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The USDJPY pair saw a quick rebound into the 135 yen
The 135 yen level appears to be strong resistance.
“The USDJPY pair saw a quick rebound into the 135 yen”
The USDJPY pair saw a quick rebound into the 135 yen range during NY trading hours today as the release of April’s US employment statistics showed that the US labor market remained robust despite the headwinds of the macro environment, which has strengthened the demand for the dollar. However, for now, the 135 yen level appears to be strong resistance.
Despite the strong US employment statistics, expectations of a US rate cut in July have slightly diminished, and expectations of a rate hike in June have not increased. According to CME’s FedWatch, the probability of a hold in June is almost 100%, while the expectation of a rate cut in July has fallen to around 40% from 60% the previous day.
The market is increasing expectations of a halt to rate hikes after this week’s FOMC and is turning its attention to a potential rate cut. While Federal Reserve Chairman Powell has repeatedly expressed a negative view of an early rate cut, today’s US employment statistics appear to justify his view.
Following today’s US employment statistics, the market is also increasing its expectations of the Fed maintaining high interest rates for an extended period, but expectations for the downside of USDJPY remain strong, and some are already predicting a fall to 120 yen by the end of the year.
EURUSD continued to trade in the 1.10 dollar range. Although there were moments when the dollar’s buying spree strengthened due to the strong US employment statistics, pushing it down to the 1.09 dollar range, it quickly rebounded. If it falls below 1.10 dollars, fund buying is also expected to be observed. Some market participants predict that EURUSD will continue to range trade between 1.09 and 1.11 dollars for a while, and some are recommending buying on the downside once it enters the 1.09 dollar range.
The ECB implemented a rate hike by reducing the normal range by 0.25 percentage points at its meeting the previous day. However, the hawkish atmosphere has not changed, and ECB President Lagarde committed to further rate hikes at the press conference. In response, expectations for the ECB to continue to raise rates have increased in the market, with some voices saying that there will be two or three more hikes, even as the end of the rate hike cycle approaches. The expected narrowing of the gap in monetary policy between the ECB and the Fed is also supporting the downside of EURUSD.
The GBPUSD pair is accelerating its buying, and its gains have expanded to the mid 1.26 dollar range. It has risen to its highest level in about a year since May of last year. After a temporary surge in selling following the US employment statistics, the market quickly turned to buying again.
Next week, the Bank of England Monetary Policy Committee is scheduled to meet, and it is widely expected that there will be an additional 0.25% interest rate hike due to the unexpectedly strong recovery of the UK economy, as indicated by the economic indicators released the day before. However, there is also the possibility that two of the dovish members of the committee may cast dissenting votes, leading to a decision of 7 versus 2 in favor of the interest rate hike.
The strength of the UK housing market has been particularly highlighted, with the previous day’s release of the number of mortgage approvals reaching a five month high, and consumer borrowing also increasing. Despite the rise in mortgage interest rates, there has been an increase in mortgage applications, and there are signs that the decline in housing prices has bottomed out. As a result of these developments, the market is expecting not only the interest rate hike next week but also further rate hikes in the coming months.
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