In this article, we have covered the highlights of global market news about the EUR/USD, NZD/USD, USD/JPY and AUD/USD.

EUR/USD might hit 1.09 as FX options market confidence grows – ING

EUR/USD is still slightly bid. According to ING analysts, the pair is expected to test resistance around 1.0785 and maybe 1.09.

The options market becomes more optimistic. “Measures like the risk reversal, which compares the price of a 25 delta EUR/USD call option to a put option with a comparable delta, continue to trend in favour of EUR/USD upside.”

The markets were willing to pay 2% more in volatility terms for a 3-month 25 delta EUR/USD put option as recently as October. This Euro put skew has now decreased to 0.67%. A significant development for the foreign exchange market would be the skew becoming positive and favoring EUR/USD calls.

Despite the atrocities in Ukraine, the investment climate is favorable, so investors may wish to purchase USD/EUR on declines.

The EUR/USD tendency today is toward resistance around 1.0785 and, should the US CPI report permit, toward the 1.09 region tomorrow.

NZD/USD rises as the US Dollar weakens but sits below 0.6400 as traders await US CPI.

The NZD/USD pair recovers from an intraday decline to trade around the 0.6340 regions during the early European session. The pair is trading in the range of 0.6370-0.6375 and is still quite close to the almost three-week high reached on Monday.

The intraday increase is driven by the resurgence of dollar selling, which is being held back by growing anticipation that the Fed may tone down its aggressive attitude. The past week’s statistics confirmed the expectations, which revealed US wage growth in December and suggested indications of reducing inflationary pressures.

Additionally, in December, economic activity in the US services sector shrank to its lowest level since 2009. The US Treasury bond rates are kept low, approaching a multi-week low, which is considered a crucial factor weakening the dollar. This, in turn, increases the anticipation of a less aggressive policy tightening by the Fed.

In addition, a generally upbeat atmosphere in the global markets hurts the dollar’s reputation as a relative haven and helps the risk-averse Kiwi. However, the pair needs to gain bullish confidence as traders are hesitant to take aggressive wagers before publishing Thursday’s consumer inflation data from the US.

The critical US CPI data should clarify if the Fed needed to raise its target rate over 5% to stop inflation from remaining persistently high. This, in turn, will significantly impact the short-term US Dollar price dynamics and aid in determining the NZD/USD pair’s next leg of a directional move.

In the absence of any relevant market-moving US data releases, the yields on US bonds may fuel US Dollar demand and provide the NZD/USD pair some momentum. In addition, traders will use signals from the general risk mentality of the market to seize short-term chances around the main.

USD/JPY continues its upward trend – UOB

At UOB Group, economist Lee Sue Ann and markets strategist Quek Ser Leang warns that in the following weeks, USD/JPY is still anticipated to fluctuate between 130.50 and 134.50.

“We anticipated the US Dollar to move lower yesterday, but we were of the opinion that 131.00 is unlikely to come into view,” said the 24-hour outlook. Our hopes were only partially fulfilled as the US Dollar momentarily fell to 131.37 before rising and trading sideways for the remainder of the sessions. Flat momentum indicators point to further sideways trading between 131.60 and 132.75, most likely.

Within the next three weeks: “We don’t have anything to contribute to our Monday report (09 January, spot at 132.10). As was previously said, rather than continuing to rise following the significant decline last Friday, the US Dollar is expected to move in a wide range between 130.50 and 134.50.

AUD/USD must surpass 0.6950 to revisit 0.7000 – UOB

According to UOB Group economists Lee Sue Ann and Quek Ser Leang, a rise over 0.6950 should give the AUD/USD pair a chance to return to 0.7000 shortly.

24-hour perspective: “Yesterday, we said that the Australian dollar (AUD) “is unlikely to increase much more” and that we anticipated it to “trade between 0.6870 and 0.6950.” The Australian dollar remained in a range of 0.6860 to 0.6930 but did not move anymore. AUD will move today between 0.6855 and 0.6925 since the price actions are likely part of a consolidation period.

Within the next three weeks: “Yesterday (10 January, spot at 0.6910), we stated that while momentum continues to point to a higher Australian dollar, it must first break and hold above 0.6950 before a rise to 0.7000 is possible. We are still of the same opinion. A break of 0.6825 (a continuation of Yesterday’s strong support level) would suggest that the present upward pressure has subsided.

Please click here for the Market News Updates from 10 January, 2023.