3 min to read
The USDJPY pair maintained its upward trajectory
regaining ground within the 149 yen range.
“In today’s New York forex market, the USD/JPY pair maintained its upward trajectory, regaining ground within the 149 yen range”
While the Tokyo session briefly witnessed a surge into the 149 yen territory, cautious comments from Finance Minister Suzuki acted as a dampener, consolidating it in the 148 yen region. However, despite the absence of significant downward pressure, the bullish sentiment targeting the 150 yen milestone remains resolute.
The prevailing notion that the Federal Reserve (FRB) is extending the period of elevated US interest rates has provided a solid foundation for the US dollar. Nevertheless, this stance has also cast a shadow of uncertainty over the prospects of a smooth economic landing. Consequently, investors are proceeding with caution when it comes to allocating capital to riskier assets. In the forex arena, a proclivity towards purchasing the dollar has emerged as risk aversion takes hold. Furthermore, the looming possibility of a US government shutdown is adding to the overall atmosphere of risk aversion.
Regarding forex intervention, the gradual upward trajectory of the USD/JPY pair has yet to manifest into heightened volatility. Volatility levels remain subdued, and the yen’s resilience is evident in cross-yen pairs like EUR/JPY and GBP/JPY. Currently, market conditions do not present a compelling case for intervention by the Ministry of Finance.
On a different front, the Euro faced a bearish outlook during today’s New York session, briefly sliding into the 1.0560-dollar range. It dipped below the previous day’s lows and appears poised to test the psychologically significant 1.05-dollar level. However, a sense of caution is emerging, as technical indicators suggest the potential for an oversold condition. As the Euro approaches the 1.05-dollar mark, active buybacks may surface, driven by short positions seeking to capitalize on the achieved milestones.
Due to counteracting factors between the US and Europe, the Euro is expected to remain confined within a relatively narrow range until the end of the year. Some forecasts even suggest the possibility of a recovery to around 1.12 dollars by the close of 2024.
In particular, the market is increasingly speculating that the FRB may sustain high-interest rates for a more extended period than previously envisaged. While this scenario is anticipated to favor the US dollar against the Euro, recent interest rate hikes by the European Central Bank (ECB) are exerting a countervailing influence.
Conversely, the FRB foresees a moderation in the US economy by mid-2024, with inflation inching closer to the 2% target. This projection could give rise to expectations of rate cuts in the US market, potentially exerting downward pressure on the US dollar.
Meanwhile, the GBP/USD pair persisted in its quest for lower levels today, hovering in 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 protracted high-interest rate policy, is one of the contributing factors. Additionally, the pound faced headwinds following last week’s meeting of the Bank of England’s Monetary Policy Committee (MPC). The market witnessed a significant pullback in rate hike expectations, which had hitherto bolstered the pound. Consequently, the pound declined not only against the Euro but also against the yen.
Market sentiment suggests that even if the British economy does not underperform as initially feared, the pound is likely to remain under pressure, with limited prospects for an upside recovery.
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