Today I dipped a little bit into the amazing world of FOREX, where attention again turns to the Japanese Yen. It has been pretty much unpredictable for some time now, and that has left everyone on their toes.
Of course, excepting the huge economic data that is not expected to be released this week, from the traders' point of view, they will be following very closely how global events and feelings about risk will influence currency moves.
Market Overview
Japanese Yen Movements
On its wild ride earlier this week, the USD/JPY dropped hard to 141.66 on Monday but quickly turned around and shot back up. Tuesday saw it move between 143.60 and 146.36 to settle at 144.30, up a tiny 0.09%. The chief factor fueling Yen volatility is speculation about what the Bank of Japan (BoJ) might do next with interest rates. As BoJ's Deputy Governor Shinichi Uchida said the other day, they have to be even more vigilant towards the threat of rate hikes because market changes might impact their policy moves. It is this uncertainty which gives a major reason why the value of the Yen fluctuates by so much.
US Dollar Trends
The U.S. Dollar Index (DXY) is keeping its head above 103.20 on Wednesday during the session in Europe. At the same time, the 10-year U.S. Treasury yield follows the 3% advance on Tuesday from already elevated levels of about 3.9%. Also up: Traders are keeping one eye on a big auction of U.S. Treasury notes and some data on how much credit people used in June.
Other Currency Movements
And here are a few interesting moves with the other currencies:
USD/CAD has declined for three consecutive days and is now testing lows near 1.3750 after some stability around the 1.3770 mark early on Wednesday. Canada is going to publish important reports regarding orders from managers and minutes of the July meeting in the Bank of Canada.
NZD/USD: The New Zealand Dollar strengthened and moved towards just above 0.6000 as reports came showing that unemployment went up to 4.6% in the second quarter, although job growth was better than expected.
EUR/USD has gone down on Tuesday but has somewhat managed to stay above the 1.0900 handle during the European session on Wednesday. GBP/USD: The British Pound shed more than 0.5% on Tuesday, marking the lowest close in a month. It still remains under pressure, with the rate below 1.2700 in Wednesday morning action.
Gold (XAU/USD): It has found it hard to recover after breaking below $2,400 on Tuesday, hovering around $2,390 as the European session begins.
What I Think about the USD/JPY Pair?
Now to the USD/JPY, which again has proven to be fairly interesting over the last day or so. The current rate is near 147.00 and increased by just about 2% in 24 hours. I speculate this one will bounce back to a certain level - probably between 143.50 and 146.20 - from what I've seen in some recent times. 148.30 is the next significant support for USD/JPY.
If it can stay above those levels, the USD might continue with its strength against the Yen. This strength is mostly because the U.S. has higher interest rates as compared to Japan, thus making the U.S. Dollar more attractive to investors. When the Federal Reserve keeps the rates high, the U.S. Dollar becomes very attractive compared to the Yen being that the BoJ rate policy is keeping the rates low.
It will be very hard to see the USD/JPY trading over the 148.30 resistance - that is, if nothing dramatic changes in people's feelings towards risk or there isn't some significant global event in the next weeks. And the most intriguing information that needs to be taken into consideration is that the next leg of the pair should be driven by some BoJ decisions and world economic events - all in important points for traders engaged on the stage today.
Conclusion
In conclusion, the Japanese Yen still remains the focus in the forex market. The inconsistency of its mode is being drastically hit by decisions from central banks and other economic factors globally. As a trader, the view should never be detracted from world events and change in the risk sentiment as these tend to fuel currency movements. This must set the USD/JPY on a high chance of a lookout. I am really anxious to see if it settles down or just keeps everyone guessing.