- Expectations the Federal Reserve will aggressively hike rates boosted demand for the greenback
- The single currency has been hurt by the economic impact of the war in Ukraine
- The U.S central bank is expected to raise rates by 50 basis points when it meets next week
Forex market
The dollar hit a two-year high yesterday as concerns about slowing growth in China and expectations the Federal Reserve will aggressively hike rates boosted demand for the greenback. The Japanese yen also rebounded as investors speculated that the Japanese central bank or government may act to stabilize the currency, which last week hit a 20-year low against the dollar.
Concerns about Chinese growth have increased with the financial hub of Shanghai has been under strict lockdown to fight COVID-19 for around a month. Beijing overnight also ramped up plans for mass testing of 20 million people and fueled worries about a looming lockdown. The Wall Street Journal also on Tuesday reported that Chinese President Xi Jinping has told officials that he wants China’s economic growth to outpace the United States this year. That may be slower than previously expected.
Economic Calendar
China last month targeted economic growth of around 5.5% this year. The consensus for U.S GDP growth this year is just barely above 3%, so that’s a huge, huge downgrade in terms of a growth target. The dollar index against a basket of currencies was last up 0.61% at 102.30, the highest since March 2020.
The offshore yuan held just below a 17-month low reached on Monday after China's central bank eased banks' foreign exchange holding requirements in an effort to stem the currency's drop. The single currency has been hurt by the economic impact of the war in Ukraine and by expectations the European Central Bank will move more slowly than the Fed in raising interest rates.
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The euro added to losses after it was reported that Russian gas supplies under the Yamal contract to Poland have been halted. The U.S central bank is expected to raise rates by 50 basis points when it meets next week, and again in June and July. Fed funds futures traders expect the Fed’s benchmark rate to rise to 2.69% by year-end.
Euro-EUR
The single currency dropped to its weakest since 2017 today as investors increasingly concerned about the global growth and inflation outlook snapped up dollars, while a mixed bag of corporate earnings sent stock markets lower again. The dollar has roared 4.3% higher in April and is on course for its best month since January 2015. Overall, the EUR/USD traded with a low of 1.0634 and a high of 1.0737 before closing the day around 1.0636 in the New York session.
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Japanese Yen-JPY
The Japanese Yen rebounded as investors speculated that the Japanese central bank or government may act to stabilize the currency, which last week hit a 20-year low against the dollar. Concerns about Chinese growth have increased with the financial hub of Shanghai has been under strict lockdown to fight COVID-19 for around a month. Overall, the USD/JPY traded with a low of 127.00 and a high of 128.21 before closing the day around 127.20 in the U.S session.
British Pound-GBP
The British Pound held near its lowest levels since 2020 yesterday against a broadly firm dollar, with worries about Britain's economic outlook exacerbated by the latest debt numbers and fears that COVID-19 restrictions in China will hurt world growth. It is down 3.7% this month against the dollar and is set for its biggest monthly fall since July 2019. Overall, the GBP/USD traded with a low of 1.2569 and a high of 1.2770 before closing the day at 1.2572 in the New York session.
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Canadian Dollar-CAD
The Canadian Dollar weakened to a six-week low against its U.S counterpart, as rising uncertainty about the global economic outlook contributed to financial market volatility and broad-based gains for the safe-haven U.S currency. It will be hard for the CAD to reflect tighter BoC policy and still relatively firm commodity prices while risk appetite remains fragile. Overall, USD/CAD traded with a low of 1.2682 and a high of 1.2825 before closing the day at 1.2822 in the New York session.
Australian Dollar-AUD
The Australian Dollar was deep underwater today as concerns about the impact of coronavirus lockdowns on Chinese demand sank commodity prices and risk trades in general. It has now shed 2.6% in just two sessions and risks further retracement. The Australian Dollar was undermined by sharp falls in commodity prices with iron ore - Australia's biggest export earner. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.
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Euro-Yen EUR/JPY
EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has lost 1.39%.
Sterling-Yen GBP/JPY
Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has lost 2.00%.
Aussie-Yen AUD/JPY
Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has lost 1.48%.
Euro-Sterling EUR/GBP
This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has gained 0.61%.
Sterling-Swiss GBP/CHF
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has lost 1.00%.
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