US recession. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Forex: On Friday US dollar against Japanese yen increased by 0.9%

Kenny Fisher 17.04.2023 16:13

USD/JPY slips to 1-month low US retail sales fall for second straight month Fed members Waller and Bostic urge more rate hikes Japanese yen extends losses The Japanese yen took it on the chin on Friday, as USD/JPY jumped 0.90%. The yen has edged lower on Monday and fell as low as 134.22, its lowest level since March 15th. With expectations rising that the Fed will raise rates in May, the yen could remain under pressure and fall closer to the symbolic 135 line. It was a light data calendar in Japan last week, giving investors plenty of time to focus on comments from new BoJ Governor Ueda. At the G-20 meeting in Washington, Ueda stuck to his script of “more of the same”, saying the Bank would continue its ultra-loose monetary policy. There has been pressure on Ueda to tighten policy, given that inflation hit 3.1% in February, higher than the 2% target. The Bank of Japan has become an outlier as other central banks have raised rates in order to contain inflation. In fairness, inflation in Japan compares to the levels we are seeing in most developed economies. Former Governor Kuroda insisted that inflation has been driven by higher import costs rather than stronger domestic demand and said real wages would have to rise before the BoJ would consider raising rates. The problem is that real wages continue to fall – the decline of 2.6% in February, marked an 11th straight decline. Read next: Oanda's Kenny Fisher points to Tuesday as a potential time of Aussie movement| FXMAG.COM Until wage growth recovers, there is little chance that the BoJ will tighten policy. That doesn’t mean the BoJ won’t make any moves in the near future, especially if the yen continues to depreciate. In December, the BoJ blindsided the markets by widening the target band on 10-year government bonds, which sent the yen sharply higher. Fed’s Waller, Bostic says more hikes needed The US dollar powered higher on Friday despite a soft retail sales report, as a rise in inflation expectations and hawkish Fedspeak raised the odds of a rate hike in May. UoM inflation expectations for the next 12 months jumped 4.6% in April, up sharply from 3.6% in March. Consumer confidence has been on the low side as inflation remains high, and the decline in retail sales was another sign that the US economy is losing steam. Fed member Waller stated on Friday that the Fed would need to continue raising rates because inflation is “far above target” and the labor market remains “quite tight”. Waller warned that the Fed would have to keep rates at a high level for an extended period and for longer than the markets expected. Fed member Bostic urged one or two more 25-bp hikes before wrapping up the current rate-tightening cycle. The likelihood of a 25-bp increase in May jumped to 80% on Friday, up from 68% a day earlier, which propelled the US dollar to strong gains at the end of the week. USD/JPY Technical There is resistance at 134.60 and 135.42 133.45 and 132.39 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY - Yen falls below 134 as US dollar gains strength - MarketPulseMarketPulse

Suprisingly, Nikkei 225 is still more than 30% below its ATH (printed in 1989)

Kelvin Wong 19.04.2023 12:01

Emerging markets and China’s risk premiums over Japan have been narrowed. Japan is considered a potential defensive play as its stock market valuation is much lowered than the rest of the world. Nikkei 225 is consolidating within a long-term uptrend phase in place since March 2009. The Japanese stock market has underperformed and languished against the US since the infamous burst of Japan’s property bubble in early 1990 that led to two decades of sticky deflation. Even though, the implementation of “Abenomics” in December 2012; a potent mix of expansionary fiscal and monetary policies had led to an accumulated gain of 150% seen in the Nikkei 225 till the end of 2022, it is still 36% below its all-time high level of 38,957 printed in December 1989 before the bursting of the property bubble from its current level of 28,590 at this time of the writing. Why this time may be different? Let’s take a trip down memory lane. The underperformance of Japanese equities against the rest of the world since 1990 has been attributed to two main factors; localized demographics where Japan’s birth rate declined faster than the increase in her aging population which led to lower productivity. Secondly, the entry of China into the World Trade Organization in December 2001 kickstarted two decades of globalization that saw the emergence and attractiveness of a new investing asset class, emerging markets over the prior 1980s decade of Japan’s electronics exports dominance. Fast forward to today, the world is in a much different place; globalization has broken down since the US-China trade war implemented by the Trump administration in 2018, and under the current Biden administration, the rivalry between the two major superpowers remains intact, this time round is the “battle” of securing high-end semiconductor chips. The impact of such “hostilities” between the US and China has led to a breakdown of globalization and the “emerging markets risk premium” once sought after by international investors has either narrowed or diminished. Also, China is now facing an aging population problem where its population shrank to a level below total deaths in 2022, the first time such an occurrence happen since the 1960s. Hence, the edge once enjoyed by China and emerging markets over Japan is likely to take a backseat. Japan’s central bank, BoJ may be forced to normalize its ultra-easy monetary policy On 20 December, BoJ made a significant adjustment to the controlled bandwidth of its yield curve control (YCC) policy; another form of “creative” quantitative easing program that was introduced in September 2016. The latest YCC policy adjustment has now allowed the 10-year JGB bond yield to move 50 basis points on either side of the 0% target, wider than the previous 25 basis point band. This “step-up” tweak is likely to be a precursor to an interest rate hike in 2023 by the BoJ as it normalized its decade-long ultra-loose monetary policy in Japan due to a growth in inflationary pressures where the core inflation has increased steadily above 2% year-on-year (the central bank’s target) for several consecutive months since April 2022. Given that prices of market-based transacted financial instruments are determined by a significant portion of greed and fear, thus a small policy adjustment or tweak is likely to trigger a butterfly effect in the global financial markets. Read next: The Commodities Feed: Strong Chinese activity data| FXMAG.COM Also, bearing in mind that Japanese corporations (financial institutions & non-financial institutions) are one of the highest net exporters of capital on a global scale as they seek to invest overseas to get a better return, and such flows of funds may start to flow back to Japan due to the normalization of domestic monetary policy. For example, overseas fixed income yield premium over similar Japanese investment instruments is likely to be narrowed, hence making outbound investments unattractive for Japanese corporations on a hedged currency basis. Hence, it may trigger a positive feedback loop in the Japanese stock market. Japan’s stock market may be considered a defensive play Source: TradingView as of 19 Apr 2023 (click to enlarge chart) Japan 225 Technical Analysis – Consolidating within a long-term secular uptrend phase with positive elements Source: TradingView as of 19 Apr 2023 (click to enlarge chart) Since its 31-year high of 30,835 printed on 14 September 2021, the Japan 225 Index (a proxy for the Nikkei 225 futures) has evolved into a consolidation “Symmetrical Triangle” range configuration for 18 months within a long-term secular uptrend in place since 10 March 2009 low of 6,945. The upper (resistance) and lower (support) boundaries of the “Symmetrical Triangle” is at 28,665 and 25,630 respectively. The monthly RSI oscillator has staged an impending bullish breakout from its corresponding descending resistance which indicates a revival of long-term upside momentum that may translate to a potential bullish breakout of the “Symmetrical Triangle” range configuration of the Index. However, a break with a weekly close below 24,190 long-term pivotal support invalidates the bullish tone for a decline towards the next support at 20,700. Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Time to take note of Japan’s stock market again - MarketPulseMarketPulse

Alexandros Yfantis talks US dollar against Japanese yen - April 19th

InstaForex Analysis 19.04.2023 23:27

Red lines- Fibonacci extension targets USD/JPY USDJPY is trading at new short-term higher highs. Price is now around 134.71 making new daily highs. Upside potential remains towards 136.50-137 and if this resistance is broken, we can expect a move above 141. Price in the near term continues forming higher highs and higher lows. The RSI in the daily chart has still not reached overbought levels. The RSI is positively sloped. Support is found at previous higher high of 133.74 and next support is at the previous higher low at 132. As long as price is above these two levels, bulls remain in control of the trend. Bulls do not want to see price break below 132. For now there is no such sign of a reversal. Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| FXMAG.COM Relevance up to 20:00 2023-04-20 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/320529

Japan’s economic recovery is being driven by a tourism boom

ING Economics 20.04.2023 12:37

Today's data release confirms that the trend of weak manufacturing against strong services continues. Service activity has risen for four consecutive months while sluggish demand for chips is dragging on exports. We believe that a continued recovery would support the Bank of Japan revising its yield curve control (YCC) policy in the coming months The number of foreign tourists to Japan has increased sharply over the past few months 0.7% Tertiary Industry Index % MoM sa Better than expected The Tertiary Industry Index, which measures the change in the total value of services purchased by businesses, and is a strong indicator of economic health, was stable in March at 0.7%. Service activity improved in February on the back of tourism boom Services rose 2.0% month-on-month, seasonally adjusted in February, signalling a solid recovery in service activities. By industry, tourism activity surged the most – by 10% in February (vs 5.7% in January), and retail trade also gained solidly for the third consecutive month. According to visitor arrival statistics, the number of foreign tourists has increased sharply since last December when the border crossing restrictions were lifted. However, Chinese visitors – who normally make up the biggest group of foreign tourists to Japan – have not yet returned in great numbers. We expect further improvements in services in the coming months, as we believe Chinese tourists will begin to increase more rapidly, and there will also be more domestic tourists travelling during Japan's upcoming Golden Week season in May. Tourism and services have room for further improvement 4.3% Exports %YoY Higher than expected Exports rose 4.3% in March (vs 6.5% in February and a 2.4% market consensus) The trade deficit narrowed modestly in March for a second month as import growth slowed to 7.3% year-on-year (vs 8.3% in February) mainly due to the firming Japanese yen (JPY) and falling commodity prices. By destination, exports to China fell by 7.7% while exports to the US and EU rose by 9.4% and 5.1% respectively. By export item, motor vehicles gained 38.3% while electrical machinery deepened its contraction (-4.5%) in March. We expect interregional trade to remain sluggish as poor semiconductor performance will dominate the positive impact of China's reopening for a while. But, solid exports to developing markets are likely to continue, especially in the auto sector, at least for this quarter. That being said, given the US's IRA act is expected to negatively affect Japanese automakers along with softening demand in the US, we believe that exports will likely turn negative in the coming months. Trade deficit narrowed in March Source: CEIC The Bank of Japan watch The BoJ will hold its monetary policy meeting next week for the first time under Governor Kazuo Ueda, and it is expected to stand pat. We believe that a solid service sector will not only lead to growth recovery but also stimulate service prices. Tourism and hospitality prices, in particular, are expected to continue rising for the time being, keeping the CPI above the long-term average. Read next: The Commodities Feed: Demand worries linger| FXMAG.COM This year's strong wage growth will also likely compensate real incomes to keep up with high inflation. Thus, we believe that the BoJ will likely take a gradual step towards normalisation in the coming months. Read this article on THINK TagsServices Japan exports Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

According to Oanda's Kelvin Wong, the latest Japan's economic data don't seem to play in favour of the continuation of ultra-easy monetary policy

Kelvin Wong 21.04.2023 11:22

Japan sticky inflation (excluding fresh food & energy) continued to increase for 10 consecutive months. Flash manufacturing PMI for April has shown signs of bottoming out from contraction. AUD/JPY reversed from key medium-term resistance at 90.70. Market participants in the financial markets will turn their focus to the Bank of Japan’s monetary policy decision outcome next week on Friday, 28 April under the helm of a new Governor, Kazuo Ueda. Why is it important? During a decade-long tenure of the prior Governor Haruhiko Kuroda, BoJ has changed the course of the financial markets by the unleash of close to US$3.4 trillion worth of liquidity into the global financial system under the ambitious expansionary “Abenomics” program to combat the risk of global deflation triggered by the aftermath of the Great Financial Crisis of 2008. Right now, the world is facing a sticky heightened inflationary situation where developed nations’ central bankers have started to ramp up interest rates hike and reverse their respective Quantitative Easing programs since early 2022. The remaining laggard among them is BoJ which still maintained a negative policy interest rate at -0.10%. Hence, a slight change in monetary policy from ultra-easy to normalization under new BoJ Governor Ueda is likely to see significant funds flow reversal back into Japan as Japanese investors have accumulated a mountain of offshore investments that amounted to more than two-thirds of Japan’s GDP due to the” Yield Curve Control” (YCC) program enacted in 2016 to put a cap on the yield of the 10-year Japanese Government Bond (JGB). If such a scenario happens, it can send shockwaves and a dominoes effect in the global financial markets where fixed income yields in the US and Europe may spike up and an increased risk of capital flight out of emerging markets. Maintaining dovish monetary guidance over local economic realities Since the last “monetary policy shock teaser” from BoJ in December 2022 where it widened the band of its YCC program to allow the yield of the 10-year JGB to move by 50 basis points from 25 basis points on either side of the 0% target, and market participants took such a move as a precursor to an end of ultra-easy monetary policy in Japan and started to increase bullish and bearish bets on JPY and JGB respectively. Since taking over the helm at BoJ in early April, Ueda has started to tone down the speed of BoJ’s monetary policy normalization and gave clear guidance during the Spring IMF meeting that BoJ is likely to maintain its ultra-low interest rate at this juncture; indicating no rush to implement a policy change. However, the latest local economic data do not seem to support the continuation of ultra-easy monetary policy for Japan. Even though the headline inflation rate for March dipped to 3.2% year-on-year from February’s print of 3.3%, 2 consecutive months of growth declined from January’s 4.3% but implied sticky inflation as measured by excluding fresh food and energy (core core inflation rate) continued to climb to 3.8% year-on-year in March from 3.5% in February, ten consecutive months of expansion to hover close to a four-decade high. Read next: Federal Reserve is at risk of... overtightening? Bitcoin seeing some support around $29K| FXMAG.COM In addition, manufacturing activities have started to show signs of bottoming out from contraction; the April flash Jibun Bank Manufacturing PMI increased to 49.5 from a final reading of 49.2 in March, indicating its highest reading since October 2022. Hence, with inflation staying above BoJ’s target of 2% for a year and manufacturing activities have started to improve, BoJ may start to give an implicit heads-up on laying the groundwork for the normalization of its ultra-easing policy in the coming meeting next Friday with hints coming from the latest inflationary and growth data projections in its economic quarterly outlook report to be released on the same day as well as Ueda’s press conference. AUD/JPY Technical Analysis – Retreated from key medium-term resistance ahead of BoJ Source: TradingView as of 20 Apr 2023 (click to enlarge chart) The AUD/JPY cross rate has staged a negative reversal from its 90.70 key medium-term pivotal resistance today with several bearish elements. Hence, the latest price actions suggest there is an increased risk that the recent 470 pips rally from its 24 March 2023 low of 86.06 is likely to be considered as a minor corrective rebound (dead cat bounce) within a medium-term downtrend phase in place since September 2022 high of 98.69. In addition, short-term downside momentum has resurfaced as indicated by the 4-hour RSI oscillator where it is now breaking below key corresponding support at the 44% level after a prior bearish divergence seen at its overbought region. A break below 89.50 immediate support may expose the next support at 87.80. However, a clearance with a 4-hour close above 90.70 negates the bearish tone for a squeeze up towards the next resistance at 92.80 (swing high areas of 26 January/15/22 February 2022 & close to the key 200-day moving average). Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. BoJ may start to give more hints on policy normalization - MarketPulseMarketPulse

Rolls-Royce share price has increased by over 60% since the start of the year

Central banks: Our latest calls ahead of a dramatic month

ING Economics 24.04.2023 10:30

USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy

David Kindley 25.04.2023 16:15

FXMAG.COM: Could you please comment on the Japanese CPI? What will be the BoJ's next steps? David Kindley (Orbex): Last Friday (Apri 21st) Japan’s core consumer price index (CPI), which includes energy costs, came in at 3.1% for March, matching a median market forecast. However, the year-on-year rise in the so-called "core core" index hit its highest rate since December 1981, and was up 3.8% year-on-year. This led investors to believe that the pressure is now on for the Bank of Japan (BoJ) to begin raising rates. Market participants should instead be focusing on the BoJ's quarterly outlook report due after the meeting David Kindley (Orbex): It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy. That being said, BoJ Governor Kazuo Ueda remains adamant that inflation in Japan is transitory as it’s mostly attributed to higher import prices. Ueda has vowed to keep monetary policy ultra-loose until there is concrete evidence that the current rise in inflation in Japan is driven by strong demand rather than import and supply pressures. It is highly likely then, that at the upcoming BoJ Interest Rate Decision on April 28, Ueda will opt to make no changes to BoJ’s ultra-loose policy and there will be no increase to their key interest rate which stands at –0.1% since January 2016. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM David Kindley (Orbex): Market participants should instead be focusing on the BoJ's quarterly outlook report due after the meeting. The report will include BoJ’s inflation forecasts until 2025 and can provide important insights into BoJ’s future monetary steps.

InstaForex's Ralph Shedler talks Euro against Japanese yen

Ralph Shedler 25.04.2023 22:06

Relevance up to 20:00 2023-04-26 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. EUR/JPY downside reversal The EUR/JPY pair crashed today. It was trading at 146.38 at the time of writing. Dropping below the uptrend line signaled that the uptrend ended and that the sellers could drive it towards new lows. The former low of 146.47 represented a downside obstacle as well. Now, the price tries to ignore this downside obstacle and resume its downside movement. Read next: It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy | FXMAG.COM EUR/JPY trading conclusion If the price stabilizes below the former low of 146.47, it may activate a further drop and provide a new selling opportunity. Read more: https://www.instaforex.eu/forex_analysis/321101

FX Daily: Euro’s attractiveness on the rise

ING Economics 27.04.2023 14:28

The big drop in the dollar yesterday was, in our view, a re-linking between FX and short-term rate differentials. In this sense, markets are finding the euro quite attractive given it can offer not only an ongoing domestic tightening cycle, but also still room to speculate on a hawkish surprise at the coming meetings. Today, US GDP may come in below consensus USD: Earnings versus banks and Fed expectations In yesterday’s FX Daily note, we discussed how the rally in the dollar in the first part of the week appeared unlikely to be sustainable. Indeed, we then observed a reconnection between FX and short-term rates in yesterday’s price action. The recent dovish repricing in Fed rate expectations eventually caught up with the dollar, which sold off across the board yesterday despite global equities remaining under some pressure on lingering concerns over regional banks in the US and weak earnings in Europe. Positive news has come from the tech sector in the US, where earnings have surprised on the upside, and this has offered some floor to US equities. While it’s true that there was a large gap in terms of short-term rate differentials to be covered by the dollar against the euro and other European currencies, relative equity dynamics have remained more relevant from a statistical standpoint, and a better performance in US stock markets compared to European ones today could help the dollar at least stabilise. Data-wise, we’ll see the release of first-quarter growth figures in the US. Our economics team expects a below-consensus 1.5% quarter-on-quarter annualised print (consensus is 1.9%). Consumer spending should be strong in line with robust retail sales in January which were boosted by unseasonably warm weather. However, weaker net trade and inventory performance should offset that story. Like any Thursday, some focus will also be on initial jobless claims, which we expect to come in at 250k, in line with consensus. If some positive news on the US earnings side can offset the impact of US regional bank concerns on the dollar today, our expectations for a sub-consensus GDP reading suggest the balance of risks is still slightly tilted to the downside today. Francesco Pesole EUR: Market's favourite The big rally in EUR/USD yesterday was a testament to how markets seem to favour the euro among other currencies in instances when the dollar falls on the back of Fed dovish repricing and US banking concerns. Our perception is that investors favour currencies that can offer both an ongoing domestic tightening cycle and still some room for a hawkish surprise at the coming meetings. In that sense, the euro is one of the very few currencies that can offer this combination at the moment, and we don’t fail to see its attractiveness compared to peers. Our eurozone economist published his European Central Bank preview yesterday, discussing our call for a 25bp rate hike at next week’s meeting. However, he highlights how the chances of a 50bp move are non-negligible and we might revise our call after inflation data and the Bank’s Lending Survey. Markets are currently pricing in 30bp of tightening, so there is still room for the euro’s rate attractiveness to rise, and we cannot exclude that we’ll find ourselves with a much stronger EUR/USD as key central bank meetings kick off next week. Today, a stabilisation around 1.1050/1.1100 seems plausible, although a break above 1.1100 could trigger another substantial rally in the pair. On the data side, the eurozone’s calendar only includes the economic confidence data for April, which is not very market-moving. Individual countries' CPI figures will start to be released tomorrow. Read next: The Commodities Feed: Oil sell-off continues| FXMAG.COM Elsewhere in Europe, the Riksbank hiked by 50bp, but the emergence of two dissenters on the Board and the signal that rates will peak after the next 25bp rate hike translated into a dovish surprise for markets. As discussed in this note, it will be harder for Governor Erik Thedeen to prop up the krona from now on. Francesco Pesole JPY: Don't rule out a hawkish tilt in the BoJ message The Bank of Japan will announce monetary policy tomorrow, for the first time under new Governor Kazuo Ueda. In line with the consensus call, we expect no changes to the policy settings for interest rates and asset purchases. The release of the new outlook report and specifically inflation forecasts will drive a big part of the market reaction. However, there is a possibility that the BoJ will tweak forward guidance, in particular, the very last part of the statement which reads, “interest rates to remain at their present or lower levels". It could also possibly drop the “lower levels” bit, ultimately switching to a more flexible approach and laying the groundwork for a policy adjustment in the future. With not much priced in in terms of policy shift this summer by the BoJ and given the dollar’s weak momentum seen yesterday, USD/JPY looks vulnerable ahead of tomorrow’s risk event in Japan. We still target 128 for the end of the second quarter. Francesco Pesole CEE: Unexpected push from EUR/USD The region received an unexpected positive push from EUR/USD yesterday and despite a slight deterioration in global market sentiment, conditions for CEE FX look quite good. Although energy prices are not playing as much of a role for the region as in the past, gas prices hit record low levels again yesterday. Overall, the CEE region may thus look for new gains in the second half of the week if the euro maintains its push towards stronger levels. We also see a positive picture at the local level where we have seen the first signs of a reversal in the negative trend of falling interest rate differentials after two weeks. Although core rates eventually erased their decline and the differential remained almost unchanged yesterday, we think this should be a local low and rates can support CEE FX again. From this perspective, we think the Czech koruna and Polish zloty may be interesting in coming days. The koruna should start to return to stronger levels in our view as the Czech National Bank meeting approaches, and with a higher EUR/USD at least 23.30 EUR/CZK should not be a problem in the coming days. The Polish zloty continues its two-week rally and should continue its trajectory in the conditions we have described here. Given the region's underperformance over the past few months, we think there is still plenty of room for a rally, and the market can unwind the risk premium built up in the first quarter. A test of 4.580 EUR/PLN can be expected for today. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

USD/JPY: BoJ meeting starts today, but the bank is expected to keep rates unchanged

Kenny Fisher 27.04.2023 15:43

Tokyo Core CPI expected to remain unchanged at 3.2% US to release unemployment claims and GDP BoJ’s 2-day meeting begins today USD/JPY is trading quietly at 133.84, up 0.13% on the day. The yen’s lack of movement could change today with a host of key releases. Japan will release Tokyo Core CPI, while the US publishes Preliminary GDP for the first quarter and unemployment claims. Japan releases Tokyo Core CPI for April early on Friday, which is expected to remain steady at 3.2%. Will BoJ meeting bring more of the same? Japan’s inflation is running around 3%, a dream for most central banks but a headache for the Bank of Japan. There has been pressure on the BoJ to tighten policy as inflation remains above the target of 2%. Japan has experienced decades of deflation and the massive stimulus programme was meant to stimulate the economy. Inflation has moved higher, but former BoJ Governor Kuroda insisted that the central bank would not consider tightening until it was convinced that inflation was sustainable, which required stronger wage growth. New BoJ Governor Ueda has toed the party line so far, but left open the possibility of tightening if wage growth and inflation climb faster than expected. All signs point to the BoJ maintaining its policy settings when it wraps up its 2-day meeting on Friday, but the central bank has surprised the markets in a big way before, and the markets will be following the meeting closely. Read next: According to Oanda's analyst, bullish bias on gold is supported by de-dollarization, US-China High Tech War and more| FXMAG.COM In the US, unemployment claims have moved higher for four straight weeks and come in above the estimate each time. The upward trend is expected to continue, with claims expected to rise to 248,000, up from 245,000. The labor market remains strong, but the upswing could signal cracks in what has been a robust US labour market. Preliminary GDP for the fourth quarter is expected to drop to 2.0% y/y, down from 2.6% in Q4. USD/JPY Technical USD/JPY tested support at 133.41 earlier in the day. The next support line is 132.69 134.27 and 134.99 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY - Yen eyes Tokyo CPI, US GDP - MarketPulseMarketPulse

Japan: stronger-than-expected GDP supports BoJ policy normalization

Bank of Japan choose not to rise the rates, institution highlighted it will need some to time to conduct a review of monetary policy guidance

Kelvin Wong 28.04.2023 13:53

No change on key policy short-term interest rate and limits of the Yield Curve Control programme. Scrapped forward guidance to maintain the interest rate at current or lower levels Need one and half-year to conduct a review of monetary policy guidance. USD/JPY and Nikkei 225 rallied; watch the 135.30 key short-term resistance on USD/JPY. The Bank of Japan has maintained its key policy short-term policy interest rate as expected at -0.10% and kept the limits of its Yield Curve Control (YCC) program on the 10-year Japanese Government Bond (JGB) yield unchanged at 0.50% on either side of the 0% target. Here are a couple of key highlights BoJ removed forward guidance that pledged to keep key policy interest rates at current or lower levels and highlighted that it will need one to one and half-year to conduct a review of monetary policy guidance. The latest BoJ quarter outlook report has indicated that the risk to inflation (price) outlook is skewed to the upside in the fiscal year 2023 but skewed to the downside later in the fiscal year 2025, inflationary expectations have moved sideways after heightening, Japan’s economy is likely to recover moderately after under pressure from past rises in raw materials. In addition, the outlook report has mentioned that wage negotiations for the fiscal year 2023 are expected to see higher wave growth than last year, inflation (price) may deviate downward if wages do not strengthen as expected, mentioned that consumer inflation is likely to slow below 2% toward the middle of the fiscal year 2023 with Japan’s GDP output gap to turn positive around the same period. New BoJ’s key median economic data forecasts FY 2023 Core CPI at 1.8% year-on-year versus 1.6% previously FY 2023 Core-Core CPI at 2.5% year-on-year versus 1.8% previously FY 2024 Core CPI at 2.0 % year-on-year versus 1.8% previously FY 2023 Core-Core CPI at 1.7% year-on-year versus 1.6% previously FY 2023 Real GDP at 1.4% year-on-year versus 1.7% previously FY 2024 Real GDP at 1.2% year-on-year versus 1.1% previously In a nutshell, FY 2023 and 2024 inflation forecasts have been upgraded from the previous report while economic growth (real GDP) is being revised down for FY 203. USD/JPY & Nikkei 225 moved higher ex-post BoJ decision The USD/JPY has rallied by 1.2% (160 pips) from today’s current intraday low of 133.33 to print an intraday high of 134.94 at this time of the writing; still below a key pivotal resistance of 135.30 (click here for more details as highlighted in our previous report). In addition, the benchmark Nikkei 225 recorded an intraday gain of 0.8% to hover at a five-day high of 28,806. Read next: Kelvin Wong talks JGB, US dollar against Japanese yen and more| FXMAG.COM What’s in the mind of BoJ’s new governor Ueda It seems that Ueda is trying to be a “hedger” to prevent any disruptive movement in the global financial markets that increased cross-assets volatility significantly given that there are several potential risk-off shocks such as the ongoing US debt ceiling partisan squabbles that may lead to failure to extend the debt ceiling this summer’s deadline. The key point to note is that prior “everlasting” forward guidance of keeping BoJ’s key interest rate at a negative level has been scrapped coupled with projections upgrade on Japan’s inflation (core and core-core) for both FY 2023 and FY 2024 which suggests that Ueda may be laying down the groundwork via baby steps for monetary policy normalization. Perhaps, a change may come after summer when the US debt ceiling fiasco may be resolved and waiting for more clarity for a pause on the Fed’s current interest rate hiking cycle. Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. BoJ: maintained ultra-easy policy but scrapped forward guidance - MarketPulseMarketPulse

Bank of Japan stays on hold but policy adjustment is coming

ING Economics 28.04.2023 15:23

Based on upbeat activity data and higher-than-expected inflation, we believe the BoJ will take steps to normalise policy by adjusting its yield curve control tool in the coming months The Bank of Japan in Tokyo -0.1% Policy rate As expected BoJ rate hike will likely come next year but YCC policy will likely come to an end this year The Bank of Japan held its first policy decision meeting under Governor Kazuo Ueda. As expected, the BoJ has not changed any policy settings but made significant changes to the statement. The BoJ has removed its entire forward guidance on rates from the statement, which means that it sees macro conditions as having changed meaningfully and monetary policy is now in need of a new approach. This naturally leads to the need for a policy review as suggested in today's meeting. At least one year has been suggested for this review. We think today's BoJ action was well-orchestrated in the sense that it secures flexibility for future policy changes while curbing market expectations of an early rate hike. Governor Ueda clearly messaged to the market that the BoJ's easy policy will be maintained for a while as premature tightening could threaten the fragile recovery and the Bank will monitor inflation to see whether it can be sustained above 2% persistently. Inflation is key to determining the actual timing of a rate hike decision. Although the BoJ suggested it could take a year to 18 months to review policy, the BoJ's actions won't be bound by it. At the press conference, Governor Ueda confirmed that even as the review is continuing, the board will make policy decisions at each meeting and decide whether a policy change is needed. We maintain our BoJ call for a first rate hike in 1Q24 as we believe that Japan's inflation rate should run a bit faster than the BoJ's outlook. In our view, higher-than-expected wage growth and a relatively solid recovery in the service sectors would support above-2% inflation for the time being. Regarding the yield curve control policy, we still see the possibility of a change as early as June. The YCC is one of the monetary policy tools but has created side effects for market functioning. We think that the BoJ will try to differentiate between YCC policy and policy rate action. To improve the market functioning, the BoJ is expected to adjust or scrap its YCC policy in the near future. BoJ's outlook for economic activity and prices The BoJ's latest update on the macro outlook showed that GDP forecasts have been revised down for FY2023 and FY2024, while core inflation forecasts were revised up quite significantly. We think that the BoJ sees more downside risks to growth over the next few years but the economy is expected to grow faster than its potential GDP rate. More importantly, the BoJ now sees inflation remaining above 2% through FY2024, meaning that Japan's inflation is expected to stay above the BoJ's target for two consecutive years. We also think that core inflation is likely to remain above 2% as service-driven growth continues this year while higher-than-expected wage gains this year could improve consumer's purchasing power. Recent price gains in the housing market are also a good sign of sustainable inflationary pressures that the BoJ has been seeking. BoJ outlook sees higher-than-target inflation for two years Source: Bank of Japan 3.5% Tokyo CPI % YoY Higher than expected Inflationary pressures seem to be expanding The most relevant data for the BoJ's policy actions, among several releases today, should be Tokyo CPI. Tokyo consumer prices rose unexpectedly to 3.5% year-on-year in April (vs 3.2% in March and market consensus), despite a decline in utility prices (-2.0%). Also, core inflation excluding fresh food and energy accelerated even faster than the headline rate to 3.8% (vs 3.4% in March). Inflationary pressures are becoming more broad-based, not only due to the secondary effects from the previous hikes in commodity prices but also due to demand-driven price gains. In the monthly comparison, goods prices jumped 0.8% (MoM seasonally-adjusted) and services prices gained a solid 0.2%. Inflation rose unexpectedly with both goods and services prices rising Source: CEIC 0.8% Industrial production % YoY Higher than expected Upbeat IP and sales outcome point to a solid GDP rebound in the first quarter Industrial production rose 0.8% MoM sa in March (vs 4.6% in February and the 0.4% market consensus) for the second month on the back of strong automobile production (4.6%). Regarding IT products, the good news is that semiconductor manufacturing equipment rose solidly for two months. But production of electronic parts and devices continued to fall, thus we believe that the downcycle of chips and IT will bottom out in the latter part of the year. Retail sales also rose 0.6% MoM sa (vs 1.4% in February and the 0.3% market consensus) in March, recording the fourth consecutive monthly rise. We think the reopening has stimulated consumer spending and this will likely stay healthy for a while. Based on today's monthly activity data, we expect first quarter GDP to increase 0.4% QoQ sa from the mere 0.02% rise in 4Q22. Read next: France: Exports boost GDP while inflation increases again| FXMAG.COM 2.8% Jobless rate Worse than expected The jobless rate unexpectedly rose but not too worrying at this point Labour market data retreated for the second consecutive month. The jobless rate unexpectedly rose to 2.8% in March (vs 2.6% in Feb and 2.5% market consensus) and the job-to-applicant ratio also fell to 1.32 (vs 1.34 in February), after hitting a recent high of 1.36 in December. However, the labour participation rate rose meaningfully to 62.6% (vs 62.1% in Feb) and the data shows that female workers returned to the labour market as the Covid situation has improved and face-to-face service job opportunities have likely increased. We believe that labour market conditions maintained a healthy level with employment in the non-agricultural sector rebounding fairly quickly and the unemployment rate still remaining below 3%. Labour data weakened further in March Source: CEIC Read this article on THINK TagsJapan production Japan inflation Japan industrial production Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

Kenny Fisher 28.04.2023 16:20

Bank of Japan maintains monetary policy BoJ removes forward guidance and announces policy review Tokyo Core CPI rises higher than expected USD/JPY soars USD/JPY has jumped 1.3% today and is trading at 135.74. Earlier, the yen touched a low of 135.86, its lowest level since March 10th. BoJ holds policy but changes guidance Today’s Bank of Japan meeting was closely watched, as New Governor Ueda chaired his first meeting. As expected, there were no dramatic announcements about a shift in policy, but the yen still dropped sharply, as those investors that had hoped for a hint of monetary tightening in the short term were disappointed. The BoJ announced that key policy settings will stay the same. Interest rates will remain at -0.10% and the yield curve control (YOC) scheme on 10-year government bonds will maintain a band of 0.50% on either side of the 0% target. There was no surprise here, as Ueda has stated on numerous occasions and again this week that he would not change these policy settings. At the same time, the central bank modified its future guidance, removing its pledge to maintain rates at “current or lower levels”. The BoJ said it would “patiently continue with monetary easing” while saying it would conduct a broad review of monetary policy, which it expects to take one to one-and-half years. The takeaway from the BoJ meeting is that the markets can expect more of the same in the short term, but there is the possibility of a shift in policy down the road. Ueda stated earlier in the week that if inflation and wage growth were to accelerate faster than expected, he would consider the possibility of tightening policy. Ueda does not seem as glued to current policy as his predecessor Kuroda, but the new Governor is unlikely to make any moves absent a major change in economic conditions. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM Ahead of the BoJ meeting there was an interesting note from Barclays which said that the yen could regain its status as a safe-haven currency, which has been taken over by the US dollar. Barclays said that if the BoJ normalizes policy and central banks cut rates due to a weak global economy, rate differentials would tighten and the yen would move higher. Barclays is projecting that the yen will rise to 123 by the end of next year, and the stronger currency could re-establish itself as a safe haven. Overshadowed by the BoJ meeting, Tokyo Core CPI rose in April, an indication that high inflation is alive and well. The indicator rose from 3.2% to 3.5%, above the market consensus of 3.2%. USD/JPY Technical USD/JPY tested resistance at 1.3585 earlier today. The next resistance line is 1.3657 134.99 and 1.3427 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. USD/JPY surges after BoJ maintains policy, inflation rises - MarketPulseMarketPulse

According to Althea Spinozzi, it's clear that inflation remains Fed most significant focus

On Friday, the major currencies that were weaker than USD were Swiss franc and Japanese yen

Kelvin Wong 08.05.2023 14:13

Better than expected US non-farm payrolls for April have failed to ignite US dollar bulls. Two outliers; the safe haven currencies, CHF and JPY underperformed against the US dollar due to the resurgence of risk-on behaviour in the US stock market. JPY future’s bearish positioning has highlighted a risk of a short-term revival of JPY’s strength. Last Friday, the better-than-expected US official non-farm payrolls data (labour market) for April failed to trigger a meaningful rally in the US dollar in general where the US Dollar Index ended the 5 May US session with a loss of -0.16% to close at 101.28, a whisker away from its 100.95 key medium-term support that has been tested twice so far in past four weeks. Even the recovery in the 2-year US Treasury yield which added 12 basis points to close at 3.92% last Friday reinforced by the rosy US payrolls data that put a halt to the prior three sessions of daily losses has failed to ignite the bulls in the US dollar. Interestingly, the major currencies that underperformed against the US dollar last Friday were the safe haven pair duo; CHF (-0.5%) and JPY (-0.4%), and the primary driver was the risk-on behaviour seen in the US stock market. The benchmark S&P 500 has managed to reduce its initial accumulated losses of -2.6% from last Monday to Thursday by more than half, ending last Friday’s US session with a minor weekly loss of -0.8% attributed mainly by stellar returns of Apple, NVIDIA and Tesla that on the average contributed 26% of last Friday’s S&P 500 daily gain of +1.85%. Also, the Bank of Japan’s (BoJ) latest guidance from its recently concluded monetary policy meeting in April is still skewed towards maintaining its ultra-dovish stance at least in the short term that is likely to have put a cap on traders’ bet on further JPY’s strength and weakness on the 10-year Japanese Government Bond (JGB) price. Based on the latest weekly Commitments of Traders report as of 1 May 2023 compiled by the Commodity Futures Trading Commission (CFTC) on US exchange-listed FX futures market on the JPY futures contract (take note that JPY is quoted as the base currency & USD as the variable currency), it has indeed shown that traders’ sentiment is skewed towards a more bearish positioning on JPY. Trader’s sentiment from the Commitments of Traders report is measured by the difference between the net open positions of large non-commercials (speculators) and the large commercials (hedgers/dealers). A positive number represents net long positions on JPY and a negative number represents net short on JPY. JPY futures’ bearish positioning is building up Fig 1: JPY futures net positioning trend as of 1 May 2023 (Source: MacroMicro, click to enlarge chart) Since 3 April 2023, the weekly reported net open positions on the JPY futures market have indicated a steady increase of net shorts positions on JPY from -109,302 contracts to -145,845 as of 1 May 2023 which suggests that traders’ sentiment on the JPY is getting bearish on an incremental basis. An important point to note is that sentiment on financial assets can significantly impact their tradable prices in the short to medium term if such sentiment has reached an “overcrowded” positioning situation. Too much bearish sentiment can lead to an upside reversal in the prices of the financial asset (the opposite, contrary opinion effect) and vice versa for too extreme bullish sentiment. These contrary opinion effects are being triggered easily due to a lack of further catalysts to support the initial “overcrowded” positioning and new related data or news flow that goes against the narrative that built up the initial sentiment. Read next: Apple earnings: Company did not give an outlook for the next quarter, which could prove even more challenging due to parts shortages and competition| FXMAG.COM A closer inspection of the latest sentiment of JPY futures by considering prior positioning levels with the movements of JPY/USD, the current reported net short open positions of -145,845 is coming close to a level of around -205,000 (40% away) that led the JPY to strengthen by +16% against the US dollar from 21 Oct 2022 to 16 January 2023. Hence, the current bearish positioning of JPY in the futures market seems to be reaching “overcrowding” levels where the risk of an upside reversal (JPY strength) in the short to medium term cannot be ignored. Two likely catalysts are the reduction of the current bullish sentiment status of the US stock market and this Wednesday, 10 May release of US inflation data for April. USD/JPY Technical Analysis – Post NFP rally has started to fizzle out Fig 2: USD/JPY trend as of 8 May 2023 (Source: TradingView, click to enlarge chart) Last Friday, 5 May post-US non-farm payrolls bounce seen in the USD/JPY has stalled at the 38.2% Fibonacci retracement of the prior minor decline from the 2 May 2023 high of 137.77 to 4 May 2023 low of 133.50. Short-term upside momentum has turned lacklustre as the 4-hour RSI oscillator has failed to make a break above its corresponding resistance at around the 50% and has yet to hit its oversold region (below 30%). A break below 133.75 intermediate support exposes the next support at 131.80 which is the lower limit of the short-term range configuration in place since 1 March 2023 swing high. On the other hand, a clearance above 135.65 jeopardizes the bearish tone to see the next resistance coming in at 137.70. Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. JPY bearish positioning is getting overstretched - MarketPulseMarketPulse

Asia week ahead: Policy meetings in China and the Philippines

ING Economics 11.05.2023 12:12

Next week’s data calendar features policy meetings from the People's Bank of China (PBoC) and Banko Sentral ng Pilipinas (BSP), wage and job data from Australia, plus growth and price data from Japan Source: Shutterstock Wage and job data to be released in Australia Justifying the recent increase in the cash rate, Reserve Bank of Australia (RBA) Governor Philip Lowe noted that the central bank would continue to “…pay close attention to… the evolution of labour costs”, of which the main indicator is the quarterly wage price index. The next one of these is due out on 17 May. This has been rising very slowly. But with the RBA hiking in May, one wonders if it might have had advanced knowledge that this number is going to come in higher than consistent with its inflation target. The run rate for this index on a quarterly basis has been about 0.8% quarter-on-quarter, and we would expect something similar this time. If so, that would lift the wage-price inflation rate to 3.5%. If we got a repeat of the third quarter of 2022 quarter-on-quarter result, then we could see the wage inflation rate rise as high as 3.8% year-on-year, and anything at this sort of level or above would probably set off alarm bells at the RBA. Furthermore, April labour market data that is out on 18 May will add to the story, with the unemployment rate being a key focus. We are expecting a very slight increase to 3.6% from 3.5%, though the risk to this forecast is likely to be on the downside as labour force growth remains strong. The monthly employment change will likely see the very rapid rate of full-time jobs growth in recent months drop back, though this may be offset by a pick-up in part-time jobs, and so the overall total employment growth for April could remain at a buoyant 40,000. Upcoming GDP and inflation data from Japan Japan will release several data points next week. The highlight should be first-quarter GDP on Wednesday. We expect a mild improvement and GDP to grow at 0.4% QoQ seasonally adjusted. This is mainly driven by the services sector, while exports and manufacturing remained weak. We are also expecting CPI and PPI inflation figures, which will confirm that the headline figures are continuing to cool due to falling commodity prices and the base effect. Core inflation however is expected to remain sticky and is likely to stay on the rise. Activity data from China plus the PBoC meeting The PBoC will decide whether to change the 1Y Medium Term Facility Rate (MLF) on 15 May. We expect no change at 2.75%. A rate cut would be perceived by the market that the economy was not on the path to recovery. However, the ongoing improvement in consumption, driven by internal tourism during the Golden Week holiday, suggests that recovery is happening. Moreover, the challenge from a weaker external sector cannot be addressed by a rate cut. It is possible that the central bank may add more liquidity to the money market via the MLF operation. But that should not lower the market interest rate significantly unless the scale of liquidity injection is large, which is not our expectation. Read next: Philippines’ first quarter GDP surprises on the upside but could mark the peak| FXMAG.COM Meanwhile, the Statistics Bureau will also release industrial production, retail sales, fixed assets investments and surveyed jobless rate data on 16 May. Interpreting this set of data requires attention to the low base effect last year. The data should show more than 10%YoY growth for industrial production and more than 18%YoY for retail sales, but those should be moderate month-on-month growth. Industrial production reflects the existing picture of the economy, a recovery of the domestic market but a slower external market. Retail sales strength for April should only be moderate as spenders planned leisure trips in May and saved for those trips in April. Our focus for this set of data is fixed assets investments (FAI). This should give us more hints on the speed of the government implementing infrastructure investments. We expect slight improvement on a monthly basis. BSP set to pause next week The Philippines' central bank will hold a policy meeting next week with market participants split on whether it will keep its policy rate unchanged at 6.25%. Recent comments from BSP Governor Felipe Medalla suggest that he will end the bank's aggressive tightening cycle now that inflation has shown clear signs of heading back toward the 2-4% inflation target. Medalla also hinted at a potential reduction of the reserve requirement ratio in the coming months. We expect BSP to pause next week with inflation on the downtrend and signal an eventual rate cut by the end of the third quarter should inflation trends persist. Key events in Asia next week All time refers to Singapore time Source: Refinitiv, ING Read this article on THINK Tags Emerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

RBA Meeting Minutes - policymakers were concerned about weak productivity growth that would trigger inflation risk

Kelvin Wong 16.05.2023 10:07

Two conflicting fundamental factors are driving the short-term movement of the Aussie dollar. RBA’s hawkish rhetoric has provided a potential floor but a weak external environment due to China prevents bulls from taking an aggressive stance. AUD/JPY key short-term support stands at 90.30 with major range resistance coming in at 92.10/92.80. The Aussie dollar seems to be trapped by two conflicting fundamental factors in the short to medium-term horizon. Firstly, the positive factor that supports potential strength in the Aussie dollar comes from the hawkish rhetoric portrayed by Australia’s central bank, the Reserve Bank of Australia (RBA) after its surprise 25 basis points hike on its policy interest rate to 3.85% on 2 May. Today’s release of the minutes of RBA’s monetary policy meeting for 2 May has revealed that policymakers were concerned about weak productivity growth that would trigger inflation risks, persistently high services inflation, and faster-than-expected rental increases that may require a further rise in interest rates. In contrast, the current weak external environment is likely to have an adverse impact on the economic growth of Australia due to less demand for its top industrial-related commodities exports such as coal and iron ore. Read next: China: manufacturing activities slipped back to contraction in April. Technical look at China A50| FXMAG.COM In addition, the latest macro data from China; Australia’s top trading partner suggests more evidence of a slowdown in its recovery spurt. Both consumer spending and industrial activities grew slower than expected in April. Industrial production grew by 5.6% year-on-year from 3.9% recorded in March but way below the consensus of 10.9%. Retail sales increased by 18.4% year-on-year, below the consensus of 21% but above March’s print of 10.6%. AUD/JPY Technical Analysis – May see a retest on its 92.10/92.80 major range resistance Fig 1: AUD/JPY trend as of 16 May 2023 (Source: TradingView, click to enlarge chart) Since its 20 December 2022 swing low of 87.00, the AUD/JPY cross pair has evolved into a major sideways range configuration below a key 200-day moving average that is acting as a resistance at a zone of 92.10/92.80 as seen from the daily chart. In the shorter-term time horizon depicted by the hourly chart, the price actions of AUD/JPY have managed to trace out a series of “higher lows” that is being supported by a minor ascending trendline in place since the 26 April 2023 low of 87.87 that is now acting as a key short-term pivotal support at 90.30. In addition, the hourly RSI oscillator has just managed to stage a bounce right above its corresponding support at the 47% level which suggests that potential short-term upside momentum remains intact. The intermediate resistance to watch will be at 92.10. However, a break with an hourly close below 90.30 negates the bullish tone to expose the next support at 89.35 (swing low area of 5 May 2023 & ascending trendline from 24 March 2023 low). Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. AUD/JPY Technical: Potential push up within a major range - MarketPulseMarketPulse

Japan: stronger-than-expected GDP supports BoJ policy normalization

ING Economics 18.05.2023 14:27

The easing of covid restrictions, along with government fiscal support, appears to have boosted consumption and investment. We anticipate some yield curve control (YCC) policy adjustment at the upcoming June meeting, as we believe the macroeconomic conditions now support sustainable inflation above 2% 0.4% %QoQ, sa 1Q23 GDP Higher than expected 1Q23 GDP rose mainly due to strong domestic demand Source: CEIC Domestic demand offsets weaker net exports Japan's real GDP grew 0.4% QoQ sa (vs a revised -0.1% in 4Q22, a 0.2% market consensus, and 0.4% INGf') in the first quarter. A strong rebound in service activity related to the reopening of the economy was the main driver of growth. Private consumption rose 0.6% (vs 0.2% in 4Q22) on the back of the government's travel subsidy program and a recovery in inbound tourism. The upside surprise came from the unexpected rise in business spending, which rose 0.9% (vs -0.7% in 4Q22). Forward-looking machinery orders data suggest that strong service sector orders offset sluggish manufacturing orders. PMI data shows that the historically high level of service-sector PMIs has continued, suggesting that in the near term at least, service-sector-led growth will continue. Partially offsetting the strength of domestic demand, weak global demand conditions weighed on the nation's exports (-4.2%), and net exports made a negative contribution to the overall growth rate of 0.3% pp in 1Q23. Forward-looking data suggest strong service growth will continue Source: CEIC Inflation outlook Yesterday, the Japanese government approved power utilities' plans to raise their rates for households, and price hikes are expected to take effect from 1 June. We have revised up our inflation forecasts accordingly to 2.8% YoY from 2.6% previously. We think headline inflation will stay above 2% for longer than expected but will eventually slow back below 2% by the end of this year. However, we think core inflation will stay above 2% throughout 2023. Core inflation could stay above 2% throughout 2023 Source: CEIC, ING estimates BoJ watch The Bank of Japan will meet for its policy decision in June, so they still have time to review recent developments in inflation and other macroeconomic data. The most important factor in its policymaking is inflation. We don't think the power price hike is an immediate reason for policy action, as it is mainly a cost-push inflation driver. However, it will still boost core inflation to some extent. The Bank of Japan will be very patient in taking any action on the policy rates, and we still think that rate hikes will not come until next year after the BoJ makes some progress in the policy review, announced last month. Read next: Australia: Wage price index supports further RBA tightening| FXMAG.COM June may be too soon for the BoJ's YCC policy adjustment, but we believe that the YCC policy should be normalized soon because it has distorted the functioning of financial markets beyond supporting the economy. Since April, when the new fiscal year began, if higher-than-usual wage growth persists and supports consumer spending, and if the financial market jitters surrounding the US banking sector calm down, we think the BoJ will make a decision on YCC policy sooner rather than later. Read this article on THINK Tags Japan GDP Japan CPI Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Asia Morning Bites - 19.05.2023

ING Economics 19.05.2023 08:34

Japanese inflation picks up again, prompting thoughts of policy adjustment from the BoJ. Elsewhere, Fed speakers cast doubt on June pause thesis ahead of Powell event later today, and debt ceiling anxiety ebbs Source: shutterstock Global Macro and Markets Global markets: Optimism seems to be creeping back into markets, and both the S&P 500 and NASDAQ made decent gains yesterday (0.94% and 1.51% respectively) as Kevin McCarthy indicated that a debt bill could go before the House by next week. Chinese stocks were more mixed. The Hang Seng did gain 0.85%, but the CSI 300 was little changed (-0.1%). US Treasury yields continued to move higher though. And this may be more about rate expectations than debt ceiling worries. There have been a couple of Fed speakers over recent days pouring doubt onto a June pause, Voter Lorie Logan for one, and non-voter James Bullard another. Philip Jefferson seems to be sitting on the fence with his remarks yesterday, and it is looking like June could be a close meeting. Jerome Powell is speaking at an event later today and may shed some more light on the core FOMC view. 2Y US Treasury yields rose 9.8bp to 4.252%, while those on 10Y Treasuries rose 8.2bp to 3.646%. The increase in yields has given the USD a further boost, and EURUSD is now down to 1.0776. Soft Australian labour market data yesterday (a fall in full-time jobs and a rise in the unemployment rate) has helped the AUD to fall to 0.6628. Cable has dropped back to 1.2414 and the JPY is back up to 138.57. Other Asian FX was also softer versus the USD. The CNY has pushed conclusively back above 7.0 to sit at 7.0375 currently. The SGD also lost ground, rising to 1.348. G-7 macro: Following the big drop in the US Empire Manufacturing survey recently, more attention has been focussed on the Philadelphia Fed business survey for corroboration. And it didn’t happen. The Philly Fed survey came in at -10.4, an improvement on the -31.3 reading in April, and better than the consensus had forecast. The G-7 calendar for today is very thin. Japan: Consumer price inflation accelerated to 3.5% YoY in April (vs 3.2% in March, 3.5% market consensus) due to price increases at the beginning of the fiscal year. On a monthly comparison, goods and services prices rose 0.8% MoM sa and 0.2%, respectively. We believe that inflation will cool down again in May after these one-off price hikes, but a rise in power bills will likely push up the headline inflation again in June. Inflation will probably come down only gradually, and more slowly than the Bank of Japan (BoJ) is expecting. As a result, the BoJ will likely revise up its current inflation forecasts. Not only are wages rising, but prices of other assets in Japan are also rising. Equity indices recently returned to the pre-bubble era for the first time in nearly 40 years, and housing/rent prices are also rising. We see core inflation staying above 2% throughout 2023. As the BoJ has just begun reviewing its policies, it will still take time for them to raise policy rates, but we see a higher chance of an adjustment to their YCC policy as early as June– anchoring 2Y JGBs instead of 10Y JGBs. Read next: Sweden: How the Riksbank has made the krona’s path to recovery even narrower| FXMAG.COM What to look out for: Fed speakers Malaysia trade (19 May) Fed's Powell and Williams speak at separate events (19 May) Read this article on THINK Tags Emerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Markets under Pressure: Rising Yields, Strong Dollar, and Political Headwinds Weigh on Stocks"

Nasdaq Golden Dragon has underperformed Nasdaq since the start of the year

Ipek Ozkardeskaya 22.05.2023 10:51

The European stocks were up and the S&P500 hit a fresh high since summer, until Garret Graves, who was negotiating for the Republicans abruptly walked out, calling the White House 'unreasonable' and declaring that the discussions are on a pause. Equities sold off and yields rose. Happily, US President Joe Biden and House Speaker Kevin McCarthy had a 'productive' call Sunday and agreed to resume talks today, to avoid what could be a very damaging US default. The market mood is sweeter this Monday on news that the US politicians will at least resume talks after Friday's crisis. They will likely strike a last-minute deal to avoid a catastrophic outcome. But Treasury Secretary Janet Yellen reminds that the US will receive taxes by mid-June, but that she is not sure there will be enough money in the coffers to carry on until that date. The US Treasury General Account, that US government now taps in to pay the bills, has no more than $116 bn. The US 2-year spiked past 4.30% on Friday, even though Federal Reserve (Fed) Chair Jerome Powell said on Friday that rates may not have to rise as much as expected to curb inflation, as the bank stress is playing a nice role restricting credit conditions. Beyond Powell, the Fed members look undecided on whether to keep raising the rates or to pause. But none see the US rates being cut this year. The US dollar is down for the second day after a more than 2.50% rebound since the beginning of May. The safe haven demand due to the debt ceiling saga is one of the reasons why the US dollar saw inflows over the past couple of weeks, and an eventually lower liquidity once the crisis is over could be supportive of the greenback. But the divergence between the Fed, which has certainly come to the end of its tightening cycle, and the European Central Bank (ECB), that still has a couple of rate hikes left on the pipeline, hint that the recent weakness in the EURUSD could see a bottom. From a technical standpoint, 1.0730, the minor 23.6% retracement on September to May rally, should give support to the actual bullish trend for a renewed rally above 1.10 and to 1.12. Read next: Ipek Ozkardeskaya: A sudden jump in dollar-try is a possibility| FXMAG.COM In Japan, the selling pressure on the yen continues. Yet, the latest data from Japan revealed that the national CPI rose to 4.5% in April, up from 3.2% printed earlier, and defying analyst expectations of a fall to 2.5%. Core inflation rose from 3.1% to 3.4% as expected. Cheap yen, the Bank of Japan's (BoJ) ultra-supportive policy, Japanese corporate reforms, and some help from Warren Buffett who has recently invested in Japanese stocks, helped the Nikkei to hit a 3-decade high this month. The inflows could continue as according to the latest BoFA survey, portfolio allocations to Japanese stocks fell to net 11% underweight. The question is, what will happen when the BoJ will finally reverse its ultra-easy monetary policy to adopt to rising inflation and the hawkish global winds? The yen will certainly gain, and the equities will certainly give back gains. But no one knows how long the BoJ plans to remain absurdly dovish! What we know however is that tensions between China and the West get worse by the day. The G7 meetings over the weekend revealed that the UK is willing to follow US in curbing business investments in China. China on the other hand hit back saying that Micron chips failed to pass a cybersecurity review and the government warned Chinese operators against buying the company's chips. Nasdaq's Golden Dragon China index has clearly underperformed Nasdaq since the start of this year and there is no apparent improvement in appetite for Chinese stocks despite a supportive monetary policy and return to growth following the end of the Covid measures. Investors are scared that Xi Jinping's national security obsession could scrap investor friendly measures and leave investors on the back foot.

Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

Kenny Fisher 22.05.2023 14:53

BoJ Core CPI expected to ease USD/JPY steadies after extended slide In Monday’s European session, USD/JPY is steady, trading at 137.90. The yen gained 0.53% on Friday, after a nasty slide last week in which it fell 440 points and hit a six-month low. BoJ Core CPI expected to inch lower Inflation has become a hot topic for Japanese policy makers, which marks a sea-change after years of deflation. Japan is dealing with inflation of around 3%, which is much lower than in other major economies but nevertheless higher than the Bank of Japan’s 2% target. The new inflationary era has forced central banks to raise interest rates, but the BoJ remains an outlier as it has continued its ultra-loose monetary policy. Still, it appears that change is coming. There is a new sheriff in town, with Kazuo Ueda now at the helm of the BoJ. Ueda has said he would tighten policy if inflation remains sustainable at 2%, which makes every inflation reading a potential market-mover. Last week, core CPI rose to 3.4% in April, up from 3.1% a month earlier. The rise in inflation, together with a stronger-than-expected GDP report for the first quarter, has fuelled speculation that the BoJ could tighten policy in the near future. Read next: UK Gfk Consumer Confidence index got better fourth month in a row| FXMAG.COM The markets will be closely watching BoJ Core CPI, the BoJ’s preferred inflation gauge, which will be released early on Tuesday. The estimate for March stands at 2.8%, a drop lower than the 2.9% reading in February. We’re unlikely to see interest rates rise anytime soon, but Ueda has hinted at phasing out the Bank’s yield curve control (YCC) policy. Such a move would likely send the yen sharply higher, and unsurprisingly, the possibility that the BoJ will tighten policy has attracted the attention of speculators, who are betting on a shift in policy that will boost the yen. USD/JPY Technical In the Asian session, USD/JPY put strong pressure on support at 137.45. Below, there is support at 1.3615 There is resistance at 138.37 and 139.25 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Japanese yen drifting ahead of BOJ Core CPI - MarketPulseMarketPulse

ECB's Hawkish Move and Risk Appetite Propel Major Currencies, Leaving Dollar in the Dus

Enrique Díaz-Álvarez 19.06.2023 16:14

Hawkish ECB and soaring risk appetite sink dollar Both the Federal Reserve and the ECB struck hawkish surprises last week. However, the latter hiked rates while the former did not, and markets chose to believe facts, rather than rhetoric. The dollar sold-off sharply against every major currency in the world, with the expectation of the Japanese yen, hurt by the Bank of Japan's insistence on pretending it is still 2020. The British pound was the week's winner, soaring by more than 2% against the dollar and topping the week's charts. So far this year, Latin American currencies remain the stars, with the Colombian and Mexican pesos and the Brazilian real all up by double digits against the US dollar. The UK will be in focus this week. As in the US last week, the Bank of England meeting on Thursday will be preceded by the release of the May inflation numbers. There is near unanimity that the MPC will hike rates by another 25bps on Thursday and signal that more hikes are likely on the way. Later in the week we get the flash PMIs of business activity worldwide. The week will be uncharacteristically quiet in the US, and the spotlight will be elsewhere, primarily on sterling.

USD/JPY Climbs Above 143 as Japan's Core CPI Remains Above 3%

Kenny Fisher 26.06.2023 08:34

USD/JPY climbs above 143 Japan’s core CPI remains above 3% The Japanese yen has stabilized on Friday after falling close to 1% a day earlier. In the European session, USD/JPY is trading at 143.05, down 0.04%. Earlier, USD/JPY touched a high of 143.45, the highest level since early November 2022. On the data calendar, the US releases ISM Services PMI later today. The consensus stands at 54.0 for June, following 54.9 in May. The services sector has posted four straight readings over the 50 level, which separates expansion from contraction. Japan’s core inflation higher than expected Japan continues to grapple with high inflation and core CPI for May was higher than expected. With inflation around 3%, other central banks would love to trade places with the Bank of Japan, but Japan’s inflation remains above the 2% target and has become an issue for the central bank after decades of deflation. Nationwide core CPI, which excludes fresh food but includes energy items, climbed 3.2% in May y/y, down from 3.4% in April but above the consensus of 3.1%. What was more worrying was the “core-core index”, which excludes fresh food and energy, jumped 4.3% in May, up from 4.1% in April. This was above expectations and marked the highest level since June 1981. Core CPI has now remained above the BoJ’s inflation target of 2% for 14 consecutive months. This puts into question the BoJ’s stance that cost-driven inflation is temporary and therefore there is no need to tighten monetary policy. Inflation risks are tilted to the upside and the BoJ will find it more difficult to defend its ultra-loose policy if inflation pressures don’t ease. The BoJ maintained its policy settings at last week’s meeting and has no plans to tighten interest rates anytime soon. This puts the BoJ at odds with other major central banks, which have been aggressively tightening rates in order to curb inflation. The US/Japan rate differential has been widening as the Fed raises rates while the BoJ stands pat. This has sent the yen sharply lower, raising concerns that the government could intervene in the currency markets in order to prop up the yen. The Ministry of Finance stunned the global financial markets in September and October when it intervened, at a time when the yen had fallen below the 150 line. The yen hasn’t fallen quite that low, but I would expect to hear louder verbal intervention out of Tokyo if the yen falls below 145. USD/JPY Technical USD/JPY tested support at 142.82 earlier. The next support level is 142.07 There is resistance at 143.83 and 144.27

Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

FX Daily: Inflation Takes Center Stage as Geopolitical Events Have Limited Impact

ING Economics 26.06.2023 10:38

FX Daily: Inflation remains the market’s priority Events in Russia have had little discernible impact on the FX market so far. Instead, the hot topic of high inflation and what policymakers are prepared to do about it remains the market's priority. This will be at the top of the agenda at this week's ECB's annual symposium in Sintra. Expect another mixed week in FX markets and possible BoJ intervention. USD: Geopolitics has yet to make its mark Events in Russia this weekend have so far had very little impact on global financial markets. There has been no flight to quality rush into the short end of the US Treasury market (two-year yields are down only 2bp since Friday), crude oil failed to hold onto some very modest gains in Asia, and Asian equity price action was muted. In FX, it is hard to discern any flight to quality into the dollar, nor discernible outperformance of defensive currencies like the Japanese yen and the Swiss franc. The muted response probably reflects i) a lack of clarity over what comes next after this challenge to President Putin's authority and ii) financial markets having already experienced a year of a stronger dollar and higher energy prices after the Russian invasion of Ukraine. Instead, the market is very much focused on inflation. Both central bankers and governments are under fire for having kept monetary and fiscal policy respectively too loose for too long. These (or at least monetary policy anyway) will be the hot topic for this week at the ECB annual symposium in Sintra. Many of the G7 central bank governors are in attendance and presumably will deliver a hawkish message, similar to the one that Federal Reserve Chair Jerome Powell delivered to Congress last week. This means that yield curves look to remain very inverted as investors assess the degree of looming recession and that the dollar will stay strong against those currencies without a monetary defence – i.e., USD/JPY stays bid. In addition to Powell's comment at Sintra on Wednesday, the US highlight this week will be the release of the core PCE inflation data for May. This is released on Friday. Expected at 0.4% month-on-month, another high reading for core inflation suggests there can be no let-up in the Fed's hawkishness. DXY can probably bounce around in a 102.00-103.00 range this week, while USD/JPY should edge closer to the 145 intervention zone.

Russia's Weekend Mutiny Raises Concerns About Putin's Power Grip; Market Highlights: Gold Support, FX Intervention, and Fed's Stress Test Results

Kelvin Wong 27.06.2023 10:32

Russia’s weekend mutiny cast doubts on Putin’s grip on power. No major impact on markets but keep a lookout on Gold, which bounced off the key support zone of US$1,913/1,896 per ounce. Stern FX verbal intervention from Japan’s top currency official. Watch USD/JPY key near-term support at 142.50/25. US banking stocks tumbled ahead of annual key Fed’s banks’ stress test results Before the start of this new trading week, market participants were being jolted from their weekend leisure activities to shift their focus to the internal coup in Russia that may put President Putin’s power grip in jeopardy. Yevgeny Prigozhin, leader of the Wagner Group, a Russian key independent military contractor that has played a significant role in the ongoing Russia-Ukraine territorial conflict voiced displeasure with Russia’s top leadership in handling the Russia-Ukraine situation, took over two Russian cities and order his mercenaries to march towards Moscow on Saturday. Russia’s weekend mutiny started fast and ended fast Upon reaching 200 km within Moscow, Prigozhin’s troops halted and made a U-turn back to their field camps. In addition, Putin dropped earlier treason charges on the Wagner Group and allowed Prigozhin to head to Belarus, Russia’s western neighbour for exile. In less than 48 hours, the mutiny in Russia is over without any clear details on what has transpired that led to Prigozhin’s retreat as Putin has not made any official speech or press conference yet. US Secretary of State Blinken commented that the weekend’s uprising by Prigozhin, a former Putin royalist has posed a direct challenge to Putin’s grip on power in Russia and provided a battlefield advantage to Ukraine. On the other hand, several geopolitical commenters have analyzed the situation to be in favour of Putin in which Wagner Group’s mutiny may be used as a cover for Putin to remove the top brass in Russia’s Ministry of Defence; Shoigu, the defence minister and Gerasimov, chief of the general staff as they posed a threat to Putin’s rule. Thus, the change of Russia’s military leadership may be part of the “deal” package that the Kremlin and Prigozhin agreed on. No significant movements in markets but watch gold In today’s Asian session, both the S&P 500 and Nasdaq 100 e-mini futures were up slightly by around +0.20% after posting their worst weekly losses last week in three months. Major Asian stock indices were mixed at this time of the writing, Nikkei 225 (-0.24%), Kospi 200 (+0.60%), Hang Seng Index (-0.14%), Hang Seng China Enterprises Index (+0.13%), and CSI 300 (-0.70%). The US dollar is almost unchanged on average with the US Dollar Index inching down by a meagre -0.1%. Gold, a traditional safe haven asset that tends to benefit in light of major geopolitical risks upheaval in the past has exhibited some interesting price actions movement from a technical analysis perspective. Gold’s decline has managed to bounce off from a key support zone of US$1,913/1,896 per ounce Fig 1: Gold (XAU/USD) medium-term trend as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) Last week’s decline seen in Gold (XAU/USD) has led its price actions to hit a crucial medium-term pivotal support zone of US$1,913/US$ 1,896 per ounce (printed an intraday low of US$1,910 last Friday, 23 June) which is being defined by a confluence of elements; the lower boundary of the medium-term ascending channel in place since 3 November 2022 low, 38.2% Fibonacci retracement of the prior medium-term up move from 3 November 2022 low to 4 May 2023 high, and approximately the downside price objective of recent “Descending Triangle” bearish breakdown. Momentum has also improved as the daily RSI oscillator has managed to stage a bounce off the key corresponding support at the 36 level. Watch the US$1,896 key medium-term pivotal support and a clearance above US1,940 intermediate resistance sees the next resistance coming in at US$1,990 (also the 50-day moving average). FX verbal intervention from Japan After a strong upside movement seen in the USD/JPY that recorded a weekly gain of +1.3% last week which outperformed other major USD crosses, the US Dollar Index only rose by +0.56% over the same period, Japan’s Vice Finance Minister Masato Kanda, a top currency official that has oversight over foreign exchange market matters has sounded the alarm in today’s morning Asian session. Based on a Reuters report, Kanda said that the authorities will respond to any excessive moves in the foreign exchange market, warned that the recent yen moves were rapid and will not rule out any chance of an FX intervention. He said, “Regardless of the direction, it’s generally not good for the economy if exchange rates move excessively in a way that deviates from economic fundamentals.” Today’s verbal intervention was the most pronounced made by any of Japan’s finance ministry officials in the past month when USD/JPY sailed past the prior 141.00 and 142.00 psychological levels “effortlessly”. USD/JPY has shed -0.2% intraday and broke key near-term support at 143.45 at this time of the writing, the next support to watch will be at 142.50/25 (former swing highs of 11/21/22 November 2022). Fed’s annual banks stress test results out on Wednesday The US Federal Reserve will unveil the results of its annual stress tests on the 23 biggest US banks on Wednesday, 28 June. The key focus will be on a section of the test, labelled as “exploratory market shock”, this is the first time such a test is being conducted on the trading books of the largest US banks. The urgency and significance of the “exploratory market shock” stress test come after the US regional banks’ turmoil. Hence, monitoring of fixed income duration risk is paramount now given that the latest Fed’s hawkish monetary policy guidance is to keep interest rates higher for a longer period. Last week, the US banking stocks shed by -6.80% as indicated by the SPDR S&P Bank exchange-traded fund, its worse weekly performance in seven weeks and underperformed the S&P 500. Fig 2: S&P 500 major trend with VIX as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) If the “exploratory market shock” stress test results come in unfavourable, it may put more downside pressure on US banking stocks which in turn may trigger a volatility upside breakout in the VIX, a measurement of implied volatility on the S&P 500 as it has compressed to a low level of 13.44 not seen since early February 2020 before the pandemic. A sudden spike in VIX may dampen the current bullish mood for US stock indices.

Challenges in the Philippines: Rising Rice and Energy Costs Threaten Inflation Stability

Yen Plummeting to Multiyear Lows Sparks Market Attention

Michael Hewson 28.06.2023 08:10

Yen in focus as it falls to multiyear lows After 6 days of declines, European markets managed to break their recent losing streak yesterday, closing marginally higher after a day when the direction could have gone either way. The catalyst for the recovery off the day's lows was a strong US session which was driven by two sets of strong US economic numbers. US consumer confidence for June hit its highest levels in 17 months, while new home sales jumped by 12.2%, the highest number in over a year. If the US economy is starting to struggle then there is little evidence of that in yesterday's numbers, which in turn helped drive a strong finish for US markets, led by the Nasdaq 100. Yesterday's resilience came in spite of another slide in crude oil prices, which have continued to suffer under the weight of concerns about a slowing global economy and a drop in demand over the second half of the year. The increased stridency of hawkish central bank rhetoric coming out of Sintra in Portugal at the ECB central bank conference, when it comes to future rate hikes is helping to drive yields higher, yet stock markets appear unfazed. Yesterday we heard from several ECB governing council members, including President Christine Lagarde pushing back against the idea of rate cuts in 2024, as well as signalling a commitment to another rate hike at the July meeting. This seems set in stone now, although this week's June flash CPI number might cast some doubts as to whether the rate hikes might continue beyond July. Today's speaker slate at Sintra could well create more headlines with the likes of Bank of England Governor Andrew Bailey, Bank of Japan governor Kazuo Ueda, Fed chair Jay Powell and Christine Lagarde speaking on a panel discussing monetary policy. Of particular interest will be any comments from Governor Ueda given the declinesseen in the Japanese yen over the past few days, seeing it sink to 15-year lows against the euro, as well as 8-year lows against the pound, and record lows against the Swiss franc in the last 24 hours. We've already heard from Japanese Finance Minister Suzuki in the last couple of days warning that excessive movements in the yen might prompt an appropriate response. While yen traders are focussing on the 145.00 area against the US dollar it can't have escaped their attention that their currency is getting hit even harder away from the spotlight of the greenback. If a response is coming it could well come soon. Staying with currencies the Australian dollar plunged overnight after headline CPI slowed sharply on May from 6.8% to 5.6%, well below forecasts of 6.1%, and with the RBA meeting next week this slowdown could prompt the central bank to re-pause the pace of the current rate hiking cycle. After the European close we also get the latest results from the US bank stress tests, which couldn't be more timely given recent events in March, however they aren't likely to offer much insight into what took place, as the US regional banks were not covered under the various scenarios, as they were considered too small and not systemically important enough. This was a major oversight, as recent experience in Europe has taught us, and particularly in Spain over 10 years ago, where a large cohort of Spanish Cajas nearly brought the economy to its knees and resulted in a banking bailout. Just because a bank is small doesn't mean it won't cause a financial meltdown if its troubles spread. The tests also had a rather big flaw in them in that they didn't factor a sharp rise in interest rates into any of the scenarios, the very scenario that started the dominos tumbling with the collapse of SVB. EUR/USD – holding above the 50-day SMA and support at the 1.0870/80 area. We have resistance back at last week's high just above the 1.1000 level, with the main resistance at the April highs at 1.1095. Below 1.0850 signals a move towards 1.0780. GBP/USD – a positive session yesterday holding above the lows of last week, and support at the 1.2680/90 area. Below 1.2670 could see a move towards the 50-day SMA. Still on course for a move towards the 1.3000 area but needs to clear 1.2850. EUR/GBP – appears to be building up to move higher but needs to move through the 0.8630/40 area. The main support is at last week's low at the 0.8515/20 area. A move through 0.8640 could see a move towards 0.8680. While below the 0.8630 area the bias remains for a return to the recent lows. USD/JPY – continues to edge higher towards the 145.00 area. We have support at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30. FTSE100 is expected to open 19 points higher at 7,480 DAX is expected to open 45 points higher at 15,892 CAC40 is expected to open 25 points higher at 7,240 By Michael Hewson (Chief Market Analyst at CMC Markets UK)

ECB Bank Forum: Ueda and Powell's Insights on Rate Policy and USD/JPY

Ed Moya 29.06.2023 08:26

Ueda, Powell participating in panel at ECB Bank Forum Japanese yen slips below 144 US consumer confidence surges higher USD/JPY continues to push higher and is closing in on the 145 line. In the North American session, the yen is trading at 144.60, up 0.37%. Will Ueda provide any clues at ECB Bank Forum? It’s a quiet day on the data calendar, with no important US releases. In Japan, retail sales are expected to improve to 5.4%, up from 5.0%. Today’s highlight is the ECB Bank Forum in Sintra, with the heads of the major central banks taking part in a panel on policy. Bank of Japan Governor Ueda and Fed Chair Powell will participate and any hints about rate policy could move USD/JPY. The Fed and the BoJ are in very different situations, which could make the ECB event all the more interesting. The Fed is close to its tightening cycle, in which it has raised rates by some 500 points. Fed Chair Powell has hinted at a couple of more rates this year, but if inflation continues to fall, the Fed could start chopping rates early in 2023. The BoJ has maintained its ultra-loose policy, even as all the other major banks have raised rates in order to curb inflation. The BoJ has insisted that inflation is temporary, even though it remains above the Bank’s target of 2%. The BoJ isn’t looking at raising interest rates anytime soon, although it could tweak its yield curve control policy in order to prop up the ailing Japanese yen, which has plunged 3.7% in the month of June.

German Inflation and US Q1 GDP Awaited: Market Focus Shifts

Michael Hewson 29.06.2023 09:24

German inflation in focus, ahead of US Q1 GDP Having stopped the rot on Tuesday, ending a 6-day losing streak, European markets saw another positive session yesterday, although gains were tempered by remarks from Fed chairman Jay Powell who warned that several more rate hikes could be expected in the coming months, in comments made in an ECB panel discussion in Sintra, Portugal. US markets finished the day mixed with little in the way of direction, as they digested the various remarks from central bankers, as they all peddled a similar narrative, of further rate rises to come. The Japanese yen continued to decline, already at record lows on a trade-weighted basis, Bank of Japan governor Kazuo Ueda gave little indication that officials were any close to stemming the recent losses. The subdued finish in the US is likely to translate into a flat European open. There is the hope that upcoming data could prompt a softening of this hawkish message starting today with the latest June inflation numbers from Germany. We've seen a sharp deceleration in the last few months, falling from 7.6% in April to 6.3% in May. Today's June numbers could see a modest increase to 6.8%, which will do little to assuage ECB concerns that inflation is falling back sharply. In the UK the sharp rise in gilt yields in the wake of surging inflation is prompting concerns about the housing market, and more specifically the ability of consumers to pay their existing mortgage or take out new ones. Since the start of the year, we've seen a modest improvement in mortgage approvals, after they hit a low of 39.6k back in January. The slowdown towards the end of last year was due to the sharp rise in interest rates which weighed on demand for property, as well as weighing on house prices. As energy prices have come down, along with lower rates at the start of the year, demand for mortgages picked up again with March approvals rising to 51.5k, before slipping back to 48.7k in April. This could well be as good as it gets for a while with the renewed increase in gilt yields, we've seen in the past few weeks, prompting weaker demand for new borrowing. Similarly net consumer credit has also started to improve after similar weakness. Although inflationary pressures are starting to subside, the increase in wages is unlikely to offset concern over higher rates and higher mortgage costs in the coming months. Given current levels of uncertainty, consumer credit numbers could well increase further, while net lending could see a further decline after April lending fell by -£1.4bn, the weakest number since July 2021. We also have the final iteration of US Q1 GDP, which was revised up to 1.3% from 1.1% a few weeks ago. The main drag was down to a bigger than expected scaling down in inventories, as well as an upward revision to personal consumption to 3.8%, which was a significant improvement from 1% in Q4, as US consumers went out on a New Year splurge. Slightly more concerning was rise in core PCE over the quarter, from 4.4% in Q4 to 5%. We're not expecting to see much of a change in today's revisions, although headline might get revised to 1.4%, while most of the attention will be on the core PCE number for evidence of any downward revisions, as more data gets added to the wider numbers. Weekly jobless claims are expected to come in unchanged at 265k. EUR/USD – holding above the 50-day SMA and support at the 1.0870/80 area, but unable to move through the 1.1000 level. The main resistance remains at the April highs at 1.1095. Below 1.0850 signals a move towards 1.0780. GBP/USD – slid back sharply below the 1.2670 area, now opens a move towards the 50-day SMA at 1.2540. If this holds, we remain on course for a move towards the 1.3000 area. EUR/GBP – broken above 0.8630, heading towards the 50-day SMA at 0.8673, which is the next resistance area. Support comes in at the 0.8580 area. USD/JPY – continues to edge higher towards the 145.00 area. We have support at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30. FTSE100 is expected to open 2 points higher at 7,502 DAX is expected to open 7 points higher at 15,956 CAC40 is expected to open 10 points higher at 7,296 By Michael Hewson (Chief Market Analyst at CMC Markets UK)

German Industrial Production Drops in May, Recession Risk Looms

FX Daily: Riksbank's Hike and Dollar Strength Amid Inflation Concerns

ING Economics 29.06.2023 09:37

FX Daily: Riksbank needs to show the krona some love The central message coming from this week's Sintra conference is that economies are holding up better than expected, the decline in inflation has been frustratingly slow and more tightening needs to be done. Expect the dollar to stay bid ahead of what should be another high US core inflation print tomorrow. Elsewhere, the Riksbank is expected to hike 25bp. USD: No reason to fight dollar strength this week Central bank communication at this week's Sintra conference in Portugal has stayed pretty hawkish. The core message seems to be that low unemployment rates have allowed economies to withstand large tightening cycles reasonably well, meaning that inflation has not fallen as much as expected. Expectations for the duration and terminal rates for tightening cycles are being revised higher. This is most credibly being done in the US, where the economy appears to be outperforming. This is allowing the dollar to stay quite bid - especially against those currencies without much/any interest rate difference such as the Japanese yen and the Chinese renminbi. On the latter, policymakers are gently trying to fight the steady move higher in USD/CNY by setting lower fixings. However, they may be forced to cut the required reserve on FX deposits as they did last September if they want to send a stronger message of displeasure over renminbi depreciation. And as we have seen over the years, a steady uptrend in USD/CNY is not conducive to an overall bear trend in the dollar. Back to the Fed. If central banks are increasingly data-dependent, what's next in store for the Fed? The most important data point of the week will be tomorrow's release of the core PCE deflator for May expected at 0.3/0.4% month-on-month. Presumably, investors will be a little long dollars going into that release. Before that, however, we today see the weekly initial jobless claims figures. These have recently settled at higher levels. Any big upside surprise here could knock the dollar intra-day on the view that tighter policy is finally easing up labour supply - a key shoe to drop in the fight against inflation. DXY looks biased to 103.30/35 and possibly 103.65 - as long as initial claims do not spike higher today.

August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

Market Focus Shifts to US Data Amid Quiet Start to the Week

ING Economics 03.07.2023 09:32

FX Daily: Quiet start to an intense week The Independence Day holiday in the US means the week should start quietly in markets, but US data will soon attract the market's attention again now that a July Fed rate hike is a consensus view and there is also speculation about a move in September. We think the dollar can find some support this week. In the CEE region, central banks in Romania and Poland meet. USD: Data in focus amid thin holiday volumes The month of June saw the dollar weaken against all G10 currencies except for the Japanese yen, but the greenback has been quite supported in the past few days. Some hawkish comments by Federal Reserve Chair Jay Powell at the Sintra central bank symposium last week have helped markets to close the gap with the FOMC’s dot plot projections: the Fed funds futures curve currently prices in 34bp of tightening to the peak, a 10bp increase compared to a week ago. Crucially, markets are now actively considering the option of two rate hikes. This week should start quite quietly with the Independence Day holiday meaning US markets should have reduced flows until tomorrow. Still, US data activity will peak as markets assess the probability of a September hike now that a July increase appears to be the consensus view. Today, all eyes will be on the ISM manufacturing index, although a greater focus will be on the services survey released on Thursday (the May print dropped more than expected). On Friday, jobs figures for the month of June will be published: after the latest comments by Powell, it will probably take a very weak reading to put a July hike under discussion. On the Fed side, the first event to note is on Wednesday, when the June FOMC minutes are released. The dollar can probably find some more support this week as markets see more reasons in the data and the minutes to gradually align with the more hawkish dot plot projections.

German Ifo Index Continues to Decline in September, Confirming Economic Stagnation

US CPI Set to Fall to 3%, Bank of Canada to Hike Again?

Michael Hewson 12.07.2023 08:27

US CPI set to fall to 3%, Bank of Canada to hike again? By Michael Hewson (Chief Market Analyst at CMC Markets UK) European markets saw another positive session yesterday, rising for the third day in a row in anticipation that China's efforts to support its property sector may translate into further measures to support a rebound in economic activity. The FTSE100 once again underperformed as the strong pound and weakness in pharmaceuticals acted as a drag. US markets also closed higher on optimism that today's CPI report wouldn't spring any unpleasant surprises. This positive finish looks set to see markets here in Europe open slightly higher in a couple of hours' time. US inflation appears to be heading in the right direction, after sliding to a 2-year low last month of 4%, from 4.9% in April. A year ago, US CPI hit its peak at 9.1%. Core prices have continued to look sticky slipping back to 5.3% from 5.5%, however the continued hawkishness of the Federal Reserve has seen the slide in yields that came about because of these numbers, reverse sharply. With another rate rise due later this month this week's CPI numbers won't impact how the Federal Reserve is likely to act in 2 weeks' time, but the numbers might shine a light in whether we can expect another rate hike in September. June CPI is expected to slow further to 3.1% and core prices to slow to 5%. Having decided to signal a pause in their recent rate hiking cycle when they hiked rates in January, the Bank of Canada surprised markets in June by deciding to hike rates again, by 25bps to 4.75%. The decision followed a similar decision by the RBA days before on concerns that inflation was proving to be much stickier than feared. The Bank of Canada also tweaked its guidance about the need for further rate hikes giving them more flexibility when it comes to raising rates or choosing to hold them. Any decision could well be tempered by the current business outlook which in Q2 fell to its lowest levels since Q3 of 2020, although last week's June jobs report was strong, which could prompt the central bank to hike again by another 25bps to 5%. Core inflation did slow to 3.9% in May from 4.3% in April but remains elevated, and with the Fed likely to hike in two weeks' time it's quite likely the BoC will want to get out in front of them. The Japanese yen has been one of the big movers in recent days on speculation that the Bank of Japan may start to look at tweaking its yield curve control policy, when it next meets at the end of the month. EUR/USD – looks set for a move towards the recent range highs at 1.1100. Support at 1.0970 as well as last week's lows at 1.0830. Below 1.0820 targets 1.0780. GBP/USD – continues to move higher as we look to extend to fresh 15-month highs, and the 1.3010/20 area. A move through 1.3020 signals potential for 1.3200. Main support at 1.2680 area. EUR/GBP – sliding towards the 0.8500 area, with a break below potentially targeting 0.8460. Resistance remains back at the highs this week at the 0.8570/80 area. We also have resistance at the 50-day SMA which is now at 0.8620. USD/JPY – slipped below the 50-day SMA at 140 which was the next support for the US dollar and could well extend towards the 138.50 area and cloud support. Last weeks' weekly reversal suggests that a short-term top might be in. We need to see a move back above 142.80 to stabilise and argue for a return to 144.00. FTSE100 is expected to open 17 points higher at 7,299 DAX is expected to open 55 points higher at 15,845 CAC40 is expected to open at 35 points higher 7,235

EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

FX Daily: Underdogs Rally Ahead of US CPI Release

ING Economics 12.07.2023 09:08

FX Daily: Underdogs make a comeback ahead of US CPI It has been a good week for the underdogs in the G10 FX world. The Japanese yen, Norwegian krone, Swedish krona and Swiss franc led the gains against the dollar over the last week. This may well be a position adjustment against the risk of a benign US CPI print today and a tweak in Bank of Japan policy at the end of the month. Today's CPI reading will therefore be key. USD: Benign CPI could unlock a leg lower lower in the dollar Another European morning follows another Asian session where USD/JPY has led the dollar lower. The Japanese yen has now appreciated 3.6% against the dollar over the last week, closely followed by NOK (+3.4%), SEK (+2.7%) and CHF (+2.4%). We discussed some of the push-pull factors driving the dollar in yesterday's update, but the outperformance of these underdog currencies clearly points to some position adjustment at work. The broad-based nature of the rally in these currencies suggests investors may be anticipating a more benign US price environment like the one we saw in November last year when the US started to print core inflation at 0.3% month-on-month after a string of 0.6% releases. That nicely brings us to today's main event, which is the June CPI release at 14:30CET. Expectations are for a more benign 0.3% MoM core reading - the lowest since last November - and base effects bringing the headline CPI down to just 3.1% YoY - the lowest since March 2021. Assuming no nasty upside surprises here, this may be enough to firm up a view that a 25bp Fed hike may well be the last in the cycle. If so, DXY could make a run at the year's lows near 100.80. A quick word on the yen. Developments in USD/JPY - especially the sell-off in early Asia - seem to be led by selling in the JGB bond market. Here, 30-year JGB yields are rising - spreads between 30-year US and Japanese government bonds have narrowed 12bp over the last week - and the Nikkei equity index is underperforming. This has all the hallmarks of position adjustment before the 28 July Bank of Japan (BoJ) policy meeting, where expectations are growing that the BoJ could switch to targeting the five-year part of the JGB yield curve - another small step to policy normalisation. In short, then, this USD/JPY move looks driven by the private not public sector (i.e. no intervention) and something like 138.25 looks like a near-term target for USD/JPY assuming today's US CPI data does not surprise on the upside

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GBP/JPY: Pound-Yen Rally Faces Exhaustion and Potential Pullback

Ed Moya 12.07.2023 10:02

GBP/JPY The British pound has appreciated over 18% to the Japanese yen this year as stubborn inflation has bolstered the odds of aggressive central bank tightening by the BOE. Pound-yen has steadily gathered strength in the first half of the year but exhaustion could be settling in. The pound initially rallied earlier in London after weekly hourly earnings came in scorching hot, which should raise the prospects of a half-point rate hike at the August 3rd BOE meeting. The pound may get a major boost against the dollar if it can extend above the 1.30 level, but for some traders it is looking toppish against the yen. GBP/JPY may have a decent pullback if continued bearishness takes price below the bullish trendline that has been in place since March. Pound downside momentum could target 176.50 against the yen if the bullish trend line (around the 179.75 ) is invalidated. Key resistance currently resides around the 184.20 level.

Is Gold Ready to Shine Again? US CPI and Fed Policy Insights

Michael Hewson 12.07.2023 15:04

The gold price has made a retreat to the vicinity of $1,900 per ounce. What's next for gold prices - will the King of Metals find support there from which to bounce? Please comment on the US CPI reading. What does it mean in terms of further Fed monetary policy? Today’s US CPI numbers for June were never likely to change the calculus behind another 25bps rate hike when the Fed meets in two weeks’ time. Having hit a peak of 9.1% this time last year, today’s numbers have seen US CPI slow further to 3%, while core CPI slowed to 4.8%, a much softer number than expected. The nature of today’s figures suggest that whatever other Fed officials would have us believe further rate hikes beyond July will be a big ask, and probably won’t happen, hence today’s US dollar weakness. This may also help to explain why the US dollar has slipped so much against the Japanese yen in recent days, although some are suggesting it is because we might see a policy shift from the Bank of Japan when it meets at the end of this month. Whichever way you come at it from the net effect is likely to be the same in that US and Japanese rates are likely to converge, rather than diverge.This should be good news for gold as a weaker US dollar should help lift the yellow metal back towards $2,000 an ounce

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EUR/USD Faces Overbought Conditions as ECB Rate Hike Expectations Shift, Focus on Euro-Area Inflation

Ed Moya 19.07.2023 08:22

EUR/USD excessively overbought? The euro-dollar ascent was mostly a one-way move for most of July. After inflation eased to the slowest pace in more than two years, the dollar tumbled. With the Fed entering their blackout period before the July 26th FOMC meeting, the lack of hawkish pushback has allowed the dollar to remain vulnerable to further pain just ahead of the 1.1300 handle. Bullish momentum has cleared multiple hurdles but the 1.1350 level should prove to be rather strong. While the end of the Fed’s tightening cycle appears to be in place, expectations are shifting that the ECB might not be that far from pausing their rate hiking cycle. Today’s comment from ECB’s Knot, a well-known hawk, suggested that they could be ready to pause in September and that it might hinge on the inflation data going forward. All eyes will be on the Wednesday’s second reading of euro-area inflation. The EUR/USD daily chart displays a potential bearish butterfly pattern. Point D is targeted with the 1.414 1.414% Fibonacci expansion level of the X to A move and the B to C leg. If dollar strength emerges here, downside could target the 1.1050 level. If invalidated, bullish momentum could surge above the 1.1300 region, potentially targeting the 1.1450 resistance zone. USD/JPY dead-cat-bounce or sustainable rally? The plunge for dollar-yen accelerated after last week’s cooler-than-expected inflation report shifted Fed rate hike expectations. The macro backdrop has mostly seen investors calling for pain for the Japanese yen since 2021. Hedge funds ramped up bearish yen bets(according to the COT report for the week through July 11th), taking their net short positions to the largest level since last May. Now the focus also includes the BOJ, which includes some disappointment with keeping the BOJ keeping Yield Curve Control intact. Yen volatility could remain excessive if the Fed signals more tightening might need to be done after the July 26th FOMC meeting and if BOJ doesn’t tweak their policy. Over the next couple of weeks, it seems that the yen rally will either cool towards 141.50 (a temporary recovery) or we will see it surge below 136.00 (the downtrend remains in place).

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Central Bank Decisions: Fed, ECB, and BoJ - Market Expectations and Currency Volatility

Michael Hewson 24.07.2023 10:04

Bank of Japan decision – 28/07 the US dollar has traded in a fairly wide range against the Japanese yen in recent days, with whispers abounding that the Bank of Japan could be about to tweak its yield curve control policy, with a view to targeting shorter term rates. The BoJ has been the major outlier this year in terms of tightening policy, making the yen the worst performer year to date for the first half of this year. This appears to have gone into reverse this month on the basis that the market is convinced a policy change is coming, whether it be now or in October. Recent whispers suggest a move may now be deferred until October, however as with anything with Japan the currency may also have a part to play if we head back towards 150.00. Of course, it's also important to remember there is a US dollar element here, and the fact that the market thinks the Fed is done after this week's July rate rise is another factor behind the recent volatility in the Japanese currency. Whatever happens this week with the BoJ, with Japanese core CPI already above 4% and at a 40-year high a policy tweak is coming, and that could see further yen gains in the coming months.

Bank of England: Falling Corporate Price Expectations May Signal Peak in Rate Hike Cycle

Diverging G3 Trends Dominate: USD Steady on US Data, JPY Stronger as BoJ Softens YCC, EUR Weaker on Doubtful September Rate Hike

ING Economics 28.07.2023 10:40

FX Daily: Diverging G3 trends dominate Closing the week, we have the Japanese yen a little stronger as the BoJ softens up YCC control, the dollar is steady-to-stronger on good US activity data, and the euro is weaker as the ECB throws a September rate hike into doubt. After the BoJ press conference, today's highlight will be the US Employment Cost Index data. A soft number could hit the dollar. USD: The ECI will be in focus today The combination of some stronger US activity data and some independent euro weakness on the back of yesterday's ECB meeting has seen the trade-weighted DXY dollar push a little higher. DXY would be even higher were it not for the lower USD/JPY we have seen today on the back of the Bank of Japan's tweak to its Yield Curve Control (YCC) target. Regarding the BoJ, we think the market is right to have taken USD/JPY a little lower after this surprise adjustment to how it manages its 10-year Japanese government bond (JGB) yield target. What has probably prevented USD/JPY from dropping harder are the new BoJ core CPI forecasts, where FY24 and FY25 CPI are still only forecast at 1.9% (April forecast 2.0%) and 1.6% (1.6%) respectively. This hardly provides a firm foundation to conclude that CPI will now sustainably run near 2.0%. Instead, the tweak to the YCC programme may reflect BoJ Governor Kazuo Ueda's preference to take baby steps away from the heavy control of the JGB market - i.e. maybe he's more of a free marketeer. However, we do think the drop in USD/JPY might get some support from the dollar side today. Undoubtedly, US activity data has been holding up well, and based purely on the activity data alone one would argue that the Fed had the strongest case for another rate hike, yet Fed Chair Jerome Powell acknowledges that US monetary policy is already in restrictive territory and the focus is on disinflation. On Wednesday, Powell said there would be important data prints before the September FOMC meeting – two CPI prints, two jobs reports and the Employment Cost Index (ECI). Well the second-quarter ECI figure is released today and is expected at 1.1% – a drop from 1.2% in the first quarter and a peak of 1.4% in the first quarter of 2022. My colleague James Knightley thinks the risks are skewed to a sub-consensus 1.0% reading today given the softer average hourly earnings and survey evidence both from the Fed's Beige Book as well as the NFIB data that the US labour market is coming better into balance. A soft ECI number can wipe out the final 8bp that is priced for the US tightening cycle this year and will probably knock the dollar 0.5-1.0% lower. This would be a good story for risk assets, where both the Fed and seemingly the ECB would be closer to ending tightening cycles. If we are right with our call on the ECI, DXY could head back to yesterday's low near 100.50.

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FX Daily: Carry Trade Remains Popular Amidst Global Monetary Policy Changes

ING Economics 31.07.2023 15:51

FX Daily: Carry trade en vogue despite monetary hikes, pauses and cuts Monetary policy tightening cycles are close to their peak in the G10 space, although this week should see a 25bp hike in the UK and possibly Australia too. Policy changes are more advanced in parts of the EM world, where Chile cut rates 100bp on Friday and Brazil should start easing this week too. However, low volatility looks set to remain a key driver of FX. USD: Overnight rates at 5.30% make the dollar an expensive sell The dollar is proving quite resilient. Overnight USD rates at 5.30% are probably playing a role here. Also, evidence of a 'Goldilocks' scenario in the US is helping too, where there are further signs of disinflation even though US consumption is holding up quite well. This compares to Europe and China where business surveys remain soft and the concern is that stagnation deteriorates into contraction. Testing the US soft-landing thesis this week will be the release of ISM surveys and Friday's nonfarm jobs report. Later today we will also see the Federal Reserve's Senior Loan Officer Survey, where we'll receive insights on lending volumes and how much credit conditions have tightened. Recall that the equivalent survey from the European Central Bank last week undermined the euro. Some last vestiges of tightening cycles in G10 economies can be offset against developments in emerging markets. Here, Latin America saw some of the earliest and most aggressive tightening cycles during the pandemic and, on Friday, Chile kicked off easing cycles with a 100bp rate cut. Money markets seem to imply expectations of a 700bp rate cut over the next 12 months. And Brazil is expected to start easing on Wednesday with a 25bp cut. In theory, this should be good for emerging market growth prospects (and EM portfolio flows) and a slight dollar negative. The risk, however, is that rates are cut too far too fast - let's see. Also, look out today at 0900CET for any new measures from China's State Council to boost consumption (and EM growth prospects). Despite this diverging global growth and monetary policy story, cross-market volatility remains low - perhaps as investors are now expecting prolonged pauses in core interest rate markets. This remains a negative for the Japanese yen and a positive for the high yielders including the Mexican peso and the Hungarian forint. The dollar is probably trapped somewhere in the middle here and unless we see some sharp deterioration in US activity that would favour the Fed not just pausing, but easing - the dollar can probably trade out ranges over coming weeks. DXY to trade 101.00-102.00 near term.

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USD/JPY Surges Above 143 as Japanese Yen Continues to Slide on BoJ's Yield Control Tweaks

Kenny Fisher 02.08.2023 09:00

The Japanese yen continues to slide and is down 1.41% this week. In Tuesday’s European session, USD/JPY is trading at 143.16, up 0.64%. Dollar/yen powers above 143 The yen continues to lose ground against the US dollar. Earlier in the day, the yen weakened to 143.18, its weakest level against the US dollar since July 7th. The yen has plunged 370 basis points since Friday when the Bank of Japan stunned the markets and tweaked its yield control (YCC) policy. The Bank of Japan has loosened its YCC and this has sent the yen sharply lower. The BoJ had set a rigid cap of 0.50% yields on 10-year government bonds but has turned that cap into a yardstick, saying it would offer to purchase JGBs at 1%. The 10-year yield rose has risen to a multi-year high of 0.61% and there is a strong possibility of the yield continuing to rise. The BoJ has been an outlier of central banks, sticking to its policy of negative rates. True, inflation in Japan is much lower than in other developed economies, but there is growing criticism that this policy is outdated and the central bank needs to take further steps toward normalization. Governor Ueda stressed on Friday that the YCC tweak was not a move towards normalization and we’re unlikely to see any tightening from the BoJ unless inflation moves significantly higher. In the US, ISM Manufacturing PMI is today’s key release. The manufacturing sector remains in the doldrums and has been in decline since October, with readings below the 50.0 level. Demand has been weak and production has been declining due to the lack of orders. In June, the Manufacturing PMI slipped to 46.0, the lowest level since May 2020. Another decline is expected for July, with a consensus estimate of 46.8 points. . USD/JPY Technical USD/JPY has pushed above resistance at 142.63. Above, there is resistance at 144.09 There is support at 141.47 and 140.35

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FX Daily: US Treasury Wobble Sparks Risk Asset Concerns, Boosts Dollar

ING Economics 03.08.2023 10:18

FX Daily: US Treasury wobble unnerves risk assets A sell-off at the long end of the US Treasury market has cast a shadow over risk assets and hit cyclical currencies. The dollar has been the main beneficiary. Expect focus to very much remain on the US bond market into next week's quarterly refunding. For today, attention is on whether the BoE hikes 25bp or 50bp and how Brazilian assets react to the 50bp rate cut. USD: Tracking Treasuries Wednesday's session was all about the US bond market and the sell-off at the long end of the curve. US 30-year Treasury yields were briefly 15bp higher. And far from the benign bullish disinversion of the curve we saw after the soft June CPI print, yesterday's move was a more negative bullish steepening. Higher risk-free rates hit US growth stocks (Nasdaq -2%) and also hit 'growth' currencies, such as the commodity complex and the unloved Scandi currencies. At the heart of yesterday's move was the US fiscal story. Despite the Democrat administration and its supporters in the media decrying Fitch's decision to remove the sovereign's AAA status on Tuesday evening, there is genuine concern over US fiscal dynamics. And it looks like the Fitch release was carefully timed. Yesterday also saw a slightly higher than expected US quarterly refunding announcement, where $103bn of 3, 10, and 30-year bonds will be sold next week. The fact that fiscal dynamics were in play yesterday was reflected in wider US asset swap spreads (Treasuries underperforming the US swap curve) and the US yield curve steepening. As above, higher risk-free rates are providing greater headwinds to risk asset markets - including equities. We are also seeing some slightly higher cross-market volatility readings which may prompt investors to partially de-risk from carry trade strategies (good for the Japanese yen and Swiss franc on the crosses, bad for the high yielders). We will also be interested to see how the Brazilian real performs today after Brazil's central bank started its easing cycle last night with a 50bp cut and promised similar magnitude cuts over coming meetings. The currency could edge a little lower today given the international environment. While the US Treasury story will be with us into next week's auctions, the focus today will be on the initial jobless claims (these have been moving markets) and the services ISM index. Barring a significant rise in claims or a big dip in the services ISM, it looks like the dollar will hang onto recent gains into what should be a decent US July nonfarm payrolls report tomorrow. DXY could grind its way toward the 103.50 area.

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BoJ Observes Higher Inflation; Mixed US Job Report; Japanese Yen Weakens

Ed Moya 08.08.2023 08:50

BoJ Summary of Opinions takes note of higher inflation US job report a mixed bag The Japanese yen has started the week in negative territory. In the European session, USD/JPY is trading at 142.36, up 0.42%. BoJ says monetary easing to continue Inflation continues to be a key issue for the Bank of Japan, although it is much lower than in other major economies, at around 3%. Still, inflation is above the Bank’s 2% target and this continues to raise speculation that the BoJ will have to tighten policy sooner or later. The BoJ has pushed back against talk that it will tighten, and when the central bank recently made its yield curve control (YCC) more flexible, Governor Ueda was careful to stress that the step did not represent a move towards normalization. Against this backdrop, the BoJ released its Summary of Opinions earlier today. The members reiterated the necessity to keep an ultra-easy monetary policy in place, but some members noted that inflation and wages could continue to increase. One opinion went as far as to state that 2% inflation “in a sustainable and stable manner seems to have clearly come in sight” and urged the BoJ to make YCC more flexible. This BoJ internal conversation could be a signal that policy makers are slowly acknowledging that inflation, which has been above the 2% target for months, may be sustainable. That would mark a sea change in the BoJ’s thinking and could have major ramifications on the exchange rate. The US employment report for July was a mix. Nonfarm payrolls were soft at 187,000, despite a banner ADP release which fuelled expectations of a breakout nonfarm payrolls release. Job growth is slowing, but the unemployment rate ticked lower to 3.5% down from 3.6%, and wage growth stayed steady at 4.4%.

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Dollar's Strength: A Consequence of Limited Alternatives

ING Economics 11.08.2023 10:44

FX Daily: Dollar benefits from a lack of alternatives The US remains on an encouraging disinflation track, but the dollar is not turning lower. This is, in our view, due to a lack of attractive alternatives given warning growth signals in other parts of the world (such as the eurozone and China). Evidence of a US economic slowdown is needed to bring USD substantially lower. USD: Disinflation not enough for the bears July’s US inflation numbers released yesterday were largely in line with expectations, reassuring markets that there are no setbacks in the disinflationary process for now. Core inflation inched lower from 4.8% to 4.7%, while the headline rate suffered a rebound (from 3.0% to 3.2%) due to a reduced base effect compared to previous months, which was still smaller than the consensus of 3.3%. With the exception of resilience in housing prices, price pressures clearly abated across all components. All in all, the US report offered reasons for the Fed and for risk assets to cheer, as the chance of another rate hike declined further. Equities rallied and the US yield curve re-steepened: the dollar should have dropped across the board in this scenario. However, the post-CPI picture in FX was actually more mixed. This was a testament to how currencies are not uniquely driven by US news at the moment. The Japanese yen drop was not a surprise, given abating bond and FX volatility, equity outperformance and carry-trade revamp, but FX markets seemed lightly impacted by CPI figures and the subsequent risk-on environment, as many high-beta currencies failed to hang on to gains. From a dollar point of view, we think the recent price action denotes a reluctance to rotate away from the greenback given the emergence of concerning stories in other parts of the world. This is not to say that the activity outlook in the US is particularly bright – jobless claims touched a one-month high yesterday, and the outlook remains very vulnerable to deteriorated credit dynamics – but if economic slowdown alarms are flashing yellow in Washington, they are flashing amber in Frankfurt and Beijing. Chinese real estate developer Garden reported a record net loss of up to $7.6bn during the first half of the year yesterday, at a time when China’s officials are trying to calm investors’ nerves about another potential property crisis. Back to the US, PPI and the University of Michigan inflation expectation figures out today will clarify how far the disinflation story has gone in July, but we still sense a substantial dollar decline is not on the cards for the moment, or at least until compelling evidence of slowing US activity makes the prospect of Fed cuts less remote. DXY may consolidate above 102.00 over the next few days.

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Japanese Yen Rebounds Amid Intervention Concerns Ahead of Inflation Data

Kenny Fisher 18.08.2023 10:08

Japanese yen rebounds, but intervention worries remain Japan releases July inflation on Friday The Japanese yen has bounced back on Thursday after failing to post a winning day since August 4th. In the North American session, USD/JPY is trading at 145.92, down 0.30%. USD/JPY has been the worst performer among the major currencies over the past month, declining about 7%. The yen dropped below the 146 line on Wednesday which marked a new nine-month low. The Japanese currency lost ground in the aftermath of the Federal Reserve minutes, in which members expressed concern about high inflation. The sharp depreciation of the Japanese currency is raising concerns that Japan’s Ministry of Finance (MOF) could respond by intervening in the currency markets in order to prop up the yen. The yen is now trading at levels at which the MOF shocked the markets last September and instructed the Bank of Japan to sell billions of dollars in support of the yen. The MOF and the BoJ have stated in the past that they are more concerned with sharp swings in the exchange rate and not so much with a particular value for the yen. The yen has plunged about 800 points since late July which means that another intervention cannot be ruled out. The US/Japan rate differential has been widening, with the yen depreciating as a result. The economic troubles in China have led to a sharp drop in the Chinese yuan, which is another factor weighing on the ailing yen. Japan releases the July CPI inflation report on Friday. Headline CPI is expected to fall from 3.3% to 2.5%, while the core rate is projected to dip from 3.3% to 3.1%. The ‘core-core’ rate, which excludes food and energy items, is projected to rise to 4.3%, up from 4.2%. Any surprises from the inflation report could mean volatility for the Japanese yen. USD/JPY Technical There is resistance at 146.74 and 147.31 USD/JPY tested support at 145.71 earlier. Below, there is support at 144.92

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Forex Insights: Rising Real Yields, Evergrande Woes, and Dollar Strength

Ed Moya 21.08.2023 12:29

Soft landing hopes fizzle as real yields hit highest levels in a decade China jitters remain as Evergrande files for US bankruptcy Dollar index posts best win streak since May 2022 The Japanese yen is no longer acting like a safe haven currency. With global stocks having the worst week since March, dollar-yen appears poised to finish the week higher. Wall Street has had a major reset, and now believes that interest rates will stay higher for longer, and is fearful that the Fed might have to deliver more tightly given the strength of the US economy. The global bond market selloff as taken treasury yields two levels that are forcing portfolio managers to adjust accordingly. Short term rates are too attractive, and that should provide some underlying strengths for the US dollar. Today, the yen is on firming footing but some of that is on profit-taking given the big week the dollar has had. With tech and communication stocks getting hit the hardest, expectations for a safe-haven trade could keep the dollar supported. The wildcard for the dollar trade will be Fed Chair Powell’s Jackson Hole speech, which could remain hawkish or possibly contain a dovish twist The USD/JPY daily chart has already tested key levels that are making Japanese officials uncomfortable, but given the potential FX flows following Jackson Hole, it seems Japan will wait before intervening. This combination of a return of the king dollar and lagging Japanese yen has served to boost USD/JPY beyond 145.00 and towards major psychological support around the 150.00 level. As long as markets continue to bet on an inflation-fighting Fed and patient BOJ, USD/JPY could target the 148.00 region next week. With any dovish surprises from Powell, a breakdown could occur below the noted 145.00 psychological support level.

USD/JPY Breaks Above 146 Line: Bank of Japan's Core CPI in Focus

Kenny Fisher 22.08.2023 09:05

The Japanese yen faced considerable losses on Monday as USD/JPY surged to 146.23 during the North American session, marking a 0.57% increase for the day. The US dollar's strength has propelled it dangerously close to pushing the yen below the critical 146 line, a scenario witnessed last week when the robust US dollar drove the struggling yen to a nine-month low. Once synonymous with deflation, the Japanese economy has undergone a significant transformation in the era of high global inflation. With Japan's inflation hovering slightly above 3%, a level that many major central banks would eagerly welcome, the landscape has shifted. Notably, inflation remains relatively high by Japanese standards, as both headline and core inflation have consistently outpaced the Bank of Japan's (BoJ) 2% target. Japan's inflation data is closely scrutinized as the prospect of elevated inflation sparks speculations that the BoJ might need to tighten its lenient policy stance. Although the central bank has maintained that the high inflation is transitory, it's worth remembering that other central banks have made similar claims only to backtrack later. The Federal Reserve (Fed) and the European Central Bank (ECB) come to mind as examples. In the previous week, July's Consumer Price Index (CPI) remained steady at 3.3% year-on-year, while Core CPI experienced a slight dip to 3.1% year-on-year from the previous 3.3%. Looking ahead, Tuesday brings the release of BoJ Core CPI, the central bank's favored inflation metric, which is projected to decrease to 2.7% for July, down from June's 3.0%. USD/JPY pushes above 146 line Bank of Japan’s Core CPI is expected to ease to 2.7% The Japanese yen has posted significant losses on Monday. USD/JPY is trading at 146.23 in the North American session, up 0.57% on the day. The US dollar has looked sharp and is within a whisker of pushing the yen below the 146 line, as was the case last week when the strong US dollar pushed the ailing yen to a nine-month low. The Japanese economy was once synonymous with deflation, but that has changed in the era of high global inflation. Japan’s inflation is slightly above 3%, a level that other major central banks would take in a heartbeat. Still, inflation is relatively high by Japanese standards and both headline and core inflation have persistently been above the Bank of Japan’s 2% target. Japan’s inflation reports are carefully monitored as higher inflation has raised speculation that the BoJ will have to tighten its loose policy. The central bank has insisted that high inflation is transient, but the BoJ wouldn’t be the first bank to make that claim and then backtrack with its tail between its legs. Remember the Fed and the ECB? Last week, July’s CPI remained unchanged at 3.3% y/y. Core CPI dropped to 3.1% y/y, down from 3.3%. On Tuesday, Japan releases BoJ Core CPI, the central bank’s preferred inflation gauge, which is expected to dip to 2.7% in July, down from 3.0% in June. China’s economic troubles have sent the Chinese yuan sharply lower, with the Chinese currency falling about 5% this year against the US dollar. A weak yuan makes Chinese exports more attractive, but this is at the expense of other exporters including Japan. As a result, there is pressure in Japan to lower the value of the yen in order to compete with Chinese exports. USD/JPY Technical USD/JPY pushed above resistance at 145.54 earlier today. The next resistance line is 146.41 There is support at 144.51 and 143.64

Earnings, Soft PMIs, and Market Dynamics: Impact on Yields, Dollar, and Key Developments

Ed Moya 24.08.2023 12:47

Earnings and soft services PMIs sends yields and dollar lower Fed rate hike odds for September 20th meeting stand at 11% (down from yesterday’s 16%) Russian mercenary leader Prigozhin may have died in plane crash The US dollar remained near session lows against the Japanese yen after the Treasury’s mixed 20-year auction. The bond market rally that started yesterday is holding up after decent demand saw a 4.499% yield, which was higher than the pre-sale yield of 4.490%, and obviously above the 3.954% prior 20-year bond auction. Eventually the bond market will fixate over foreign demand, but for now the Treasury doesn’t seem to be seeing have any trouble with the extra issuance. PMIs Both the dreadful eurozone PMIs and softening US ones helped keep the bond market rally going and that should help with the global disinflation process. Rates are coming down and so are Fed rate hiking expectations. Earnings For a second consecutive quarter, Foot Locker significantly slashed their guidance. Wall Street was already skeptical of how Foot Locker would finish the year, but the outlook just went from bad to abysmal. Foot Locker suspended their dividend and cut their full-year sales and earnings guidance, noting softening trends in July. A tough consumer backdrop is only going to get worse, which could lead to a few ugly quarters for the footwear chain. Abercrombie & Fitch Co. earnings were the exact opposite to what came out of Foot Locker. Abercrombie is raising their outlook as their customers appear to be bucking the trend we saw from Macy’s and Kohls. All the signs are there for the outlook to get worse for the consumer. Mortgage rates are over 7% for the first time in nearly 2 decades. Credit card debt just jumped over $1 trillion as Generation X has the highest balance. The US job market is showing signs of cooling and that should continue as consumer spending softens. USD/JPY daily chart The USD/JPY chart is tentatively pulling back as global bond rates decline following weak global PMIs. Despite the two-day slide, a bullish bias might remain if the long end of the curve sees rates remaining elevated. If bearish momentum remains, the 142.75 will provide initial support. To the upside the 147.50 provides key resistance, while the 150.00 level remains a key price barrier.

Quiet Start for Japanese Yen as USD/JPY Trades Higher

Kenny Fisher 29.08.2023 10:31

The Japanese yen is trading quietly at the start of the week. In the North American session, USD/JPY is trading at 146.60, up 0.11%. The yen has plunged 3.05% in August against the US dollar and is trading at its lowest levels since November 2022. Powell, Ueda speak at Jackson Hole There was a degree of anticipation as major central bankers gathered at the Jackson Hole summit. The meeting has been used as a launch-pad for shifts in policy, but one would be hard-pressed to point to any dramatic news from the summit. Bank of Governor Kazuo Ueda stayed true to his script that underlying inflation remains lower than the BoJ’s target of 2% and as a result, the BoJ will stick with the current ultra-easy policy. Ueda has followed his predecessor Haruhiko Kuroda and insisted that he will not lift interest rates until there is evidence that domestic demand and stronger wage growth replace cost-push factors and keep inflation sustainably around the 2% target. Ueda continues to argue that inflation is below target and that he expects inflation to fall, but core inflation indicators continue to point to broad-based inflationary pressures and have remained above the 2% target for around 15 months. Still, the BoJ is sticking to its loose policy and trying to dampen speculation that it will tighten policy. The BoJ tweaked its yield curve control policy in July but at the time, Ueda insisted that the move was not a step towards normalization of policy. Federal Chair Jerome Powell delivered the keynote speech on Friday, but anyone looking for dramatic headlines walked away disappointed. Powell reiterated that the battle to lower inflation to the 2% target “still has a long way to go”. Powell was somewhat hawkish with regard to interest rates, saying that the Fed would “proceed carefully” with regard to raising rates or putting rates on hold and waiting for additional data. There was no mention of rate cuts, a signal that the Fed isn’t looking to trim rates anytime soon. The future markets responded by raising the odds of a rate hike in September to 21%, up from 14% a week ago. USD/JPY Technical There is resistance at 147.19 and 147.95 145.86 and 145.10 are providing support

Market Insights: Dollar Position Shifts and Central Bank Speeches Drive Currency Trends

InstaForex Analysis 29.08.2023 15:45

The value of the net short dollar position fell by $2 billion to -$14.3 billion over the reporting week, according to CFTC data. Most currencies had minor changes, except for the Japanese yen, which is rapidly being sold off. Furthermore, futures for most commodity currencies, as well as for oil, copper, and gold, went through a bearish correction. This points to growing concerns about a global recession. At the same time, it indicates that the US dollar is currently the market's main favorite, and that it is logical for the dollar to strengthen. Federal Reserve Chairman Jerome Powell's speech in Jackson Hole did not provide any new information. Powell stuck to his stance, reiterating the message that the US central bank is prepared to continue raising the funds rate if necessary, and that this policy will remain restrictive until there's compelling evidence that inflation is approaching the Bank's 2% inflation target. Powell also remarked that the current restrictive policy will put downward pressure on economic activity, hiring and inflation. However, he warned that if the economy continues to grow above trend, it could put further progress on inflation at risk and could warrant further tightening of monetary policy. Overall, Powell's speech essentially reaffirmed that the Fed still relies on data and will act cautiously. This week, the market will focus on the US non-farm employment figures, the US ISM Manufacturing Index, China's PMI, and eurozone inflation for August. EUR/USD European Central Bank President Christine Lagarde also spoke in Jackson Hole. Her speech mainly focused on structural changes affecting monetary policy, but without any hints of changing the current ECB strategy. The eurozone inflation report for August will be released on Thursday, where it is expected that inflation will fall from 5.3% to 5.1%, and core inflation will drop from 5.5% to 5.3%. Since the ECB heavily relies on data, this report might lead to a surge in volatility if the figures significantly deviate from forecasts. The net long position for the euro decreased by 0.3 billion over the reporting week, standing at 21.5 billion. Positioning remains firmly bullish. At the same time, the price is still below the long-term average, and there are almost no signs of an upward reversal. A week earlier, we expected a test of the support level at 1.0830; the euro fell even lower to the channel's lower band at 1.0767. From a technical standpoint, an attempt to build a bullish correction seems likely, with the resistance area being at 1.1010/50. At the same time, we see a downtrend in the long-term period, so the option of a shallow correction followed by an attempt to break down from the correction channel seems plausible, in this case we can expect the euro to move towards the previous local low of 1.0634. GBP/USD GfK's long-running Consumer Confidence Index increased five points to -25 in August. All five measures were up in comparison to last month's announcement. Even though the overall figure remains sharply negative, hopes for an improvement in household finances are returning to the positive territory. The Major Purchase Index is up eight points, which is a good thing, as the advance is potentially better news for retailers. However, it simultaneously indicates that inflation deceleration remains uncertain, as a sharp rise in demand fuels price growth and contradicts the Bank of England's plans to reduce consumer demand. Potentially, the situation favors the growth of the UK economy, but it also supports fears that the BoE will raise rates to a higher level than the market expects. The pound has a chance to revive its growth as soon as the market re-evaluates interest rate forecasts. The net long position for GBP increased by 0.6 billion to 4.7 billion over the reporting week. Speculative positioning is firmly bullish, but the price is also falling. The main reason for such an imbalance is the situation in the debt market, where UST yields have considerably stronger prospects than British bond yields. In the previous review, we assumed that the likelihood of a bullish correction has increased, but the long-term trend remains bearish. As of Monday morning, this forecast remains valid. The moderate decline that started in July increases the chances of a technical correction, but fundamental markers indicate that the pound will depreciate further. If a correction develops, we see a resistance area at 1.2680/90, where sell-offs may resume. The long-term target shifts lower to the support area at 1.2290/2310.

The Japanese Yen Retreats as USD/JPY Gains Momentum

Kenny Fisher 30.08.2023 10:02

The Japanese yen continues to lose ground on Tuesday. In the North American session, USD/JPY is trading at 147.26, up 0.50%. The yen broke above the 147 level for the first time since November 2022. Tokyo says battle with inflation has reached turning point Just a few days after Bank of Japan Governor Kazuo Ueda’s speech at the Jackson Hole summit, the Japanese government released a potentially significant white paper. To say that the two events were contradictory might be a stretch, but they appeared to present a very different stance towards inflation. At Jackson Hole, Ueda stuck to the BoJ’s well-worn script that underlying inflation remains lower than the BoJ’s target of 2%. As a result, the BoJ has insisted it will stick with the current ultra-easy policy until there is evidence that inflation remains sustainably above target. The white paper sounded a different tone, noting that “Japan has seen price and wage rises broaden since the spring of 2022. Such changes suggest the economy is reaching a turning point in its 25-year battle with deflation” and “a window of opportunity may be opening to exit deflation.” Could this be a turning point that leads to a tightening in policy? The government hasn’t acknowledged that deflation is over, despite the fact that core inflation has remained above the 2% target for 16 successive months. Wages are also on the rise after companies significantly bumped up employee wages earlier in the year. The white paper spoke of the need to “eradicate the sticky deflationary mindset besetting households and companies”, but I wonder if the BoJ also suffers from the same mindset, even with inflation remaining above target month after month. Investors should remain on guard for a shift in central bank policy, especially if the yen continues to head towards the key 150 level. USD/JPY Technical There is resistance at 147.19 and 147.95 146.30 and 145.10 are providing support

FX Daily: Low Volatility Persists Amidst US Jobs Data Ripples

ING Economics 31.08.2023 10:30

FX Daily: Low vol environment continues US jobs numbers continue to cause ripples in a becalmed summer FX market. Expect more of the same today as the market focuses on the weekly initial claims ahead of tomorrow's big NFP report. In Europe, the focus will be on the eurozone's August CPI release. Expectations of a further hike from the ECB are firming up and justify EUR/USD trading at 1.09-1.10. USD: Thrashing around in a low vol environment Second-tier US jobs data (JOLTS and ADP) have seen the dollar soften a little this week. However, the data have yet to prove the smoking gun that can mark the end of the Federal Reserve's hawkish stance. Stronger trends will only start to develop should we see a large downside miss on tomorrow's release of the August NFP jobs data or a sharp rise in the unemployment rate. That would undermine the thesis that strong employment consumption can keep the Fed in hawkish mode for a lot longer than most think. For today, the focus will again be on some second and third-tier jobs data in the form of the weekly initial claims read. We will also see personal income, spending, and the core PCE deflator for July. Consensus actually sees the core PCE deflator rising to 4.2% year-on-year from 4.1% – so hardly a reason for markets to add to dollar short positions. In general, cross-asset market volatility remains low and there is not much to argue against the Japanese yen or Chinese renminbi-funded carry trade. As we have noted before, 5.30% overnight rates mean the dollar can hold gains in a carry trade environment. Currencies outperforming remain the EM high-yielders, such as those found in the CEE3 region and also Latam. Here, the Mexican peso continues to hold gains and offer near 12% implied yields. The peso should also be helped by the latest remarks from Banxico that, unlike Brazil and Chile, it is not considering rate cuts anytime soon. Unless we see a sharp spike in the weekly initial claims data today, we suspect DXY does not break too far from a 103.00-103.50 range.

Brent crude oil has reached a fresh ten-month high near $93 while WTI is approaching $90

USD/JPY Drifts into 145-150 Range: Assessing Alarm Signals and Market Dynamics

ING Economics 31.08.2023 10:33

JPY: Where is the alarm? USD/JPY has quietly drifted into the 145-150 intervention zone without triggering many alarm bells in Tokyo. One difference between now and the intervention period last September and October is that FX conditions are much more orderly. For example, one month USD/JPY implied volatility is trading near 9% today versus levels in the 14-15% region during Japanese FX intervention last year. At the same time, there is no sense of a 'sell Japan' mentality emerging, and Japanese authorities may actually tolerate a softer yen given the deflationary forces emerging from China and the weak export markets in Asia and Europe. Unless we see some financial shock that triggers an unwind of the carry trade, it looks as though USD/JPY can hang around this 145/150 region longer than we had originally forecast. A decisive turn lower may have to wait until the late September and October period when more evidence of a US slowdown should have emerged and speculation will be growing over a Bank of Japan policy change at the meeting in late October.

UK Labor Market Shows Signs of Loosening as Unemployment Rises: ONS Report

Market Impact Beyond Apple: US Small Caps, Yen, and ECB Meeting

Ipek Ozkardeskaya 08.09.2023 12:49

Beyond Apple... When a tech giant like Apple, with a market cap of nearly $2.8 trillion sneezes, the whole market catches a cold. The S&P500 fell for the third day to 4451 yesterday, while Nasdaq 100 slipped below its 50-DMA. Apple selloff also affected suppliers and other mega cap stocks. Qualcomm for example fell more than 7%, while Foxconn remained little impacted by the news. Zooming out, the US small caps were also under pressure yesterday, the Russell 2000 fell below its 100-DMA and came close to the 200-DMA, as the latest data showed that the US jobless claims fell to the lowest levels since February, defying the latest softness in jobs data. Other data also showed that the labor unit cost didn't fall as much as expected in Q2. But happily, the US treasuries were not much affected by the latest jobless claims data. The US 2-year yield fell below 5%, although the US dollar index extended its advance toward fresh highs since last March. The selloff in the Japanese yen slowed against the US dollar. The USDJPY pushed below the 147 mark this morning despite a slower than expected GDP print in Japan in the Q2. Capital expenditure fell 1%, private consumption declined 0.6%, making the case for a softer Bank of Japan (BoJ) more plausible. But the Japanese officials dared traders to continue buying the USDJPY to 150, saying that they would intervene. The EURUSD sees more hesitation into the 1.07 mark, and into next week's European Central Bank (ECB) meeting. The base case is a no rate hike, and yesterday's morose growth figures came to cement the no change expectation. But the economic weakness may have little impact on inflation. Any bad surprise in German inflation due this morning could convince some ECB doves that the European policymakers may announce another 25bp hike when they meet next week.

Australian Employment Surges in August Amid Part-Time Gains, While US Retail Sales and PPI Beat Expectations

The Japanese yen edges higher amid BoJ policy comments

ING Economics 08.09.2023 13:45

The Japanese yen is slightly higher on Thursday. In the European session, USD/JPY is trading at 147.39, down 0.19%. The yen can’t seem to find its footing and has dropped close to 1% this week. Earlier today, the yen fell as low as 147.87, closing in on the 148 line which has held since October 2022. Bank of Japan policy makers don’t make public statements or hold interviews nearly as much as Fed members, and I must admit to being pleasantly surprised at seeing that two BoJ officials had made public comments in as many days. I have found the Fed to be considerably more transparent than the BoJ, and the more we hear from BoJ policy makers, the better, especially during a time of expectations of a shift in BoJ policy. On Wednesday, Bank of Japan member Hajime Takata said that the BoJ needed to “patiently maintain” its massive monetary stimulus, noting that the central bank would need a year to determine whether recent wage increases were sustained. The BoJ has insisted that it will not tighten policy until it sees evidence that inflation is sustainable, such as higher wage growth. What was more interesting was that Takata said that Japan’s economy is “finally seeing early signs of achieving the BoJ’s 2% inflation target”. This may not be a ringing endorsement that the target is close, but at least is an acknowledgment of broad inflationary pressures, which the BoJ has tended to downplay despite core CPI exceeding the 2% target for 16 consecutive months. On Thursday, BoJ member Junko Nakagawa had a more dovish message, saying that the central bank needed to maintain its ultra-loose monetary policy and argued that there was an “equal degree of upside and downside risks to the inflation outlook”, which made it difficult to determine when inflation might hit 2% in sustainable manner. The BoJ next meets on September 22nd and the markets will be looking for hints of a shift in policy, which could have major ramifications on the direction of the Japanese yen. USD/JPY Technical USD/JPY is testing support at 147.58. Below, there is support at 146.71 1.4810 and 1.4893 are the next resistance lines

The ECB to Hike, But Euro Rally May Be Short-Lived as Dollar Strength Persists

US CPI Data Indicates Hawkish Stance Remains, Dollar Strengthens

Craig Erlam 14.09.2023 10:11

September still a hold, while swap contracts suggest odds a 49.3% chance of a hike at the November 1st FOMC meeting Supercore inflation rate rises most since March Two-year Treasury drifts lower by 2.1 bps to 4.999% Inflation is not easing enough for the Fed to abandon their hawkish stance. The upside surprises might be small, but that should keep the hawks in control. Core inflation heated up for the first time in six months and that should have markets leaning towards one more Fed rate hike in November. Inflation will likely still be running well above the Fed’s 2% target for the rest of the year, but a weaker consumer supports the case the disinflation process will remain intact. US CPI Source: BLS This was a complicated inflation report. Everyone knew that gas prices were sharply higher and that the housing market is still seeing elevated prices(house prices are now rising, while rents have eased). The headline inflation read showed CPI increased 0.6% in August from a month ago, which was the highest reading since June 2022. The annual inflation reading rose from 3.2% to 3.7%, a tick above expectations. Market reaction A weakening US consumer will continue as they battle surging gasoline prices, stubborn shelter prices, and increasing medical costs. US stocks are wavering as this inflation report will keep the Fed pushing the ‘higher for longer’ narrative. If Wall Street remains convinced that the labor market is cooling, that will do the trick for getting inflation closer to the Fed’s target. The US dollar and Treasury yields were initially higher given the core CPI delivered an upside surprise, but once traders digested the entire report, the bond market reversed course. Core inflation rose 0.3%, which was due to the rounding of 0.278% which somehow makes it a lot less hot. Rent makes up 40% of Core PCE and prices posted the smallest gain since the end of 2021. Expectations are elevated for the consumer to be significantly weaker and that we could have a soft holiday spending season, which should support the disinflation process. Dollar 5-minute Chart The dollar is wavering as Wall Street wasn’t able to come up with any definitive stances on when the Fed will signal the all clear that policy is restrictive enough. The dollar’s strength is most notably against the Japanese yen, while the euro will likely react to Thursday’s ECB rate decision. Following yesterday’s Reuters report that the ECB will have inflation projections above 3%, markets appear to be leaning towards a rate hike.

USD/JPY Eyes Psychological Level of 150.00 Amidst BoJ's Monetary Policy and Fed's Rate Hike Expectations

InstaForex Analysis 27.09.2023 14:12

For the fourth consecutive day, the USD/JPY pair is steadily heading towards the psychological level of 150.00, currently trading above the 149.00 mark. The Japanese yen continues to face pressure due to the Bank of Japan's decision last week to maintain the status quo. At the end of the September meeting, the Japanese central bank left its ultra-loose policy unchanged, refraining from any hints of possible changes in the near future. Additionally, earlier this week, Bank of Japan Governor Kazuo Ueda stated that the current policy has a significant stimulative effect on the economy, and the main position is to patiently maintain monetary easing. He added that Japan's economy is at a critical stage in achieving a positive wage growth cycle and sustainable inflation at 2%, which is not yet visible. Such statements dispel hopes of a future exit from the massive stimulus program and continue to undermine the yen. On the other hand, the Federal Reserve has indicated that interest rates will not be falling in the near future. It openly stated that there will be further rate hikes by the end of the year, with only two rate cuts expected in 2024, instead of the previously speculated four, as anticipated three months ago. Many FOMC members still express uncertainty about the end of the fight against inflation. Consequently, this supports the prospects for further tightening of monetary policy. This, in turn, led to selling in the U.S. bond market and pushed the yield on 10-year Treasury bonds to the highest level since 2007, which became a key factor in the recent rise of the U.S. dollar to a 10-month peak and continues to support the USD/JPY pair's upward trajectory. Nevertheless, the prevailing risk-off environment favors the relative status of JPY as a safe haven and limits the potential for spot price growth. But it should not be forgotten that Japanese authorities will intervene in the currency market to support the national currency. This restrains bulls from pushing USD/JPY to new levels. In fact, Japanese Finance Minister Shunichi Suzuki issued a new warning against the recent weakness of the yen and stated last week that the government would not rule out any options to address excessive volatility in the currency markets. This, in turn, requires caution before taking positions regarding the continuation of the established upward trend observed since mid-July. However, for now, the fundamental backdrop supports the pair's growth. But it is worth paying attention to today's news regarding the dollar before rushing into betting on further moves.

Shift in Central Bank Sentiment: Czech National Bank Hints at a 50bp Rate Cut, Impact on CZK Expected

EU GDP Stalls in Q3 Amid BOJ Yield Curve Control Tweaks

ING Economics 02.11.2023 11:57

EU GDP expected to stall in Q3 , BOJ tweaks YCC By Michael Hewson (Chief Market Analyst at CMC Markets UK) European markets managed to get off to a positive start to the week yesterday, helped in no small part by the limited and incremental nature of the Israeli incursions into Gaza which appears to be helping assuage concerns that the escalations might prompt another front opening on Israel's northern border with Lebanon and Hezbollah. US markets also got off to a strong start with the Dow posting its biggest one-day gain since July, while the Nasdaq 100 and S&P500 both rose by more than 1%, while oil prices closed at their lowest level in over 2 weeks. While yesterday's rebound was welcome it isn't likely to change the fact that US stocks look set to close their 3rd successive monthly decline. Yesterday the Japanese yen pushed higher on a report from Nikkei that the Bank of Japan was set to move the bands when it comes to its yield curve control policy. This morning we found out how true that story was when the Bank of Japan, while keeping rates unchanged, did just that, pushing the upper boundary to 1% which was less hawkish than markets had been expecting, given they had already been targeting that level when it came to their bond buying operations. In moving the band, they have merely removed the discrepancy between the YCC rate and their bond buying levels, disappointing the markets who had been expecting something a little more radical, like pushing the band beyond 1%. In not being more hawkish the Japanese yen tumbled and slid back through the 150.00 level. At the same time, the BoJ raised their inflation forecasts for 2023 to 2.8, and for 2024 to 2.8%. Despite yesterday's strong US session markets here in Europe look set to open slightly lower as we head into the final trading day of October and look ahead to tomorrow's Federal Reserve rate meeting as well as a tsunami of US economic data this week, we'll also be getting an insight into how the economy in Europe has fared over the last 3 months. Yesterday we found out that theGerman economy contracted by -0.1% in Q3, while also slipping into disinflation in October, raising the question as to how far behind the rest of Europe might be in that regard. The French economy is expected to have slowed from 0.5% in Q2 to 0.1% in Q3, with a similar slowdown expected to be seen in the Italian economy, which is also expected to have slowed to 0.1%. On the wider EU measure the economy is expected to have slowed to 0% in Q3 from 0.1%, meaning that over the last 4 quarters we've seen little to no growth at all. Inflation is also expected to have slowed sharply with French CPI for October expected to have slowed to 4.5% from 5.7% on an annualised basis. EU flash CPI is expected to have similarly slowed from 4.3% to 3.1%, with core prices forecast to remain a little stickier at 4.2%, down from 4.5%. Given the weakness seen in these figures there is rising concern that the ECB may have erred when it raised rates by another 25bps in September. They certainly ought to offer some pause for thought to the German hawks on the governing council who probably still feel that more needs to be done, when it comes to further rate hikes. In the US we have the latest Chicago PMI as well as October consumer confidence, neither of which are expected to show much in the way of resilience. Consumer confidence is expected to slow to 100.5 from 103, while Chicago PMI is forecast to edge higher to 45, from 44.1. EUR/USD – continues to rally off the 1.0520 lows of last week, with the next support at the recent lows at 1.0450. Resistance at the 1.0700 area and 50-day SMA. GBP/USD – continues to rally off the lows of last week at the 1.2070 area last week. Major support remains at the October lows just above 1.2030. Below 1.2000 targets the 1.1800 area. Resistance at 1.2300. EUR/GBP – retested the 0.8740 area yesterday, before slipping back. We need to see a break above 0.8750 to target the 0.8800 area. A move below 0.8680 and the 200-day SMA targets the 0.8620 area. USD/JPY – retreated from the 150.78 area at the end of last week, slipping back to the 148.75 area and the lows from 2-weeks ago. Below 148.70 targets the 147.30 area. Still on course for a potential move towards 152.20, while above the 148.75 area. FTSE100 is expected to open 10 points lower at 7,317 DAX is expected to open 20 points lower at 14,696 CAC40 is expected to open 5 points lower at 6,820

Continued Growth: Optimistic Outlook for the Polish Economy in 2024

Fed Continues Rate Hikes Amid Strong Growth, Inflation Concerns

ING Economics 02.11.2023 12:26

Don't expect the Fed to stop amid strong growth, higher inflation. By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank The US dollar was bid on Tuesday thanks to a rapid selloff in the Japanese yen, after the Bank of Japan (BoJ) announced mini policy loosening steps that didn't find buyers. Loosening the upper limit on the 10-year JGB yield in the context of a YCC policy is not enough when considering that the BoJ should drop it altogether and for good. But on the contrary, not only that the BoJ is not giving up on its YCC policy, but is on track to match its record annual bond purchases. Almost all the Japanese 10-year bonds are held by the BoJ – which in my opinion will become illegal one day - and the BoJ hasn't yet moved an inch towards normalization of its rate policy whereas the major central bank rate hikes start plateauing after more than a 1.5 year of aggressive rate hikes. So, no wonder the yen got smashed yesterday. The USDJPY spiked past 151, even though the uptick in the US - Japan 10-year yield spread – which also ticked up because of a jump in the Japanese 10-year yield, didn't attract the yen longs. The only thing that holds traders back from more aggressive selling is the fear of a direct FX intervention. If that happens, there is a good reason to buy a dip. Zooming out of Japan, the US dollar index consolidated a touch below last month peak. The US consumer confidence index dropped to a 5-month low, but the latest wages data continued to give signs of strength. Yes strength – I am sorry. The employment cost index, a top-notch gauge of what employers spend on compensation, rose 1.1% in Q3 – slightly higher than a quarter earlier. Wages and salaries rose 4.6% - above the US headline CPI, and well above 3% as before the pandemic. And that was before the UAW reached a jaw-dropping deal with Detroit's 3 carmakers where they nailed a 25% increase in wages and around 150% increase in compensations for the low-paid tier of temporary workers. The ADP data is expected reveal around 150K new private job additions in October, and JOLTS data is expected to show a drop in job openings. On Friday, we will have a look at the official figures. The latter won't impact the Federal Reserve (Fed) expectations for this week's policy decision. But any further strength in US jobs data will reinforce a potentially hawkish stance from the Fed policymakers this week. The Fed. We know that the Fed is not done hiking the interest rates. We know that Jerome Powell won't call the end of the policy tightening after seeing a blowout growth data – which showed that the US GDP grew almost 5% in Q3 (that's more than China!), and inflation ticked higher because Americans kept spending. Duh! And if people kept spending their savings it was because they didn't necessarily feel threatened to lose their jobs, or remain jobless for long. So yes, the jobs market strength is playing tricks on the Fed, and it's clearly not loose enough. The chances are that we won't hear anything soothingly dovish. 'The higher yields help us do the job' is the best it will get. You know where growth is not strong? China is not doing brilliant and this week's economic data in China showed that the Chinese factory sector slipped back into contraction and the Eurozone economies announced gloomy GDP updates, as well. The German economy contracted in Q3, the French and Italian economies stagnated, the overall Eurozone growth fell 0.1% on a quarterly basis. But at least, inflation slowed. As a result of soft growth and inflation data, the EURUSD couldn't extend gains above the 50-DMA and sank below the 1.06 level yesterday. The positive trend is losing momentum, the divergence between the strength of the US economy versus its European counterparts, and the divergence between the Fed and the European Central Bank (ECB) outlooks play in favour of a deeper depreciation in the euro against the greenback. Crude approaching $80pb crossroads US crude slipped below its 100-DMA yesterday as buyers became rare on news that Israel's ground offensive is not as violent as expected. A 1.3mio barrel build in US crude inventories may have helped the bears to push the selloff below the $82pb level. Yet, oil bears will certainly hit a decent support near the $80p level because at this level, they know that Saudi has their back. And the risks of geopolitical nature remain clearly tilted to the upside. For those who bet that we will see a dip near the $80pb level, it is soon time to roll up the sleeves. Worst since the pandemic, and yet... The S&P500 rose on the last day of October but recorded its longest monthly slide since the pandemic. Still, the index kicks off the new month a touch above the major 38.2% retracement which should distinguish between the continuation of last year's rally, and a slide into the medium-term bearish consolidation zone. The next direction will depend on whether the US yields will consolidate and eventually come lower, or they will continue their journey higher. In the second scenario, we will likely see major US stock indices sink into a bearish trend.

Federal Reserve's Stance: Holding Rates Steady Amidst Market Expectations, with a Cautionary Tone on Overly Aggressive Rate Cut Pricings

USD ESG Bond Market: Navigating Challenges and Opportunities in 2024

ING Economics 16.11.2023 11:37

USD ESG bond market to see weaker growth momentum in the wait for policy clarity The year ahead will be an interesting one for the USD ESG bond market, especially in the US. Given uncertain economic conditions and higher-for-longer interest rates keeping borrowing costs high, we expect to see continued caution from issuers. The ongoing anti-ESG movement adds additional complexity. The upcoming presidential election in 2024 could also lead issuers who have been keen for more policy clarity to take a ‘wait and see’ approach until there is higher medium-term ESG policy certainty. Despite these headwinds in the USD ESG bond market, there are also several encouraging factors, such as more clean funding announced and more tax credits guidelines released under the Inflation Reduction Act (IRA). The markets should see US$240 billion (€225bn equivalent) of green, social, sustainable and sustainability-linked bonds in the US dollar in 2024. Given the complexities of the domestic market, we forecast that USD ESG bond market supply in the US in 2024 will be around US$100 billion, lower than our estimated 2023 level of US$103 billion and the 2022 level of US$110 billion. We expect the majority of USD-denominated ESG bonds to continue to be issued outside of the US and total $140 billion in 2024, higher than the 2023 level of US$137 billion and the 2022 level of US$131 billion. This leads to an estimated US$240 billion globally in USD-denominated ESG bond issuance, at the same level as 2023 and 2022. Much of the growth in USD ESG bond supply will be driven by governments. In 2024, we expect USD ESG bonds from governments and US municipals to reach US$125 billion, slightly higher than our 2023 estimate of US$121 billion. Corporates, however, will likely see a decline in issuance volumes to US$49 billion in 2024, down from US$52 billion in 2023 and US$79 billion in 2022. The weaker momentum will likely be observed in both investment grade and high-yield USD ESG bonds. The decline could be higher among corporates within the US jurisdiction than elsewhere. In 2023, the energy sector has been the only sector that has seen USD ESG bond issuance growth compared to last year (albeit at a relatively low absolute volume), partly because the IRA is incentivising more producers from the sector to finance energy transition activities. Nevertheless, in 2024, the potential risks from economic conditions, climate disclosure rule delays, and election uncertainties could soften companies’ determination to issue ESG bonds. ESG bonds issued in other currencies to slightly expand ESG bonds issued by governments, agencies, banks and corporates in the pound sterling, Japanese yen, Chinese renminbi, Canadian dollar, Swedish krona and other currencies showed robust growth between 2020 and 2022 from €30 billion equivalent to €220 billion. The segment should add another €260bn this year, according to our expectations. China has been one of the leaders in previous years but has lagged behind in 2023 so far. Including China, we forecast the “other currencies” segment to print €270 billion in 2024, showing smaller growth than in earlier years.

Geopolitical Tensions Propel Oil Rally: Market Insights by Ipek Ozkardeskaya

Japanese Core Inflation Edges Up to 2.9%, Adding Pressure on BoJ; US PMIs Awaited for Economic Insights

Kenny Fisher 27.11.2023 15:42

Japanese core inflation rises US PMIs expected to show little change The Japanese yen is unchanged on Friday, trading at 149.57. Japan’s core inflation rises to 2.9% Japan’s core CPI rose slightly in October to 2.9% y/y, up from 2.8% in September and just below the consensus estimate of 3.0%. The core CPI print excludes fresh food but includes energy. Core CPI has now exceeded the Bank of Japan’s 2% target for 19 consecutive months. Headline inflation jumped to 3.3% y/y, up from 3.0% in September and above the market consensus of 3.2%. The acceleration in inflation will put further pressure on the BoJ to tighten its ultra-loose policy. There is growing speculation that the BoJ could raise interest rates from -0.1% to zero early in 2024. The BoJ is known to be very tight-lipped and there’s little chance of any communication with the markets with regard to a shift in policy. What is clear is that any move away from the current policy could cause market turmoil and hurt Japan’s fragile economy. Still, with inflation remaining stubbornly high, a shift in monetary policy is likely only a question of time. The Bank of Japan meets next on December 19th. Once dull affairs that barely made the radar of investors, the meetings are now closely watched on expectations that the BoJ could change policy, which would be a sea-change after years of ultra-loose policy. The US wraps up the week with the release of manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November stand at 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). The manufacturing sector has been particularly weak, with the PMI indicating declines over most of the past year. If either PMI misses expectations, the US dollar could show stronger movement. . USD/JPY Technical 149.29 and 148.54 are providing support There is resistance at 150.22 and 151.25

FX Daily: Yen Bulls on Alert as Focus Shifts to US Payrolls and BoJ Speculation

"Rising Stars: Dutch Maintenance Contractors Emerge as M&A Favorites for Private Equity Firms

ING Economics 12.12.2023 13:59

Elsewhere... The nice jump in the Japanese yen pulled the dollar index lower yesterday. Of course, the EURJPY, GBPJPY and AUDJPY all made a similar move. The US bonds, on the other hand, were little changed yesterday – for once – as traders sat on their hands ahead of this week's much-awaited US jobs data, while technology stocks were on fire yesterday. Alphabet jumped more than 5% after Google released Gemini – the largest and most capable AI model it has ever built, and AMD jumped nearly 10% after the company unveiled a chip that will run AI software faster than rival products. But rival Nvidia was little hit by the news, as its chips gained 2.40% yesterday. The AI demand is big enough for everyone to benefit amply from it. Today, all eyes are on the US jobs data. According to a consensus of analyst estimates on Bloomberg, the US economy may have added 180'000 new nonfarm jobs in November, the pay may have risen slightly faster on a monthly basis, and the unemployment rate is seen steady at 3.9%. The fact that the data released earlier this week hinted at a clear loosening in the US jobs market makes many investors think that today's official data will also follow the loosening trend. If the data is soft enough, the rally in the US bonds could continue and the US 10-year yields could have a taste of the 4% psychological mark, while a stronger-than-expected figure could help scale back the dovish Federal Reserve (Fed) expectations but could hardly bring the hawks back to the market before next week's FOMC decision.

The EIA Reports Tight Crude Oil Market: Prices Firm on Positive Inventory Data and Middle East Tensions

Yen Rebounds After Two-Day Slide as US Inflation Expected to Drop to 3.0%

Kenny Fisher 12.12.2023 14:57

Yen rebounds after two-day slide US inflation expected to drop to 3.0% The Japanese yen has ended a two-day slide, in which it dropped 1.4% against the US dollar. In Tuesday’s European session, USD/JPY is trading at 145.21, down 0.66%. Yen volatility continues The yen has been showing sharp swings since last Thursday, when signals from the Bank of Japan of a possible tightening in policy sent the yen soaring over 2% on Thursday. The yen then reversed directions and gave up much of those gains but has bounced back on Tuesday. The BoJ meets on December 18-19 in what has become a hotly anticipated event due to recent comments from Governor Kazuo Ueda and BoJ Deputy Governor Ryozo Himino. Ueda spoke of “an even more challenging situation” coming up for the BoJ and Himino mused about the consequences if rates were to rise into positive territory. On Monday, a report that Ueda was not referring to possible changes in rate policy sent the yen sharply lower. The takeaway is that the yen is very sensitive to talk about rate tightening and public comments from BoJ policy makers about rate policy ahead of the December meeting could have a strong impact on the yen’s movement. US inflation expected to decline to 3.0% The US releases November CPI later today, with a consensus estimate of 3.0% y/y, down from 3.2% in October. Monthly, CPI is expected to remain flat, unchanged from October. Core CPI, which has been running higher than the headline rate, is projected to remain unchanged at 4.0% y/y. Monthly, the core rate is expected to inch higher to 0.3%, up from 0.2% in October. It’s a virtual certainty that the Fed will hold rates at a range of 5%-5.25% on Wednesday, but today’s inflation release could be a key factor as to what the Fed does in the upcoming months. There is a major disconnect between the markets, which have priced in four rate cuts in 2024, and the Fed, which is insisting that the door remains open to further hikes. A strong inflation report could temper market expectations for rate hikes next year, while a soft inflation release will provide support for the market stance and could force the Fed to reconsider its hawkish position. . USD/JPY Technical USD/JPY is putting pressure on support at 145.12. Below, there is support at 144.68 There is resistance at 145.85 and 146.89

Unraveling the Dollar Rally: Assessing the Factors Behind the Surprising Rebound and Market Dynamics

Market Analysis: Fed's Dovish Pivot, European Economic Challenges, and Expectations for the Week Ahead

Michael Hewson 18.12.2023 13:44

Weak start for Europe ahead of German IFO - By Michael Hewson (Chief Market Analyst at CMC Markets UK) After an unexpectedly dovish pivot from Fed chairman Jay Powell on Wednesday, European and US markets ended another positive week very much on a mixed note after New York Fed President John Williams pushed back on market expectations of a rate cut as early as March, saying it was premature to be even considering anything of that sort. Williams was followed in his comments by Atlanta Fed President Raphael Bostic who delivered a similar line of thought, saying he expected rate cuts to begin in Q3 of 2024 if inflation falls as expected. With the Fed dots indicating that US policymakers saw rates back at 4.6% this appears to be more in line with the message the Fed had hoped to deliver on Wednesday, however markets decided to take Powell's press conference comments and run with them, getting out in front of their skis in doing so. Given where the US economy is now it's surprising that the Fed are said to be to start to be thinking in terms of cutting rates simply because with the economy currently where it is, there is currently no need. With GDP at 5.2% in Q3, unemployment at 3.9%, and weekly jobless claims at just over 200k the risk of inflation reigniting is clearly still a concern for some policymakers. That certainly doesn't appear to be the case in Europe where economic activity is stagnating at best and even now the ECB comes across as being reluctant to counter a rate cut, even though a reduction in borrowing costs is clearly needed, given that headline inflation is back within touching distance of its 2% target. The same could be argued for the UK except wage growth is still trending well above 7%, while headline CPI is at 4.6%, though this could come down further in numbers due to be released on Wednesday. As we look towards the final week before the Christmas break, trading activity is likely to be somewhat thin and choppy, and while we have seen record highs for the Dow, DAX and CAC 40 in the last week or so, we still remain some distance away from the 2021 record peaks of the Nasdaq 100 and S&P500. As for the FTSE100 we're looking at yet another year of underperformance, after the record highs of mid-February, with the UK benchmark up by just over 1% year to date, with the FTSE250 not faring that much better. Due to the relatively subdued nature of Friday's US finish, today's European market open looks set to be a slightly weaker one with the only data of note the latest German IFO Business survey for December. Given the weak nature of last week's PMI numbers it would be surprising to see a significant improvement on the November numbers when the current assessment improved slightly to 89.4. The US dollar was one of the big losers last week driven lower by expectations that US rates have peaked and are on their way back down, with the Japanese yen one of the biggest gainers. This shift in sentiment will no doubt be welcomed by the Bank of Japan and to some extent helps them out with respect to the weakness of the yen ahead of tomorrow's rate decision. There is now less incentive for them to think about altering their current policy settings, although they might hint at starting to execute some form of shift early next year. EUR/USD – the rebound to 1.1010 last week didn't last long, unable to push through the November peaks at 1.1015/20. We still have support now back at the 200-day SMA at 1.0830. A break above 1.1030 has the potential to target the July peaks at 1.1275. GBP/USD – broke briefly above the 1.2730 area, and the 61.8% retracement of the 1.3140/1.2035 down move, pushing up to 1.2795 before reversing. The bias remains for further gains while above the 200-day SMA at 1.2520. We also have support at the 1.2590 area. EUR/GBP – slipped back from the 100-day SMA at 0.8640 last week, with support at the 0.8570/80 area. A move below 0.8580 targets 0.8520. USD/JPY – slipped below the 200-day SMA at 142.50 last week, opening the prospect of a move towards 140.00. We now have resistance at 146.00 and while below that we could push towards 139.20. FTSE100 is expected to open 7 points lower at 7,569 DAX is expected to open 15 points lower at 16,736 CAC40 is expected to open 3 points lower at 7,594

BoJ Set for Rate Announcement Amidst Policy Speculation, USD/JPY Tests Key Resistance

Kenny Fisher 18.12.2023 14:09

BoJ to make rate announcement on Tuesday Fed’s Williams says no rate cuts planned The Japanese yen is lower at the start of the week. In the European session, USD/JPY is trading at 142.77, up 0.44%. The yen continues to power higher and surged 1.9% last week. It marked a fifth straight winning week for the yen, which has climbed 6.2% during that time. The yen strengthened to 140.95 on Friday, its highest level since July 31. Will BoJ make a move? Bank of Japan policy meetings have become must-see events, with investors on edge over speculation that the central bank is planning to tighten policy. Tuesday’s meeting will be closely watched, especially after hints from senior BoJ officials that it could phase out negative rates, which would be a sea-change in policy that would likely boost the yen. The BoJ might not announce any changes at the meeting, but I doubt that will quell speculation that a policy change is coming. The BoJ tends to hold its cards close to its chest, maximizing the surprise effect of any policy moves. The BoJ has been an outlier among central banks in sticking to an ultra-loose policy while its peers were busy raising rates, and the BoJ is expected to tighten policy next year while other major central banks are looking to cut rates. The BoJ has long insisted that inflation is not sustainable, but that position has become difficult to defend, as inflation has remained above the 2% target month after month. New York Fed President John Williams said on Friday that the Fed was not discussing rate cuts and that the Fed could tighten policy if inflation stalled or reversed directions. The markets don’t seem to be listening, however, and have priced in six rate cuts next year, starting as soon as March. At last week’s meeting, Fed Chair Jerome Powell finally jumped on the rate-cut bandwagon and said that the Fed would cut rates three times in 2024. . USD/JPY Technical USD/JPY is testing resistance at 142.61. Above, there is resistance at 143.06 There is support at 142.02 and 141.57

Poland on the Global Investment Map: Analyzing EBRD’s Record €1.3 Billion Investment

USD/JPY Gains as US Dollar Recovers Against Yen, Eyes on Chicago PMI

Kenny Fisher 02.01.2024 13:17

The Japanese yen is slightly lower on Friday. In the European session, USD/JPY is trading at 141.75, up 0.27%. The US dollar has taken a tumble in recent weeks against most of the major currencies, including the yen. Since mid-November, the yen has jumped 6.4% against the ailing US dollar. This has relieved pressure on Tokyo to intervene in the currency markets, which was a serious concern just six weeks ago when the exchange rate was above 151. The Bank of Japan didn’t adjust its policy settings at the December meeting, although speculation was high that the BoJ might make a shift after Governor Ueda hinted at a change in policy before the meeting. The BoJ could make a move in January or perhaps in April, after the annual wage negotiations in March. The markets are expecting the Fed to hit the rate cut button early and often next year. The markets have priced in a rate cut by March at 86% and anticipate 150 basis points in cuts next year. The Fed is more cautious, and Fed members have urged the markets to lower these expectations. Chicago PMI expected to decelerate The US releases Chicago PMI, an important business barometer, later today. The PMI was unexpectedly strong in November with a reading of 55.8, which marked the first expansion after fourteen straight months of contraction. The 50 line separates expansion from contraction. The upward spike may have been a one-time occurrence due to the end of the United Auto Workers strike as activity rose in the auto manufacturing industry. The consensus estimate for December stands at 51.0, which would point to weak expansion. . USD/JPY Technical USD/JPY tested support at 141.16 before reversing directions. The next support level is 140.50 There is resistance at 142.08 and 142.74

2023 Key Highlights & Cross-Assets Performances: A Comprehensive Review and Outlook for 2024

Kenny Fisher 02.01.2024 13:18

2023 key highlights & cross-assets performances in the past 2 years Fig 1: Cross assets performances as of 29 Dec 2023 (Source: TradingView, click to enlarge chart) The US Federal Reserve’s stance of keeping interest rates higher for a longer period in the first half of 2023 triggered a resilient US dollar environment in the absence of a recession scenario in the US that led the US stock market to outperform the rest of the world. The outperformance of the US stock market in 2023 was led by the Magnificent 7 (Apple, Amazon, Microsoft, Alphabet/Google, Nvidia, Meta, Tesla) mega-cap technology stocks that have stronger balance sheets and are skewed toward “AI productivity” theme play. Also, these 7 stocks have a significant combined market-cap weightage in the Nasdaq 100 that recorded an annual gain of 54% in 2023 (2.3 times S&P 500’s 2023 returns). US regional banking crisis that led to the collapse of Silicon Valley Bank & First Republic Bank due to poor balance sheet risk management reinforced by outsized mark-to-market losses on longer-term US Treasuries (higher US Treasury yields via Fed’s tightening monetary policy). It also indirectly led to the demise of Credit Suisse which eventually was brought over by rival UBS. The US regional banking crisis was just a blip, negated by a liquidity backstop orchestrated by the US Treasury; the Bank Term Funding Program (BTFP). The risk-off behaviour in Q3 reversed abruptly in Q4 to a raging risk-on FOMO behaviour triggered by a significant easing liquidity condition in the US; the rapid drawdown of the Fed’s overnight reverse repo facility from a peak of US$2.55 trillion in December 2022 to US$683.25 billion (-74%) for the week of 11 Dec 2023 as money market funds that choose to invest their surplus cash in short-term US Treasury bills instead (rather than parking in overnight reverse repos facility) which in turn helped to fund the US Treasury general account (also US Treasury’s issuance switch from longer-term Treasuries to T-bills for funding needs). A rise in the expectations of a Fed’s dovish pivot where the first Fed funds rate cut is priced in to come as early in March 2024 indicated by the CME FedWatch tool that led to a slide of 120 basis points (bps) in the US 10-year Treasury yield from a 16-year high of 5% printed on 23 October 2023, synchronized with a weakening US dollar that kickstarted a rally in almost all asset classes (equities, bonds, gold, cryptocurrencies) except oil & China-related risk assets. China’s post-Covid re-opening bullish theme play on China and Hong Kong stock markets fizzled out after Q1 due to a heightened deflationary risk spiral caused by a persistent weak property market in China. The Hang Seng Index ended 2023 with a fourth consecutive annual loss of -14% (prior years’ losses of -15% in 2022, -14% in 2021 & -3% in 2020); its worst performance streak since 2000. Due to China’s structural weakness (deflationary risk spiral), China, and Hong Kong stock markets failed to respond to the cyclical upswing in risk assets during Q4 2023 reinforced by renewed US dollar weakness. The CSI 300 and Hang Seng Index recorded losses of -7% and -4.3% respectively in Q4 whereas the MSCI Emerging Markets Ex China exchange-traded fund gained by +12.5% over the same period, slightly outperformed the US S&P 500’s Q4 return of +11.24% The Japanese yen (JPY) plummeted to a 33-year low against the US dollar in Q3 2023 due to the Bank of Japan (BoJ)’s newly appointed Governor Ueda’s reluctance to offer firm guidance to normalize its short-term negative interest rate policy despite Japan’s core inflation rate had exceeded BoJ’s 2% target for the 20th consecutive month. Emerging themes for 2024 A potentially weaker US dollar due to the shrinkage of the US Treasury yield spread premium against the rest of the world, and a potential major JPY strength revival triggered by internal economic factors (service prices in Tokyo rose at their fastest pace since 1994 to a record gain of 3% y/y in November 2023, indicating an increase in the odds of sustainable wage-driven inflationary growth), political and business groups’ mounting pressures against a weaker JPY. The rest of the world equities may outperform the US stock market due to a weaker US dollar environment. Keep a lookout on China for potentially more “generous” fiscal and monetary policy stimulus measures that may stoke positive animal spirits in the short to medium term for China and Hong Kong stock markets. The stepped-up dovish expectations on the upcoming Fed’s interest rate cut cycle compiled with rosy earnings forecasts by analysts polled by FactSet that are projecting an earnings growth of +11.5% y/y for the US S&P 500 in CY 2024, a significant improvement from an expected CY 2023 earnings growth of just 0.6% which in turn have indicated another year of goldilocks scenario for the US economy. In contrast, the hastened speed of 6 interest rate cuts by the Fed in 2024 projected by market participants in the interest rates futures market also implied a probable US recession-liked scenario in 2024. In addition, the latest November 2023 data of the Conference Board US Leading Economic Index (LEI) has continued to flash a recession signal reinforced by weakness in the housing and labour market. If a recession hits the US economy in the second half of 2024, earnings downgrades are likely to materialize and the initial projected S&P 500 CY 2024 earnings growth rate of +11.5% is likely to be tapered to the downside which in turn may trigger a risk-off scenario that can overshadow the initial positive feedback loop from easing liquidity conditions. Potential heightened geopolitical tension between the US and China that may also spark a risk-off scenario in the latter part of 2024; the recently concluded China’s annual economic work plan conference attended by the top leadership stated that 2024 top priority will be on building a modern industrial system with a focus on developing cutting-edge technologies and artificial intelligence. Making high-tech industrialization a key priority in 2024 is likely to invite more scrutinization from neo-conservative US politicians that may put a strain on the current US-China relationship in the run-up to the November 2024 US presidential election. There is likely to be intense debate among the presidential candidates and finger-pointing again at China’s current industrialization policy that needs to be “neutralized” due to its potential national security threat to the US. Chart Of The Year – a potential major top in USD/JPY Fig 2: USD/JPY major trend as of 2 Jan 2024 (Source: TradingView, click to enlarge chart) The price actions of USD/JPY have declined by 8% to hit an intraday low of 140.25 in December 2023 after a bearish reaction from its 151.95 long-term pivotal resistance printed in mid-November 2023. The USD/JPY has traced out a potential impending major bearish reversal “Double Top” configuration considering the developments of its price actions from October 2022 to November 2023. In addition, the weekly MACD trend indicator has flashed out a bearish divergence condition over the same period (October 2022 to November 2023) which indicates the major uptrend phase from the March 2020 low of 101.18 has started to lose upside momentum which in turn increases the odds of a multi-month corrective decline to unfold next. A breakdown with a weekly close below 137.65 support exposes the next major support zone of 130.70/127.10 (also the neckline of the “Double Top” & 50% Fibonacci retracement of the prior major uptrend phase from March 2020 low to November 2023 high). On the other hand, a clearance above 151.95 invalidates the bearish scenario to see the next major resistance coming in at 159.30 in the first step.

Political Developments Shape CEE Market Landscape: Hungary's Surprising Hawkish Turn, Poland's Government Tensions, and EU Summit Accor

Navigating Dollar Trends in 2024: Short-Term Challenges and Long-Term Prospects

ING Economics 16.01.2024 12:44

The consensus view in 2024 is that the dollar will decline. We agree but suspect that a back up in short-term rates and seasonal patterns could frustrate dollar bears through the first quarter. The second quarter should see a re-acceleration of the dollar bear trend as the Fed prepares to pull the trigger on its first rate cut. As outlined in our 2024 FX Outlook, we expect a broader dollar trend to become more apparent through the second quarter as lower US rates unleash portfolio flows more broadly to the Rest of the World. Of course, geopolitical risks remain. It is not in our baseline view, but a major escalation in the Middle East and another energy supply shock would see the dollar outperform at the expense of Europe and Asia. To the forecasts. We retain a 1.15 end year forecast for EUR/USD but see range trading in the near term. While a re-assessment of the aggressively priced European Central Bank easing cycle could in theory be positive for the euro, a deteriorating investment environment could well curtail any sizable near-term gains in EUR/USD and other risk-sensitive currencies. The Japanese yen could well be an outperformer if, as our team thinks, the Bank of Japan does significantly shift policy in April. And sterling could prove something of a dark horse. We are currently mildly bearish sterling on the view that the Bank of England cuts rates 100bp. However, looser UK fiscal policy could keep sterling better supported. Across the EM space, easing cycles continue in parts of EMEA and Latam. Patience is again advised for the rally in CEE currencies. And China will continue to hold Asia FX back.

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Yen Slips as Economic Data Disappoints, SNB's Dovish Stance Challenges Franc's Gains

Enrique Díaz-Álvarez 16.01.2024 14:48

A disappointing set of domestic economic data sent the yen lower against the dollar once again last week, with the Japanese currency opening trading this week around the 145 level. Expectations for the first Bank of Japan interest rate hike have continued to be pushed further into the future amid signs of an easing in wage pressure and a drop in inflation. Last week’s earnings data for November was a massive miss, with wages growing by only 0.2% year-on-year, the lowest rate since December 2021 and well below the +1.5% consensus. Bank of Japan officials have placed heavy emphasis on earnings data in recent communications. The upcoming annual ‘Shuntō’ salary negotiations, which conclude in March, will be key in determining the timing of the first hike. As things stand, a strong wage negotiation will likely be needed to convince investors that tightening will commence soon, with swaps now assigning only around a one-in-three chance of a first move in April. National inflation data will be the focus this week, with the December data due on Thursday. CHF We recently said that it might be difficult for the franc to hold onto its gains and, indeed, the currency sold off last week and was among the worst performers among the G10 currencies. We continue to view the franc as expensive, and believe that more weakness could be in store in the coming quarters, particularly should the Swiss National Bank begin to shift its attention towards supporting the country’s growth outlook. We don’t view the recent uptick in inflation as something that could potentially prevent the SNB from delivering a dovish pivot, particularly as both measures of inflation remain firmly within target. The focus this week should be on external news, although Thursday's speech by SNB President Jordan in Davos will also be worth following.

All Eyes on US Inflation: Impact on Rate Expectations and Market Sentiment

CEE Region's Borrowing Outlook: Lower Needs, Broader Sources, and FX Market Dynamics

ING Economics 25.01.2024 16:36

Borrowing needs will fall this year, meaning a lower supply of LCY bonds, but there is still a long way to go given the slow fiscal consolidation. Central and Eastern Europe should remain more active in the FX market than pre-Covid, while a busy January and the broadening of funding sources offer flexibility for the rest of the year Borrowing needs this year will be down on last year in the whole CEE region, with the exception of Poland. The decline is due to both lower budget deficits and redemptions. In contrast, in Poland, both have increased year-on-year. Overall, the supply of local currency bonds should fall but remain well above pre-Covid levels. Given lower yields, this supply may prove more difficult to place in the market compared to last year, which saw strong market demand despite record supply. This time is different, and we expect financial markets to be tougher and punish more budget overruns and additional issuance. Local currency issuance: Improvement but still a long way to go From a positioning perspective, we find the Romanian government bond (ROMGBs) market to be overcrowded after the significant inflows last year. On the other hand, the significantly underweight Polish government bond (POLGBs) market should help cover the historically record borrowing needs. Czech government bonds (CZGBs) and Hungarian government bonds (HGBs) remain somewhere in between with steady foreign inflows into the market. On the sovereign ratings side, all the obvious changes happened last year and should stabilise this year with only some adjustments in outlooks in the pipeline, unless a more significant shock arrives. On the local currency supply side, we see a clear improvement from last year in the Czech Republic, as it was a bright spot in the CEE region with credible public finance consolidation. In addition, we see it as the only country in the region with positive risks of a lower supply of CZGBs than the Ministry of Finance indicates. Hungary has also made great progress here, of course, with the traditional broad diversification of funding sources that should keep the pressure off the HGB market in the event of an overshoot of the projected deficit. In contrast, we see only a relatively small improvement in Romania, where the supply of ROMGBs will fall only a little. The supply of Polish government bonds, meanwhile, was already at a record-high last year and is set to rise a little more this year. In addition, the use of additional sources to avoid flooding the local currency bond market will increase significantly, which we believe represents the biggest challenge for the bond market in the CEE region this year. FX issuance: Fast start and diverse funding sources offer flexibility On the FX side, CEE sovereigns are set to remain active in the Eurobond primary market in 2024 and beyond, with the overall trend driven by recent external shocks from Covid and surging energy prices, along with structural factors such as the energy transition in Europe. A key theme that unites regular issuers Romania, Poland, and Hungary is the diversification of funding sources, with more consistent interest in the US dollar, as well as alternative currencies such as the Japanese yen and Chinese yuan, alongside the more traditional euro for the region. The growing green bond market is also an area of focus, with Hungary leading the way, and Romania set to follow this year. At the same time, 2024 should see some divergence, with Poland taking the lead in the region for Eurobond issuance and set to be one of the largest EM sovereign issuers globally this year. Hungary should see a slight reduction in Eurobond supply compared to recent years, with its strategy of diversifying funding sources and front-loading supply providing plenty of flexibility for the rest of the year. Romania should retain its position as a regular issuer, although net supply will be lower this year, while catching up with Poland and Hungary in terms of diverse funding sources via green issuance and alternative currencies. A strong start to the year, with almost $15bn in issuance for CEE in January so far, should mean less pressure on the region to issue later in the year if market conditions turn.

Japanese Yen Drifts as Tokyo Core CPI Falls to 1.6%

Kenny Fisher 26.01.2024 14:41

The Japanese yen is drifting on Friday. In the European session, USD/JPY is trading at 147.80, up 0.10%. Tokyo Core CPI falls to 1.6% Tokyo Core CPI reached a significant milestone today, falling to 1.6% y/y in January, after a December reading of 2.1%. This was the first time the indicator dropped below the Bank of Japan’s 2% target since May 2022. The main driver of the decline was lower energy prices. Tokyo Core CPI excludes fresh food but includes fuel. The Tokyo core-core index, which excludes fresh food and fuel prices, rose 3.1% y/y in January, down from 3.5% in December. The drop in inflation reinforces the BoJ’s view that cost pressures are gradually being replaced by rising service prices as the main driver of inflation. This is hugely significant, as it points to inflation being more sustainable, which is a requirement for the BoJ before it tightens its ultra-loose policy. Japan also released corporate service inflation for December which held steady at 2.4%, a nine-year high. That reading underscores that service prices remain high a companies continue to pass on their costs. BoJ Governor Ueda stated at this week’s policy meeting that progress is being made towards the target of 2% sustainable inflation, and that has the markets speculating that the BoJ could make a major policy shift in April or June. The BoJ wants to see higher wages as evidence that inflation is sustainable and the national wage negotiations in March are expected to provide higher wages for workers. In the US, the first-estimate GDP for the fourth quarter smashed above expectations, but the US dollar didn’t show much interest. GDP growth rose 3.3% y/y, below the 4.9% gain in the third quarter but well above the consensus estimate of 2.0%. The US economy continues to produce stronger-than-expected data and that has the markets paring expectations for a rate cut in March. The probability of a March cut has fallen to 48%, down sharply from 70% one month ago, according to the CME’s FedWatch tool. . USD/JPY Technical USD/JPY tested support earlier at 147.54. Below, there is support at 146.63 There is resistance at 148.44 and 149.35

The Japanese yen retreats as US GDP soars 3.3% in Q4

Kenny Fisher 26.01.2024 14:46

The Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. US GDP roars with 3.3% gain The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar’s reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed’s preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower. Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ’s target of 2%. . USD/JPY Technical USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73

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Positions of large speculators according to the COT report as at 8/3/2022

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Positions of large speculators according to the COT report as at 29/3/2022

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(USD/JPY) Oanda: "Japanese yen stabilizes around 130"