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The USDJPY pair continued its impressive climb
recapturing the 149 yen threshold.
“In today’s New York forex market, the USD/JPY pair continued its impressive climb, recapturing the 149 yen threshold”
While a momentary surge pushed it into the 149 yen territory during the Tokyo session, the cautious remarks voiced by Finance Minister Suzuki acted as a brake, settling it back in the 148 yen range. Nevertheless, amidst the absence of significant downward pressure, the resolute bullish sentiment persists, with the 150 yen mark firmly in its sights.
The prevailing perception in the market is that the Federal Reserve (FRB) is protracting the period of elevated US interest rates, providing robust support for the US dollar. However, this narrative has concurrently tempered expectations of a gentle economic landing, prompting investors to exercise prudence when deploying capital into risk assets. In the forex realm, a growing risk-averse sentiment is evident through heightened dollar demand. Moreover, the looming prospect of a US government shutdown further contributes to the overarching atmosphere of risk aversion.
In regard to potential forex intervention, the gradual upward trajectory of the USD/JPY pair has yet to translate into excessive volatility. Volatility levels remain subdued, and the yen’s resilience is palpable in cross-yen pairs such as EUR/JPY and GBP/JPY. Presently, market dynamics do not present a compelling rationale for the Ministry of Finance to contemplate intervention.
On a separate note, the Euro faced a bearish outlook during the New York session today, briefly slipping into the 1.0560-dollar range. It has dipped below the previous day’s lows and appears poised to challenge the psychologically significant 1.05-dollar level. However, caution is warranted as technical indicators suggest the potential for overselling. As the Euro approaches the 1.05-dollar mark, we may witness active buybacks driven by short positions seeking to capitalize on their gains.
Given the diverging factors between the US and Europe, it is anticipated that the Euro will continue to operate within a relatively narrow range until year-end. Some forecasts even suggest the potential for a recovery to approximately 1.12 dollars by the conclusion of 2024.
Notably, the market’s growing speculation revolves around the possibility that the FRB might maintain high-interest rates for a more extended duration than previously envisaged. While this scenario favors the US dollar against the Euro, the recent string of interest rate hikes undertaken by the European Central Bank (ECB) counters this trend.
Conversely, the FRB foresees a loss of economic momentum in the US by mid-2024, with inflation edging closer to the 2% target. Such an expectation could stoke optimism regarding future rate cuts in the US, potentially exerting downward pressure on the US dollar.
Meanwhile, the GBP/USD pair diligently continued its quest for lower levels, persisting within the 1.21-dollar range and reaching its lowest point since March. The strength of the US dollar, driven by expectations of the FRB’s prolonged high-interest rate policy, plays a pivotal role in this trend. Additionally, the pound faces challenges stemming from the recent meeting of the Bank of England’s Monetary Policy Committee (MPC), which witnessed a substantial retreat in rate hike expectations. This retreat, which had hitherto supported the pound, has consequently led to declines against both the Euro and the yen.
Market sentiment appears to suggest that despite the British economy potentially outperforming initial expectations, the pound is likely to remain under pressure, with limited upside prospects.
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