2024-06-21 08:07

Japanese Yen (JPY) Analysis Japanese CPI mostly positive for the Bank of Japan JPY continues its steady decline to levels last seen before April FX intervention 10-year JGB yields head higher but have no effect on the yen The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library Japanese CPI Mostly Positive for the Bank of Japan 12-month Japanese CPI for May came in above the prior 2.5%, at 2.8% while core CPI (CPI excluding fresh food) narrowly missed expectations of 2.6% to print at 2.5%. The measure that excludes fresh food an energy, known as ‘core core inflation’, saw a decline from 2.4% to 2.1%. The Bank of Japan (BoJ) still requires convincing to hike rates again this year after calling for a virtuous relationship between inflation and wages. Demand-driven inflation as opposed to supply-led price pressures is also a key differentiator when it comes to BoJ thinking around inflation. The drop in ‘core core’ suggests non-volatile measures of inflation are losing momentum at a time when the local economy appears to be contracting (Q1 GDP measured -0.5% on a quarter-on-quarter basis). Thus the BoJ will require more data before gaining the necessary confidence to hike the interest rate again. Learn how to prepare for high impact economic data or events with this easy to implement approach: The Yen Continues its Steady Decline to Levels Last Seen Before April’s FX Intervention USD/JPY appears to be on a set course towards 160 as the yen continues to weaken. Bond yields have not exactly helped the yen but rising yields over the last two trading sessions now sees the 10-year Japanese government bond yield heading back towards 1%. While the dollar, measured by the US dollar basket has fluctuated up and down, USD/JPY has been a one-way trade. The threat of intervention is back on the table after Fiji reported that Japan’s top currency official stated there is no limit for reserves in currency intervention and also repeated that officials are monitoring the situation closely. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow The 10-year JGB appears to be heading back towards the 1% mark – but this has done very little, if anything, to halt yen declines. 10-year Japanese Government Bond Yield Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/japanese-cpi-data-mixed-as-yen-continues-steady-decline-20240621.html

2024-06-20 15:08

Japanese Yen (AUD/JPY, USD/JPY) Analysis The Japanese Yen continues to decline but in a less volatile manner than before Aussie dollar takes full advantage of the yen’s slide, USD/JPY Climbs higher Japanese bond yields don’t provide any favours for the yen Japanese inflation up next in the early hours of Friday morning The Japanese Yen has slowly declined and is now nearing levels that prevailed moments before Japanese officials intervened in the FX market to strengthen the yen back in April. The chart below is an equal-weighted yen index showing the consistent decline in the $62 billion intervention effort. Japanese Yen Index (equal weighting of AUD/JPY, USD/JPY, GBP/JPY and EUR/JPY) Source: TradingView, prepared by Richard Snow Aussie Dollar Takes Advantage of the Yen’s Slide The Aussie dollar has appreciated after the RBA mentioned they discussed the possibility of further rate hikes when the members convened earlier in June. Stubborn inflation in Australia and no real expectation of a rate cut this year are keeping the currency buoyed. AUD/JPY has cleared 105.40 and eclipsed the pre intervention high of 104.95. With the Bank of Japan (BoJ) not expected to hike until September potentially, the yen is likely to continue to weaken against the stronger Aussie. AUD/JPY Weekly Chart as the Pair Clears Prior Resistance Source: TradingView, prepared by Richard Snow Japanese Bonds Provide no Support for the Yen Japanese bond yields have declined after trading comfortably above the 1% marker although, recently yields have perked up again. As long as the interest rate differential between the US and Japan remains as wide as it is (>5%), the yen is always going to be swimming upstream. 10Y Japanese Government Bond Yield Source: TradingView, prepared by Richard Snow USD/JPY Continues to Climb Higher Quietly USD/JPY now appears set on the 160 marker, appreciating since the pair turned at 151.90. The RSI is nearing overbought territory on the weekly chart but Japanese officials will likely be observing the period of relatively lower volatility as a reason to stay their hand for now. The weak yen has spurred on a wave of tourists as travelers top 3 million for a third month. The weaker yen however, has not escaped the attention of the country’s top currency official, Masato Kanda. According to Jiji, the official stated there is no limit to the resources available for foreign exchange interventions. USD/JPY Weekly Chart Source: TradingView, prepared by Richard Snow The next piece of top tier economic data appears via Japanese inflation in the early hours of Friday. The Bank of Japan needs further convincing that CPI and wages are continuing to exhibit a virtuous relationship or at least to the degree that would necessitate another rate hike. https://www.dailyfx.com/news/usd-jpy-eyes-160-mark-amid-steady-yen-depreciation-20240620.html

2024-06-20 11:37

Bank of England Leaves Rates Unchanged, Sterling and Gilt Yields Drift Lower GBP/USD Analysis and Charts BoE leaves monetary policy untouched. The next Quarterly Economic Forecast (August) is now key. A fairly uneventful Bank of England Monetary Policy decision with interest rates left unchanged at 5.25%. Two members called for rates to be cut by 25 basis points, while the other seven voted for rates to be left untouched. In the accompanying minutes the UK central bank said, 'As part of the August forecast round, members of the Committee will consider all of the information available and how this affects the assessment that the risks from inflation persistence are receding. On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level,’ suggesting that an August rate cut may be on the cards if inflation risks continue to recede. Market pricing now shows a 44% chance of an August cut. UK 2-year Gilt yields fell around 6 basis points after the announcement to 4.122%, the lowest level in nearly three months. UK 2-Year Gilt Yields Cable slipped around 20 pips after the announcement and currently trades around 1.2685. The next level of support is around 1.2667 ahead of the 38.2% Fibonacci retracement level at 1.2626. GBP/USD Daily Price Chart Charts using TradingView Retail trader data shows 46.72% of traders are net-long with the ratio of traders short to long at 1.14 to 1.The number of traders net-long is 2.81% lower than yesterday and 34.45% higher than last week, while the number of traders net-short is 3.91% higher than yesterday and 12.00% lower than last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias. What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/bank-of-england-leaves-rates-unchanged-sterling-and-gilt-yields-drift-lower-20240620.html

2024-06-20 10:00

Swiss National Bank, Swiss Franc Analysis SNB keeps the momentum, lowering the interest rate further, to 1.25% Inflation in Switzerland has fallen below the target and is expected to remain there In the lead up, a notable proportion of the market envisioned a hold, CHF repricing taking effect The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library Swiss National Bank (SNB) Voted to Lower the Interest Rate by 25 Basis-Points The SNB voted to lower interest rates by 25 basis points to set the policy rate at 1.25%. The rate cut was expected by the majority of the market but there was a notable outside chance that the Bank may decide to hold given the phenomenal drop in inflation and firm wage growth that revealed few, if any, signs of abating. Chairman Jordan referred to the recent appreciation of the franc being due to political uncertainty. A stronger local currency makes Swiss exports more expensive to its trading partners and can weigh on growth. Jordan also communicated the Banks commitment to intervene in the FX market in any direction, if deemed necessary. The announcement resulted in a drop in the value of the franc. Learn how to prepare for high impact economic data or events with this easy to implement approach: Swiss Inflation – The Envy of Developed Markets Swiss inflation remains comfortably beneath the 2% target, remaining at 1.4% for a second month in a row as other countries like the US and the EU are yet to achieve the feat. Just yesterday, the UK managed to hit the Bank of England’s 2% target but unlike Switzerland, UK inflation is expected to remain above 2% for some time thereafter. Swiss Inflation (Headline and Core Measures of CPI) Source: Refinitiv, prepared by Richard Snow Swiss GDP and Wage Growth Gave SNB Hawks a Reason to Hold Early signs of an economic recovery in Switzerland have been building, suggesting that rates are not too restrictive to hamper growth. In addition, wages in Switzerland had shown resilience, holding at 1.8% for three quarters in a row, only dropping marginally in Q4 2023 to 1.7%. These developments provided some uncertainty around the decision with many of the view the Bank might have held rates steady. GDP Showing Green Shoots and Wage Pressures Hold Firm Source: Refinitiv, prepared by Richard Snow USD/CHF Immediate Market Reaction and Outlook With many market participants holding out for an unchanged interest rate announcement today, its unsurprising to see a sharp repricing in the franc (weakness) as USD/CHF climbed 67 pips in the aftermath. USD/CHF 5-Minute Chart Source: TradingView, prepared by Richard Snow The weaker franc presents a potential reversal formation unfolding at the moment. Should price action close for the day around current levels, the three-day candle formation could be likened to that of a morning star – a typically bullish reversal pattern. The one concern here is the longevity of bullish drivers around the dollar. Hawkish revision to the Fed’s inflation forecast sent the greenback sharply higher but with inflation appearing on track for 2%, markets may soon price in a rate cut as early as Q3. US PCE data next week will help provide direction for the dollar and either confirm or invalidate CPI improvements. USD/CHF Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/swiss-national-bank-cuts-rates-cites-strong-franc-as-it-looks-to-fuel-growth-20240620.html

2024-06-20 08:00

EUR/USD and EUR/GBP Latest Retail Sentiment Analysis EUR/USD – Big Jump in Weekly Longs. EUR/GBP Traders Remain Long but Shorts Increase. EUR/USD – Mixed Outlook According to the latest IG retail trader data, 54.49% of traders hold a net-long position, with the ratio of long to short traders at 1.20 to 1. The number of net-long traders has decreased by 0.84% compared to the previous day but has increased by 34.83% compared to last week. On the other hand, the number of net-short traders has increased by 7.36% from yesterday but has decreased by 4.00% from last week. Our approach typically contrasts with crowd sentiment, and the fact that traders are net-long suggests that EUR/USD prices may continue to fall. However, the current positioning is less net-long than yesterday but more net-long compared to last week. This combination of current sentiment and recent changes presents a mixed trading bias for the EUR/USD pair. EUR/USD Daily Price Chart EUR/GBP – Traders Heavily Long The latest IG retail trader data reveals that 73.13% of traders are maintaining a net-long position, with the ratio of long to short traders standing at 2.72 to 1. While the number of net-long traders has increased by 1.73% compared to the previous day, it has decreased by 6.71% from last week. In contrast, the number of net-short traders has decreased by 3.00% from yesterday but has increased by 48.09% from last week. Our strategy typically involves taking a contrarian view to crowd sentiment, and the fact that traders are net-long suggests that EUR/GBP prices may continue to decline. However, the positioning is more net-long than yesterday but less net-long compared to last week. This combination of current sentiment and recent changes presents a mixed trading bias for the EUR/GBP pair. EUR/GBP Daily Chart All charts using TradingView What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/eur-usd-and-eur-gbp-latest-retail-sentiment-analysis-20240620.html

2024-06-19 08:10

UK CPI hits BoE target – both core and headline figures print in line with expectations Why the Bank of England won’t be eager to cut interest rates as early as tomorrow The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library UK CPI Hits Bank of England Target Headline CPI drops to the Bank of England’s target of 2% for the first time in nearly 3 years. This is an impressive feat given how high inflationary pressures rose at their peak. The decline has been led by falling goods inflation and markedly lower energy prices. With inflation seemingly under control, why isn’t the Bank of England’s Monetary Policy Committee (MPC) falling over themselves to lower the bank rate? The answer lies mostly within a subset of the broader inflation print – services inflation – which remains uncomfortably high. Source: Refinitiv Learn how to prepare for high impact economic data or events with this easy to implement approach: The chart below shows how other contributors to the CPI headline figure have fallen with some measures like fuel and electricity/gas turning negative (deflationary) on a year-on-year basis. However, services inflation (grey histograms) have shown little progress and remain at elevated levels – threatening the overall inflation outlook. Source: Macrobond, ING The chart below shows the little progress made in the services sector with both average wages and services CPI having made tiny inroads but appear to be heading in the right direction. Therefore, ahead of tomorrow’s Bank of England rate decision, there may be a nod to a future rate cut but the committee is likely to point to this stubborn stickiness of services inflation for its lack of urgency to alter interest rates. Source: Refinitiv, Fathom Consulting Markets assign around 5% chance of a cut after tomorrow’s BoE statement, with a greater chance of a move in September. Implied Interest Rate Path in Basis Points Source: Refinitiv, prepared by Richard Snow On the back of the stubborn services inflation print, GBP/USD rose a tad in the minutes after the release. GBP/USD 5-Minute Chart Source: TradingView, prepared by Richard Snow GBP/USD continues to edge higher after hawkish revisions to last week’s Fed projection for inflation and growth jolted the dollar back into life. The pair appears to have found support around 1.2685 ahead of the BoE meeting with 1.2800 the next notable level of resistance. GBP/USD Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/uk-inflation-hits-bank-of-england-target-what-now-20240619.html