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Forex News June 8, 2022

USD/JPY

  • USD/JPY remains on track to reach 135.00 in the near future.
  • The pair is currently up 0.4 percent on the day.
  • Following a brief pause in May, the pair has resumed its surging upward momentum in June.
  • With a 600 pips push since the lows around 127.00 last week, the pace remains rather unrelenting.
  • After breaking through short-term resistance just above 131.00, there is now little standing in the way of a push towards 135.00, at least from a technical standpoint.
  • Japanese officials’ light jawboning will continue to fall on deaf ears because their tone hasn’t changed in months. That speaks volumes about their willingness to intervene in the market.
  • The recent rally has been aided by a resumption of bond selling over the last two weeks. There was a brief pause yesterday, but yields are climbing again today.
  • 10-year Treasury yields have risen by more than 3 basis points to reclaim 3.00 percent. Returning to the USD/JPY, the strong momentum continues to provide some support for the dollar in general. That will be even more frightening if the pair breaks through the 135.00 level.

Equities

European equities open slightly higher to begin the day

The gains, however, belie the more sluggish risk sentiment

Eurostoxx +0.3 percent, Germany DAX +0.3%, United Kingdom FTSE +0.2%, France CAC 40 +0.3% & Spain IBEX +0.3%

In essence, European indices are catching up to yesterday’s late turnaround in US stocks.

The overall tone in the equity market remains sluggish.

S&P 500 futures are currently down 0.3 percent, Nasdaq futures are down 0.4 percent, and Dow futures are down 0.3 percent.

BOJ

Remarks by BOJ Governor Haruhiko Kuroda: Monetary easing must continue to support economic recovery

Monetary policy aimed at achieving 2% inflation in a stable, sustainable manner

Current 2% inflation is simply due to higher energy prices and will not be sustainable

Unless the Fed raises rates much faster than suggested, the dollar will be less affected by US-Japan interest rate differentials

He is adamant that the current easy policy is correct and that it is not the primary reason for the yen’s weakness in recent months.

The fact that the BOJ has been unable to change policy for nearly two decades speaks volumes about Japan’s underlying problems.

And, regardless of what Kuroda and company say, policy/rates divergence is unquestionably a key factor driving the latest market moves.

Dollar

  • The dollar rises in European morning trade.
  • The dollar is holding up well today as another push higher in USD/JPY sparks flows into the currency.
  • The pair appears to be heading for 135.00 and is currently up nearly 120 pips to 113.75. Bond yields have risen, lifting the mood, with the 10-year Treasury yield rising 4 basis points to 3.01 percent. Elsewhere, the greenback is making modest gains, with the aussie and kiwi being punished the most by the sluggish risk mood.
  • EUR/USD is down 0.2 percent to 1.0675 as the push and pull ahead of the ECB continues. Meanwhile, the GBP/USD has fallen from near-1.2600 highs to around 1.2520 levels.
  • This corresponds to the 38.2 Fib retracement level of 1.2471 and the 1 June low of 1.2458. On the daily close, those are key levels to watch to see if sellers are willing to chase the next leg lower.
  • Aside from that, the AUD/USD is down 0.6 percent to 0.7180 following a rejection of its 100-day moving average:
  • Sellers are battling for near-term control below the 200-hour moving average at 0.7194, but the minor support region around 0.7145-60 will be watched to see if the downside momentum continues.
  • The softer risk mood isn’t helping the more sluggish tones in the Aussie and Kiwi, with European indices now posting minor losses and US futures pointing lower. S&P 500 futures are still down 0.3 percent.

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