In this article, we have covered the highlights of global market news about the USD/JPY, EUR/USD, AUD/USD and USD/MXN.
USD/JPY fluctuates at 132.50 as the market waits for Fed action.
Despite declining US Treasury (UST) bond rates and calmer US futures, the USD/JPY remains around 132.50. In a speech to bankers on Tuesday, US Treasury Secretary Janet Yellen suggested that all small banks in the country may be included in the government deposit guarantee program.
These recommendations follow coordinated efforts by the Federal Reserve (Fed) to infuse liquidity into the US market through swap lines and discount windows. As a result of these efforts, the Fed’s balance sheet increased while quantitative tightening continued. Due to these measures, there are fewer banking-related worries now, which made Tuesday a risk-on day.
Investors have increased their risk tolerance in anticipation of Wednesday’s additional 25 basis point (bps) rate rise from the Fed due to developments in the banking sector. When the Fed announces its decision on monetary policy, the markets are pricing in an 85% likelihood of a rate increase of 25 basis points. Just a few weeks ago, the Fed’s benchmark overnight interest rate peaked at 5.5%, now about 4.8%.
The Fed’s attention has been drawn back to the inflationary path by the banking sector’s swift action, which is still considerably over the 2% objective. Inflation is anticipated to be the biggest enemy. The Fed has amply shown its ability to battle on both fronts while maintaining the rising cycle and relaxing if warranted.
EUR/USD Price Analysis: A monthly triangle teases momentum traders at 1.0780 ahead of the Fed’s decision.
As pre-Fed concern rises in the early hours of Wednesday, the EUR/USD oscillates between 1.0770 and 0.80. A statement by Christine Lagarde, president of the European Central Bank (ECB), and an ascending triangle formation that has been in place since March 1 may strengthen the cautious attitude.
Yet, it should be noted that the Euro pair’s successful reversal from the 100-DMA combines the bullish MACD signals and optimistic RSI (14) line, which is not overbought, to provide buyers with a reason for optimism.
Yet, the EUR/USD pair’s movement is now constrained by the region between 1.0800 and 1.0700. The swing high on February 14 and the late-January low provide the 1.0800 barriers further support. Thus, purchasers of the EUR/USD pair face a challenging run to the north.
On the other hand, a downward breach of the 1.0700 support might swiftly move the price in the direction of the 1.0595-area 100-DMA support level.
Nevertheless, the EUR/USD pair’s run-up between late November and early February’s 61.8% Fibonacci retracement level, or about 1.0530, may then challenge the bears.
AUD/USD remains below the 0.6700 level as interest in the Fed announcement rises.
From its low on Tuesday at 0.6650, the AUD/USD rose as the mood changed and risk appetite rose. Although traders anticipate the Federal Reserve’s (Fed) policy announcement, the pair is still consolidating.
US authorities have devised liquidity injection schemes amid the current financial turbulence. The Fed established the discount window and swapped lines to address persistent issues, with solid backing from US Treasury Secretary Janet Yellen.
While bank shares increased on Tuesday, US Treasury Secretary Yellen’s efforts to ease tension seemed successful. Despite objections from confident US lawmakers, US government authorities are also contemplating raising the cap on deposit insurance for all small banks.
The price movement on Tuesday may have changed investors’ perspectives and increased their desire for the Federal Reserve to raise interest rates by another 25 basis points (bps).
Reduced worries about financial instability signal that central banks may emphasize controlling inflation, which increases the likelihood that the Fed will raise interest rates by 25 basis points. This meeting will be necessary as the FOMC meeting draws near.
USD/MXN Price Analysis: Mexican Peso Buyers Probe Key EMA Convergence Around 18.60
While market participants wait for the results of the Federal Open Market Committee’s (FOMC) monetary policy meeting, bears of the USD/MXN take a break around 18.60 on Wednesday morning.
Nonetheless, despite posting modest gains, the Mexican Peso (MXN) pair ends its previous two-day losing skid at the lowest levels in a week.
Yet, the USD/MXN pair’s immediate downside is constrained by the convergence of the 200-EMA and the 100-bar Exponential Moving Average (EMA).
Nevertheless, the bearish MACD indications and negative RSI (14), which are not oversold, convince sellers to believe that the 18.60 support confluence will be broken.
Yet, it should be noted that since early February, the USD/MXN bears have had difficulty breaking the support confluence of about 18.50. The pair may face a fall towards 18.00 if the barrier at 18.60 holds.
The mid-March swing low combines the early-March peaks to emphasize the 18.25–20 zone as an additional filter towards the south during the projected decline.
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