Raw materials | Closed | Change, % |
---|---|---|
Silver | 25.034 | -0.21 |
Gold | 2160.106 | 0.32 |
Palladium | 1029.36 | -4.14 |
The Japanese Yen (JPY) drifts lower for the sixth straight day on Tuesday and weakens to a nearly two-week low against its American counterpart during the Asian session. Growing acceptance that the Bank of Japan (BoJ) will wait until April to exit the negative interest rate policy and the Yield Curve Control (YCC) turns out to be a key factor undermining the JPY. Apart from this, a modest US Dollar (USD) strength, bolstered by reduced bets for steep interest rate cuts by the Federal Reserve (Fed), lifts the USD/JPY pair closer to mid-149.00s.
Meanwhile, the much-stronger-than-expected pay hikes by major Japanese firms already seem to have set the stage for the BoJ to pivot away from the decade-long stimulus measures, which should act as a tailwind for the JPY. Traders might also refrain from placing aggressive directional bets and prefer to move to the sidelines ahead of the key central bank event risks. The BoJ is scheduled to announce its highly-anticipated decision in a short while from now, which will be followed by the crucial two-day FOMC monetary policy meeting starting later today.
From a technical perspective, the USD/JPY pair is holding above the 61.8% Fibonacci retracement level of the February-March downfall and seems poised to climb further. The constructive outlook is reinforced by the fact that oscillators on the daily chart have just started gaining positive traction. Hence, some follow-through strength towards the 149.75-149.80 horizontal barrier, en route to the 150.00 psychological mark, looks like a distinct possibility. A sustained strength beyond the latter might trigger a fresh bout of a short-covering move towards the 150.65-150.70 region before bulls aim to retest the YTD peak, around the 151.00 mark touched on February 13.
On the flip side, the 149.00 round-figure mark now seems to have emerged as an immediate support. Any further slide is more likely to attract some dip-buying and remain limited near the 148.30 region. This is followed by the 148.00 round figure, below which the USD/JPY pair could accelerate the downfall towards the 100-day Simple Moving Average (SMA), currently pegged near the 147.65 region. A convincing break below might shift the bias in favour of bearish traders and drag spot prices further towards the 147.00 mark en route to the monthly swing low, around the 146.50-146.45 region.
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
The Australian Dollar (AUD) hovers around the key level of 0.6550 amid subdued trading activity as market participants exercise caution ahead of the Reserve Bank of Australia's (RBA) interest rate decision on Tuesday. Investors will closely monitor RBA Governor Michele Bullock's press conference for further insights. The central bank is widely anticipated to maintain interest rates at their current levels.
The Australian equity market, the benchmark S&P/ASX 200 Index, has edged higher after starting the session positively, driven by gains in the energy and real estate sectors. This upward movement in the stock market may provide support for the Australian Dollar (AUD). Australia's economy expanded less than anticipated in the fourth quarter of 2023, leading to speculation that the Reserve Bank of Australia could initiate rate cuts later this year.
The US Dollar Index (DXY) strives to extend its gains for the fourth consecutive session, bolstered by an uptick in US Treasury yields. Bond markets have experienced a sell-off following additional evidence of resilience in the United States (US) economy, compelling traders to adjust their expectations for fewer interest rate cuts this year. Investors are eagerly awaiting interest rate decisions from both the People's Bank of China (PBoC) and the US Federal Reserve (Fed), which are anticipated to be announced on Wednesday.
The Australian Dollar remains close to the significant threshold of 0.6550 On Tuesday. A breach below this level might prompt downward momentum for the AUD/USD pair, with additional support anticipated around the 61.8% Fibonacci retracement level of 0.6528, and thereafter at the psychological support level of 0.6500. On the upside, the AUD/USD pair could encounter resistance near the nine-day Exponential Moving Average (EMA) at 0.6571, followed by the psychological hurdle at 0.6600.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.03% | 0.06% | 0.08% | 0.11% | 0.12% | 0.17% | 0.11% | |
EUR | -0.03% | 0.02% | 0.04% | 0.08% | 0.09% | 0.12% | 0.08% | |
GBP | -0.04% | -0.01% | 0.02% | 0.06% | 0.06% | 0.09% | 0.05% | |
CAD | -0.08% | -0.04% | 0.00% | 0.03% | 0.05% | 0.09% | 0.04% | |
AUD | -0.09% | -0.08% | -0.06% | -0.04% | 0.02% | 0.08% | -0.02% | |
JPY | -0.13% | -0.07% | -0.07% | -0.06% | 0.01% | 0.06% | 0.00% | |
NZD | -0.14% | -0.11% | -0.09% | -0.06% | -0.03% | -0.01% | -0.05% | |
CHF | -0.10% | -0.07% | -0.05% | -0.03% | 0.01% | 0.02% | 0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate, and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Chinese Foreign Minister Wang Yi, during his visit to New Zealand on Tuesday, said that “China is ready to work with New Zealand to implement an upgraded version of the China-New Zealand free trade agreement.”
Two sides should launch negotiations on negative list of service trade as soon as possible, so as to push bilateral cooperation to a new level.
China-New Zealand relations maintain a leading position among China's relations with developed countries.
Despite the upbeat headlines, NZD/USD is losing 0.17% on the day to trade at 0.6071, as of writing.
On Tuesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.0985 as compared to the previous day's fix of 7.0943 and 7.2056 Reuters estimates.
Index | Change, points | Closed | Change, % |
---|---|---|---|
NIKKEI 225 | 1032.8 | 39740.44 | 2.67 |
Hang Seng | 16.23 | 16737.12 | 0.1 |
KOSPI | 19 | 2685.84 | 0.71 |
ASX 200 | 5.5 | 7675.8 | 0.07 |
DAX | -3.97 | 17932.68 | -0.02 |
CAC 40 | -16.21 | 8148.14 | -0.2 |
Dow Jones | 75.66 | 38790.43 | 0.2 |
S&P 500 | 32.33 | 5149.42 | 0.63 |
NASDAQ Composite | 130.28 | 16103.45 | 0.82 |
The EUR/USD pair edges lower to multi-day lows around 1.0870 on the firmer US Dollar (USD) during the early Asian session on Tuesday. The Federal Reserve (Fed) monetary policy meeting on Wednesday will be in the spotlight, with no change in rates expected. Meanwhile, the cautious mood in the market might lift the Greenback against the Euro (EUR). The major pair currently trades around 1.0872, unchanged for the day.
The recent US economic data showed inflation in the US economy remains elevated, and this pushed out market expectations for the first rate cut in June. The Fed Chairman Jerome Powell said two weeks ago that the central bank is not far from the confidence it needs to cut rates, while some Fed officials expect the first rate cut could happen later this year or during the summer.
The Fed will announce its interest rate decision on Wednesday, which is anticipated to hold benchmark interest rates steady in the range of 5.25%–5.50% at its March meeting. Investors have priced in a nearly 73% chance that the Fed will cut rates in July, according to the CME FedWatch Tools.
The European Central Bank (ECB) decided to keep borrowing costs at a record high at its March meeting. Nonetheless, the central bank policymakers signaled progress in easing inflation and began discussions about the rate cut. The ECB Governing Council member, Pablo Hernandez de Kos, said that the central bank may start lowering interest rates in June if inflation in the eurozone continues to decline. Meanwhile, ECB policymaker Mario Centeno stated that cutting borrowing costs could help prevent a euro area recession.
Additionally, ECB Governing Council member Klaas Knot penciled in June for a first-rate cut and expects three rate cuts this year, while ECB President Christine Lagarde said that June is the earliest it is likely to cut interest rates after the ECB lowered its forecasts for inflation and estimated it will reach its 2% target in 2025.
Looking ahead, market players will keep an eye on the German and Eurozone ZEW Survey on Tuesday. Also, the US Building Permits and Housing Starts will be released later in the day. The attention will shift to the Fed interest rate decision and press conference on Wednesday. Traders will take cues from this event and find trading opportunities around the EUR/USD pair.
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.65573 | -0.06 |
EURJPY | 162.128 | -0.09 |
EURUSD | 1.0873 | -0.16 |
GBPJPY | 189.786 | -0 |
GBPUSD | 1.27271 | -0.07 |
NZDUSD | 0.60824 | -0.06 |
USDCAD | 1.35337 | -0.05 |
USDCHF | 0.88759 | 0.52 |
USDJPY | 149.113 | 0.06 |
Japanese Finance Minister Shunichi Suzuki said on Tuesday that it depends on the Bank of Japan (BoJ) to decide the details of monetary policy. Suzuki further stated that he saw positive economic signs, including wage growth and corporate spending.
“Won't comment on any BOJ policy steps to be taken.”
“It’s up to the Bank of Japan to decide specifics of monetary policy.”
“This year's wage negotiations yielding record-high wage growth so far.”
“We are clearly seeing good signs in the economy such as robust corporate spending appetite.”
“The government will deploy various policies so that positive momentum in wages continues.”
At the time of writing, USD/JPY is trading 0.02% lower on the day at 149.13.
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
CURRENCY MARKET DEFINITION
The concept of currency market has several definitions:
Simply put, currency market is the market where currency transactions are made, that is, the currency of one country is exchanged for the currency of another country at a certain exchange rate. The exchange rate is the relative price of currencies of two countries or the currency of one country expressed in another country's monetary units.
Currency market is part of the global financial market, where many operations related to the global movement of capital take place.
TYPES OF MARKETS. RUSSIAN AND INTERNATIONAL CURRENCY MARKETS
There are international and domestic currency markets.
Domestic currency market — is a market within a single country.
The international currency market — is a global market that covers currency markets of all countries in the world. It does not have a specific site where trading is carried out. All operations within it are carried out through a system of cable and satellite channels that link the world's regional currency markets. Regional markets today include the Asian (with centers in Tokyo, Hong Kong, Singapore, and Melbourne), the European (London, Frankfurt am Main, and Zurich), and the American (New York, Chicago, and Los Angeles) markets.
Currency trading on the international currency market is carried out on the basis of market exchange rates, which are set on the basis of supply and demand in the market and under the influence of various macroeconomic data. Forex is the international currency market.
Currency markets can also be divided into exchange and over-the-counter markets. Exchange currency market is an organized market where trading is carried out through an exchange—a special company that sets trading rules and provides all the conditions for organizing trading under these rules.
Over-the-counter currency market — is a market where there are no certain trading rules, and purchase and sale operations are not linked to a specific place of trade, as opposed to the case of an exchange.
As a rule, an over-the-counter currency market is organized by special companies that provide services for the purchase and sale of currencies, which may or may not be members of the currency exchange. Trading operations in this market are now carried out mainly via the Internet.
The over-the-counter currency market is much larger than the exchange market in terms of trading volume. The Forex international over-the-counter currency market is considered the most liquid in the world. It operates around the clock in all financial centers of the world (from New York to Tokyo).
CURRENCY MARKET FUNCTIONS
Currency market— is the most important platform for ensuring the normal course of all global economic processes.
The main macroeconomic functions of the currency market are:
NEWS IMPACT
Various currencies are the main trading tool in the currency market. Exchange rates are formed under the influence of supply and demand in the market.
In addition to that, currency rates are influenced by many fundamental factors related to the global economic situation, events in national economies, and political decisions.
News about these factors can be found in various sources:
The more stable an economy is developing, the more stable its currency is. Accordingly, it is possible to predict how the currency will behave in the near future, based on statistical data published in official sources of countries with a certain regularity.
This data includes:
Interest rate level, set by national authorities regulating credit policy, is an equally important indicator. In the European Union, this is ECB–the European Central Bank, in the US, this is the Federal Reserve System, in Japan—the Bank of Japan, in the UK—the Bank of England, in Switzerland—the Swiss national Bank, etc.
The interest rate level is determined at meetings of the national central bank. Then, the decision on the rate is published in official sources. If the central bank of a country reduces the interest rate, the money supply in the country increases, and the national currency depreciates against other world currencies. If the interest rate increases, the national currency will strengthen.
A speech or even a separate statement by a country's leader can reverse a trend. Speeches on these topics may change the currency exchange rate:
All this news is published in various sources. Major international news is more or less easy to find in Russian, but news related to the domestic economic policy and the economy of foreign countries is much less common in the Russian press. Mostly, such news is published by the national media and in the language of the country where the news is published.
It is very difficult for one person to follow all the news at once, and they are likely to miss some important event that can turn the whole situation on the market upside down. Guided by our main principle—to create the best trading conditions for our customers—we try to select the most important news from all over the world and publish them on our website.
The TeleTRADE Department of Analytics monitors news on most national and international news sources on a daily basis and identifies those that can potentially affect exchange rates. These are the main news items that are included in our news feed.
In addition, all our clients have free access to the Dow Jones news feed. This is a joint project of Dow Jones Newswires, the world's largest news agency, and the leading Russian news agency Prime-TASS. The news feed is created specifically for currency traders and those who are interested in getting information about the world's currency markets.
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