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USD/JPY rises to one-week high

 

Thursday, December 29, 2022

The news shaping the markets today

Russia’s military forces fired dozens of missiles on Ukraine’s Kherson city, which damaged a maternity hospital. However, the US dollar index traded lower this morning.


The Philippines reported its producer price inflation at 6.4% year-over-year in November, easing from 7.3% in the previous month. This being the lowest producer inflation rate since April 2022 lent support to the PHP/USD forex pair.


South Korea’s industrial production grew 0.4% in November, recovering from the 3.5% decline in October, which sent the KRW/USD pair higher in forex trading this morning.


Vietnam’s gross domestic product grew by 5.92% year-over-year in the fourth quarter, down from 13.71% growth in the previous quarter, which exerted pressure on the VND/USD forex pair.


Russia’s economy contracted by 4% year-over-year in November, compared to a 4.5% decline in the prior month. The news sent the RUB/USD pair lower in forex trading this morning.

 

What’s happening: The US dollar climbed to a one-week high versus the Japanese yen on Wednesday.

What happened: A surge in Japanese Treasury yields and projections of a recovery in the growth of the Chinese economy provided support to the greenback on Wednesday.

However, the US dollar recorded its biggest single-day decline in two weeks against one of its major rivals.

Why it matters: The Bank of Japan has not raised interest rates, despite surging inflation, which hit the highest levels since 1991. Japan’s core consumer inflation jumped to a four-decade high of 3.7% in November.

However, the central bank surprised markets in mid-December by raising the upper limit of its tolerance band on 10-year government bonds from 0.25% to 0.5%. The move led to speculations of a shift in monetary policy from April when the bank’s chief Haruhiko Kuroda is scheduled to retire.

A summary of opinions from the bank’s December meeting showed policymakers backing the continuance of its ultra-accommodative policy. However, policymakers also discussed plans to spur growth in wages.

Japan’s 10-year government bond yield is hovering near the highest levels since 2015 and has remained around the upper limit of the central bank’s policy band.

So far, an aggressive policy tightening by the US Federal Reserve has sent the greenback and Treasury yields higher, exerting pressure on other bond markets.

China is easing its strict zero-covid policy, which has significantly impacted its economic growth for around three years. Traders now look forward to a rebound in the Chinese economy.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, gained around 0.3% to 104.46 on Wednesday, after falling to a six-month low of 103.44 two weeks back, when the US Fed slowed its rate-hike pace.

The US dollar climbed around 0.8% versus the Japanese yen to 134.48 on Wednesday, the most since December 20.

However, the US dollar lost ground versus the British pound. The GBP/USD forex pair climbed as much as 0.63% to 1.211 during Wednesday’s session, recording its biggest single day increase in two weeks. However, the pair settled lower by around 0.1% at 1.2021.

What to watch: Traders will keep an eye on comments from central bank officials. The release of jobless claims data from the US will also remain in focus today. The number of Americans filing new claims for jobless benefits, which increased by 2,000 to 216,000 in the week ending December 17, is expected to rise further to 220,000 in the latest week.

The markets today

Gold will be in focus today after settling lower on Wednesday

Context: Gold prices fell on Wednesday, after climbing higher in the previous session.

Details: Gold prices came under pressure on Wednesday with an improvement in investor sentiment following China’s announcement of plans to further ease its strict covid-19 restrictions.

The yellow metal also moved lower amid strength in the US dollar, as any rise in the greenback makes the bullion more expensive for foreign buyers. Despite the decline, the yellow metal remained above the $1,800 mark during the session.

Gold futures for February delivery settled lower at $1,815.80 per ounce on Comex. Silver futures for March delivery declined to close at $23.84 per ounce on Wednesday.

Palladium futures for March delivery settled lower at $1,785 per ounce, while platinum futures for April closed at $1,020.2 per ounce and copper ended the trading session at $3.8425 per pound.

What are expectations: Traders will keep an eye on any further easing of covid-19 restrictions in China. Movement in the US dollar and comments from central banks around their monetary policy will also remain in focus.

Other Markets: European trading trading indices closed mostly lower on Wednesday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 0.50%, 0.61% and 0.13%, respectively, and the FTSE 100 up by 0.32%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0629 and 1.0633 Positive
USD/CHF – 0.9268 and 0.9272 Positive
Nasdaq 100 – 10670.77 and 10693.45 Positive
Nikkei 225   – 25957.50 and 26005.00 Positive
Copper – 3.8285 and 3.8386 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0625, 0.11%) Dow ($33,011, -0.11%) Brent ($83.52, -0.6%)
GBP/USD (1.2037, 0.13%) S&P500 ($3,808, 0.02%) WTI ($78.57, -0.5%)
USD/JPY (133.75, -0.54%) Nasdaq ($10,791, 0.16%) Gold ($1,815, -0.1%)

What else to watch today

Russia’s manufacturing PMI and business confidence, Turkey’s economic confidence index, MPC meeting summary and foreign exchange reserves, Spain’s retail sales, Eurozone’s loans to households, loans to non-financial corporations and M3 money supply, India’s money supply M3, Brazil’s government budget value, Argentina’s consumer confidence indicator, US natural gas stocks change, gasoline stocks change, crude oil stocks change and distillate stocks, as well as Australia’s CoreLogic dwelling prices.


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