In this article, we have covered the highlights of global market news about the USD/JPY, USD/TRY, EUR/USD and NZD/USD.
USD/JPY maintains a solid upward trend – UOB
Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, predict that the USD/JPY pair might rise to 141.50 on closing above 1405.50.
View for the next 24 hours: “Yesterday, we maintained the position that ‘the quick improvement in momentum is expected to lead to more USD strength towards 140.00’. The next barrier is at 140.50, and we emphasized that “a break of this key obstacle is not ruled out.” Our assessment was correct as the USD rose to a high of 140.22. Even if overbought circumstances indicate that the USD may not be able to keep a footing over 140.50, more USD gain is expected. A violation of 139.35 (minor support is at 139.65) would signal a downward pressure decrease on the downside.
Within the next three weeks: “On Monday, we became positive USD” (29 Aug, spot at 138.30). As the USD increased, we emphasized in our most recent story from yesterday (01 Sep, spot at 139.35) that the spike in momentum implies the USD may climb to 140.00, 140.50. As the USD reached 140.22 during NY hours, our assessment was correct. Strong upward momentum continues, and attention would move to 141.50 if 140.50 were broken. A violation of 138.60, which was yesterday’s “solid support” level (138.00), would signify that additional USD gains are doubtful.
USD/TRY: According to MUFG, the inappropriate policy keeps the Lira in danger of depreciation.
The Turkish Lira dropped from 17.92 to 18.18 versus the US dollar in the market in August. The risks for the TRY continue to be strongly skewed to the negative, according to experts at MUFG Bank.
The trade deficit is dramatically expanding, domestic demand is still strong, and inflation is relatively high. Therefore Turkey’s economy seems to be overheating.
The CBRT’s choice to cut rates would further erode trust in domestic policy frameworks and the value of the Lira.
“The Turkish policy rate now seems even more out of place. The actual policy rate has further descended into negative territory after accounting for inflation in July, which was 79.6%. It should continue to put pressure on the Lira lower.
EUR/USD: A strong NFP reading will add further negative pressure – OCBC
On Thursday, the EUR/USD was only a hair away from reaching 0.9900, but it was able to recover early on Friday. According to OCBC Bank economists, robust nonfarm payroll data might put fresh downward pressure on the pair.
“Consolidative transactions likely take place before the risky US data event, payrolls. There might be fresh downward pressure on the EUR if the print there is more robust.
Resistance levels at 1.0010 (23.6% Fibonacci retracement of Aug high to low) and 1.0080 (38.2% Fibonacci) are there.
0.9910–1.0000 range, probably during the day.
NZD/USD rebounds from early losses to above a two-year low but sits below 0.6100.
The NZD/USD pair recovers a few points in the market from this Friday’s low of mid-0.6000s, its lowest point since May 2020, and moves back toward the day’s high in the early European session. However, spot prices continue to trade below the 0.6100 level and seem unable to take advantage of the movement.
A significant reason providing some support for the NZD/USD pair is the US dollar’s retreat from a two-decade high reached on Thursday. The US dollar bulls are on the defensive due to a weaker tone around US Treasury bond rates and some repositioning trading ahead of this Friday’s US monthly employment data. In addition, the safe-haven dollar seems further weakened by indications of stability in the financial markets, favoring the risk-averse kiwi.
However, any confidence should be limited by rising concerns about the recession, economic challenges brought on by recent COVID-19 lockdowns in China, and the conflict in Ukraine. A further factor supporting the US bond rates and the dollar is the anticipation that the Fed would continue its aggressive policy tightening course. It is thus wise to hold off on positioning for any significant near-term rebound for the NZD/USD pair until there has been considerable follow-through purchasing.
Investors may also decide to wait until the publication of the much anticipated US NFP data, which is scheduled for later in the early North American session. The information will provide a new perspective on the state of the labor market and the state of the economy, which should affect expectations for a Fed rate rise. This will be crucial in boosting USD demand and assisting traders in predicting the next leg of the NZD/USD pair’s directional move.
Please click here for the Market News Updates from 1 September 2022.