- Bank of Japan doubled down on its dovish policy, sending the yen to its weakest level since 2002
- The euro hit a five-year low on growth concerns for the region
- The Fed is expected to raise rates by 50 basis points when it concludes its two-day meeting
Forex market
The dollar hit a 20-year high against rivals yesterday as the Bank of Japan doubled down on its dovish policy, sending the yen to its weakest level since 2002, while the euro hit a five-year low on growth concerns for the region. The dollar shot past the key level of 130 yen after the BOJ strengthened its commitment to keep interest rates ultra-low by vowing to buy unlimited amounts of bonds daily to defend its yield target.
The BOJ gave the 'all clear to continue selling the yen. There had been some market speculation the BOJ might step back a little given the pressure building across foreign exchange markets. A finance ministry official responded that Japan will take appropriate action in currency markets, calling recent moves "extremely worrying."
The weak yen helped to catapult the dollar to its highest level since December 2002 against a basket of currencies. The greenback has benefited from expectations the Federal Reserve will hike rates faster than peers, which would likely expand the yield gap between the U.S and Japanese government bonds. The Fed is expected to raise rates by 50 basis points when it concludes its two-day meeting on Wednesday. Aggressive increases are likely to follow at subsequent meetings, with fed fund futures traders pricing for the Fed's benchmark rate to rise to 2.73% by year-end, from 0.33% now.
The greenback pared gains after data showed U.S economic growth unexpectedly contracted in the first quarter as a resurgence in COVID-19 cases disrupted activity. The euro dropped below the key psychological level of $1.05 as investors remained nervous about Russia cutting off gas to parts of the region for refusing to pay in roubles.
The European Commission today warned buyers of Russian gas they could breach sanctions if they converted gas payments into roubles, as officials struggled to clarify the EU's stance on Moscow's payments scheme, which has sowed confusion in the bloc.
Euro-EUR
The single currency weakened yesterday on growth concerns after Russia cut off gas supplies to two eastern European nations. The dollar has gained on expectations that the U.S central bank will be more hawkish than its peers. The Fed is expected to increase rates by 50 basis points at its May 3-4 meeting as well as in June and July. Overall, the EUR/USD traded with a low of 1.0469 and a high of 1.0563 before closing the day around 1.0497 in the New York session.
Japanese Yen-JPY
The Japanese Yen fell against the U.S dollar after the Bank of Japan (BOJ) doubled down on its super-low yield policy. There had been some market speculation the BOJ might step back a little given inflation was rising and other major central banks were tightening, but it showed no hesitation. The yen is not being ignored, but it is mostly a side effect of the BOJ. Overall, the USD/JPY traded with a low of 128.32 and a high of 131.23 before closing the day around 130.82 in the U.S session.
British Pound-GBP
The British Pound edged higher today but was still trading near a 21-month low against a buoyant U.S dollar that has hit multi-year peaks against both the Japanese yen and euro. Expectations of aggressive Fed tightening this year have pushed yields on U.S 10-year notes around 45 basis points this month, in turn sending the dollar index to a five-year high. Overall, the GBP/USD traded with a low of 1.2409 and a high of 1.2568 before closing the day at 1.2455 in the New York session.
Canadian Dollar-CAD
The Canadian Dollar was little changed against its U.S. counterpart holding near its weakest level in more than six weeks, as investors grew more worried that Europe's economy could tip into recession. Risk aversion is the primary driver of the Canadian dollar right now. The price of oil, one of Canada's major exports, settled 0.3% higher at $102.02 a barrel. Overall, USD/CAD traded with a low of 1.2788 and a high of 1.2877 before closing the day at 1.2805 in the New York session.
Australian Dollar-AUD
The Australian Dollar was on the ropes today as worries about a recession in Europe and a slowdown in China engulfed risky assets and overwhelmed the promise of rising interest rates at home. Adding to the pressure was a decision by the Bank of Japan (BOJ) to reaffirm its super-easy policy, which sparked a rush from the yen to the U.S dollar and lifted the latter across the board. 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.
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 gained 1.25%.
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 gained 1.16%.
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 gained 1.45%.
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 0.12%.
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 0.42%.
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We are at the absolute end of the 3rd wave and it is likely that it ended with the historic peak in January this year. This means that a new downward cycle of a very, very large order is beginning, which will develop in the coming decades.
If the last fifth wave is complete, the correction that will develop is aimed at correcting the entire rise that you see in the charts above. In practice, this is the entire growth of US indices.
