Forex Trading Market BBI Info
1. Market review: The US dollar index fell slightly on Thursday, but held steady above the 111 mark, and finally closed down 0.09% at 111.29; the 10-year US bond yield stood at a high of 3.7%, continuing to hit a new high since 2011; The yield on the two-year U.S. bond once rose to 4.163%, a 15-year high; the yield on the 30-year U.S. bond once rose to 3.654%, continuing to hit a new high since 2014. The gap between two-year and 10-year U.S. Treasury yields widened to 57.80 basis points at one point, the widest since June 2000.
2. On the day after the September FOMC meeting, the Federal Reserve accepted a total of $2.359 trillion in fixed-rate reverse repurchase operations from 102 counterparties, a record high. U.S. Treasury Secretary Yellen’s speech showed that she very much hopes that the Federal Reserve can solve the inflation problem while maintaining a strong labor market. Yellen believes that U.S. inflation will fall next year, but it may not reach its 2 percent inflation target next year.
3. Huanzhou Central Bank executive member Schnabel said that the region has made less progress in Europe and raised interest rates further, but the rate of interest rate hike in October is uncertain. Schnabel said the risk of a recession in the euro zone had risen, while inflation could be more persistent than the ECB initially thought. Traders are betting that the European Central Bank will raise its deposit rate to 3 percent in June. Ou Huanzhou’s central bank committee predicts that the European economy will grow by 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024.
4. Weekly dynamics of the super central bank: the central bank “hawks and doves do not—”
– The Bank of England raised interest rates by 50 basis points and announced that it would start selling government bonds from October 3, reducing its holdings of government bonds by 80 billion pounds in the next 12 months;
– The Swiss National Bank raised interest rates by 75 basis points, ending an eight-year negative interest rate policy, and prepared to take further foreign exchange measures;
– Central Bank of the Philippines and Norges Bank raise interest rates by 50 basis points;
– South Africa’s central bank raises rates by 75 basis points;
– The Bank of Japan once again kept its benchmark interest rate at a record low of -0.1%, and the Central Bank of Turkey unexpectedly cut interest rates by 100 basis points.
5. The foreign exchange market fluctuated sharply yesterday:
– The Bank of Japan intervened in the foreign exchange market for the first time since 1998, and the dollar against the yen soared by 500 points. Japan’s Deputy Minister of Finance Kanda Masaru clearly denied that 145 is the defensive line of the yen exchange rate.
– The Korean won – fell below the key psychological level of 1,400 for the first time since 2009. South Korean Finance Minister Chu Kyung-ho said that South Korea will take necessary measures on foreign exchange when necessary, and will mobilize all possible measures to deal with unilateral fluctuations in the foreign exchange market.
– The offshore RMB against the US dollar fell below the 7.1 mark, continuing to hit a new low since June 2020. The onshore renminbi against the U.S. dollar closed at 7.0810 yesterday, down 275 points from the previous trading day and recording the lowest level since June 18, 2020. In August this year, in the ranking of global payment currencies based on amount statistics, the RMB remained the fifth most active currency in the world, accounting for 2.31%.
Forex Trading Market Market Viewpoints
1. Bearish on the trend of Europe and the United States, but upside risks still exist
Bearish view on Europe and the United States in October, expected to trade in the 0.9500-1.0300 range. The Federal Reserve promised to further raise interest rates sharply, and the tightening of global financial conditions continued to be conducive to the strengthening of the US dollar. The Fed will turn dove only when inflation pressures continue to ease, and August CPI has become the biggest obstacle to turning dove. But for European and American bears, the further easing of energy supply concerns may trigger upside risks in Europe and the United States. If natural gas prices continue to fall before winter, it will help ease market concerns about a rapid economic slowdown in the euro zone. At the same time, if the Federal Reserve gradually slows rate hikes and the European Central Bank tightens the pace, the euro may be stronger than expected.
2. GBPUSD may accelerate its decline towards 1.10
The pound is now at its lowest level since 1985, paring gains from an intraday rebound. The GBPUSD recently broke below its 2020 lows, indicating that the downtrend continues. The pair is expected to fall to the next potential support at 1.1210-1.1160, with the potential to accelerate towards 1.1000, the downtrend line connecting the 2016 and 2020 lows. In the event of a rebound, 1.1410 is expected to be short-term resistance.
3. The US and Japan will see a consolidation in the short term
After the market attempted to break through the psychological resistance level of 145.00, the Japanese authorities intervened in the currency market, and the US and Japan seemed to be heading for an aggressive “bearish day”, and 145.00 is also becoming an increasingly important psychological threshold. The USDJPY may consolidate in the short term. As for the medium-term trend, we still tend to be bullish on the USDJPY. The next resistance level will be seen at the trend resistance level of 146.80 at the end of April. If it breaks this position, it will look at 147.62. The high of 153.01 in 1998 and the 38.2% retracement of the entire bear market trend from 1982 to 2011. The United States and Japan may see J top here. On the downside, the key support level for the USD/JPY remains at 139.42-139.40.
4. Central bank intervention unlikely to boost the yen
Yesterday, the Bank of Japan reiterated its commitment to ultra-easy monetary policy setting. Earlier, the Fed reiterated its very hawkish policy outlook. Therefore, the Japanese Ministry of Finance is unlikely to want to intervene to bring the US and Japan lower. Conversely, yesterday’s action in Japan may just have been designed to slow the USDJPY’s gains. Therefore, we are still optimistic about the rise of the US and Japan, and the target level for the next 3 months remains at 147.00.