In this article, we have covered the highlights of global market news about the EUR/USD, GBP/USD, AUD/USD and USD/JPY.
EUR/USD fights for a definite intraday trend and consolidates around the 1.0600 mark
The EUR/USD pair failed to generate real momentum throughout Tuesday’s early European session and oscillated between modest gains and slight losses. However, below the 1.0600 level, spot prices remain vulnerable to changes in the price of the US Dollar.
The Japanese Yen’s recent surge, sparked by the Bank of Japan, is weighing on the US Dollar and supporting the EUR/USD pair to some extent. Nevertheless, several factors continue to work in favor of the Dollar, limiting the major’s upward potential, at least temporarily.
Investors seem concerned that increasing COVID-19 cases in China would prevent a more extensive openness. This, in turn, overshadows the optimism over the relaxation of lockdown measures and negatively affects the perception of global risk. This is apparent from a downbeat atmosphere around the equities markets, which could help the safe-haven Dollar.
In addition, last week, the Federal Reserve’s shift to a more pessimistic perspective boosted the likelihood of some US Dollar dip-buying emerging. The US central bank predicted it would hike rates by at least 75 basis points by the end of 2023 to control inflation.
GBP/USD: A clear breach below the 21DMA may allow for more declines, according to OCBC
GBP/USD remains mostly unmoved at 1.2150. OCBC Bank experts warn that a breach below this point might allow for more losses.
In the short future, risks are still skewed to the negative. While the RSI is unchanged, the daily momentum is somewhat negative.
The rising wedge formation (bearish reversal) and bearish divergence on the MACD continue to warn against pullbacks that play lower in the short term.
In the foreseeable future, risks are still heavily skewed to the negative.
Support is available at 1.2050 (50% fibo), 1.21 (21 DMA), and 1.2150 (21 DMA). Resistance is around 1.2450 (61.8% Fibonacci retracement of the high to low in 2022).
AUD/USD flirts with 100-day SMA around mid-0.6600s
Following an early rise to the 0.6745 level, the AUD/USD pair experienced intense selling and plunged to a nearly one-month low on Tuesday. However, spot prices recovered a small amount of ground throughout the early European session and remained stable at the mid-0.6600s.
The Reserve Bank of Australia’s (RBA) minutes revealed that policymakers discussed holding interest rates unchanged at the December meeting, which caused the Australian Dollar to begin to decline. In addition, the Bank of Japan-induced decline in the AUD/JPY cross and a protracted sell-off in the equities markets help divert capital away from the risk-averse Australian Dollar. Nevertheless, a declining US dollar helps to restrict the AUD/USD pair’s potential loss, at least temporarily.
While several variables assist in limiting the downside, the intraday USD decline could be linked to solid purchasing around the Japanese Yen. The euphoria over the relaxation of strict lockdown regulations is overshadowed by concerns that a rise in COVID-19 cases in China might prevent a more extensive openness of the nation. This should help the safe-haven Dollar and prevent any further attempts at the AUD/USD pair’s rebound, coupled with additional aggressive remarks from the Fed.
USD/JPY: As the Bank of Japan shocks markets, the yen renews its four-month low.
Despite the recent bounce, the USD/JPY still suffers from the Bank of Japan’s (BOJ) unexpected policy change on early Tuesday. The quotation first fell to its lowest point since early August while reflecting the sentiment of Yen traders until recently, bouncing from 132.66 to 133.60. Even still, the quotation is now down 2.75% as we write.
Bank of Japan shocks the markets with its YCC decision and sinks the USD/JPY
The 10-year Japanese Government Bond (JGB) rates are being pushed near zero by the Bank of Japan (BOJ), which left its benchmark rate constant at -0.10% and maintained the short-term interest rate goal at -0.1%. The Japanese central bank should have maintained the USD/JPY by doing this since it met market expectations.
The BOJ’s modification of the Yield Curve Control (YCC) and the bond issuance announcements, however, was what caught everyone off guard. According to Reuters, “The BOJ will increase the current plus and minus 0.25 percentage point range of 10-year Japan government bond rate fluctuations to plus and minus 0.5 percentage points.” After that, the Yen pair fell to a multi-day low of 132.66 before recovering above 133.00.
Please click here for the Market News Updates from 19 December, 2022.