2022-12-15 • Updated
A rise in Treasury yields and solid US labor data on Friday boosted the dollar, which climbed against the basket of major currencies.
The yen fell to a fresh 24-year low after Japan's ruling coalition expanded its majority in Sunday's upper house election. Investors interpreted the result as an upcoming wave of super-easy monetary policy.
USDJPY gained 0.9%, breaching the closely watched 137 level. Bank of Japan Governor Haruhiko Kuroda stated on Monday that he wouldn't hesitate to add monetary stimulus if needed to boost the stuttering economy.
However, the election outcome reflects public support for Prime Minister Fumio Kishida, who adheres to a dovish monetary policy and makes it clear that rising inflation in Japan isn't as critical for the local population as overseas.
With the BOJ keeping interest rates pinned to the floor even as foreign ones climb, the yen has sunk over 16% against the greenback this year. According to data compiled by Bloomberg, the currency is just a hair's breadth away from its worst drawdown ever.
The US dollar may remain expensive until the risks around elevated global inflation, European energy security, and China's growth outlook have been resolved. Moreover, the breakout of the 107.50 resistance level opens the way to 110.50 for the US dollar index, which is a 2.8% gain. An upcoming 50 basis point rate hike by the Federal Reserve in July makes it almost inevitable.
USDJPY, Daily chart
Currently, buyers are attacking the 137.50 resistance, the 261.8 Fibonacci level. The breakout of this zone opens the way to 144.00, the highest ratio since 1998.
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Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
The upcoming August inflation data may send mixed signals. The 12-month headline inflation rate is expected to rise to 3.6%, causing concerns for the Biden administration. However, core inflation, which excludes food and energy prices, is projected to decrease to 4.3%, aligning with the Federal Reserve's goals. Past price trends influence both figures, so looking at recent data for a more accurate picture is crucial.
The odds of a final interest rate hike by the US Federal Reserve (Fed) this year have dropped after US job openings hit their lowest levels since early 2021. This has led to a correction in the US Dollar as traders reduced their bets on further rate hikes.
Welcome to October, the tenth month of 2023. For this installment of What to Trade, I have handpicked a few of my favorite trade ideas for the month. Let’s go over a few of them.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
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Don’t waste your time – keep track of how NFP affects the US dollar and profit!
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