USD/JPY edges higher after BOJ’s headlines

  • BOJ likely to stress its resolve to keep monetary policy ultra-loose.
  • Russo-Ukraine tussles weighs on the market sentiment.
  • Fed speaking and expectations of an aggressive Federal Reserve rate hike boosted the greenback.

 

USD/JPY trades higher after BOJ’s resolve to keep monetary policy ultra loose amidst bullish sentiment surrounding dollar.

As per Reuters report on Friday, The Bank of Japan (BOJ) is likely to stress its resolve to keep monetary policy ultra-loose despite expected upward revision to inflation forecasts.

Sources further noted that the BOJ is expected to raise its fiscal 2022 inflation forecast to above 1.5% from the current 1.1% at the April meeting while downgrading the fiscal-2022 growth forecast from the current 3.8% expansion.

Downbeat market mood, a firm US dollar and and higher US Treasury yields also underpins the bullish trend for USD/JPY.

The Russo-Ukraine conflict weighs on the market sentiment and a cease-fire seems unlikely. Ukraine’s Foreign Minister stated that there had not been any progress. On the Russian side, reports emerged that Ukraine’s struck a Russian warship in the Black Sea with missiles, while Russia’s Defense Minister added that the Moskva -its flagship fleet- had sunk, meaning escalation remains.

New York Fed President John C. Williams speech also strengthened dollar. John C. Williams said that a 50 bps increase in May is a “reasonable” option, but the pace of hikes will depend on the economy. Williams reiterated what Fed’s Governor Brainard said that the Fed needs to move “expeditiously” to more normal policy levels ad above neutral.

USD/JPY 4 Hour Chart:

Support: 125.31 (S1), 124.73 (S2), 124.38 (S3).

Resistance: 126.25 (R1), 126.60 (R2), 127.18 (R3).

Amidst all the catalysts underpinning the uptrend for USD. We expect a bullish trend for USD/JPY.

Upbeat CPI data favors sterling

  • GBP/USD climbs higher on higher UK CPI.
  • The soaring Uk’s inflation has raised the expectation of one more interest rate hike by the BOE in May.
  • Risk on market sentiment has dampened the safe-haven appeal.

 

The Pound edged higher during Thursday trading session. The higher-than-expected declaration of the UK’s inflation boosted the pound. As per the UK’s Office for National Statistics report, the UK’s Consumer Price Index (CPI) arrived at 7%, much more than the forecasts of 6.6%. Meanwhile, the Core CPI landed at 5.7%, elevated from the estimates of 5.1%.

The yearly UK Retail Price Index has landed at 9%, higher than the previous figure and market consensus of 8.8% and 8.2% respectively.

Meanwhile, The higher CPI shows the UK is facing price pressures amid higher energy bills and food prices after Russia’s invasion of Ukraine. This figure is expected to elevate further on the prohibition of Russian oil and this has raised the hope of a fourth-rate hike by the Bank of England (BOE).

Earlier, the BOE raised its interest rates to 0.75%. The BOE hiked its borrowing rate by 25 basis points (bps) twice in February and March and by 10 bps in December. In March’s monetary policy, BOE Governor Andrew Bailey announced that inflation is set to reach 8% in the month of April and the Ukraine crisis due to Russia’s invasion of Ukraine, which is bolstering the energy bills of households. Also, the higher commodity prices have dented the margins of corporate.

Further, Risk on market sentiment despite continuing fighting between Ukraine and Russia also favors the pound, the US dollar index (DXY) is eyeing more downside on improvement in the risk appetite of investors.

GBP/USD 4 Hour Chart:

Support: 1.3019 (S1), 1.2923 (S2), 1.2874 (S3).

Resistance: 1.3164 (R1), 1.3214 (R2), 1.3310 (R3).

Moving on, investors will focus on Thursday’s Michigan Consumer Sentiment Index (CSI) to direct their move further. In the meantime we expect a bullish trend for GBP/USD.

Hawkish RBNZ favors Kiwi

  • NZD climbs higher as the RBNZ has elevated its interest rate by 0.5%.
  • An interest rate hike of 50 bps is higher than the estimate of 25 bps.
  • Softer than expected US CPI also underpin bullish trend for kiwi.

 

New Zealand dollar is edging higher against its US Dollar counterpart during Wednesday trading session after the Reserve Bank of New Zealand (RBNZ) pushed its Official Cash Rate (OCR) higher by 50 basis points (bps).  Currently, the OCR of the RBNZ has reached 1.50%.

The RBNZ said in a statement accompanying its decision “A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment.”

Meanwhile, This is the consecutive fourth interest rate hike by the RBNZ. Earlier, a 25 bps OCR hike was expected in the monetary policy announcement by the RBNZ Governor Adrian Orr. And the market participants were expecting that the RBNZ will follow the streak of 25 bps OCR hike, which has been followed in the last three monetary policies announced in October 2021, November 2021, and February 2022.

Hawkish stance of the RBNZ indicates a swift mean reversion of OCR to its neutral rate. A tightening policy is needed to minimize the risk of soaring inflation in NZ and the RBNZ is capitalizing upon the same rigorously.

US Consumer Price Inflation report of Tuesday saw Core measures come in a little softer than expected which triggered a bout of profit-taking in USD long positions.

NZD/USD 4 Hour Chart:

Support: 0.6807 (S1), 0.6765 (S2), 0.6724 (S3).

Resistance: 0.6890 (R1), 0.6931 (R2), 0.6974 (R3).

The 50bps rate hike favors the NZD against the USD. We expect a bullish trend for NZD/USD.

Gold inches higher ahead of US CPI

  • The yellow metal is trading on the front foot on Tuesday despite of hawkish Fed.
  • Risk-off flows in equities due to geopolitics and China lockdown concerns favor the safe-haven gold.
  • US inflation data will the key catalyst ahead.

 

Gold prices edged higher on Tuesday as appetite for risk weakened ahead of U.S. inflation data despite a decisively hawkish Federal Reserve.

As per strategists at TD Securities report, Gold has continued to churn higher despite a decisively hawkish Federal Reserve. Even the expected more aggressive hikes will not be sufficient to turn interest away from the yellow metal.

Meanwhile the precious metal is benefitted from the demand for safe-haven assets as global equities and other risk assets fall amid ongoing worries about the Russo-Ukraine conflict and lockdowns in China.

There were 26,087 new daily infections reported in the Chinese financial hub Sunday, an all-time high while April 11 reports a similar load of 23,342. Bloomberg reported that ”economists now predict the economy will expand 5% this year, below the official target of around 5.5%. Analysts at Morgan Stanley have cut their growth forecasts this year on the lockdown impact, while Citigroup Inc. has warned of risks to growth in the current quarter.”

Talking about the Russia- Ukraine conflict, Ukraine pleaded for more weapons from the West to help it end the siege of Mariupol and fend off an expected Russian offensive in the east, as more reports emerged of rape and brutality against Ukrainian civilians by Russian forces. Ukrainian President Volodymyr Zelenskiy said in a televised address late on Monday that Russia could resort to chemical weapons as it amassed troops in the eastern Donbas region for a new assault on the port of Mariupol, where thousands are believed to have died under a near-seven week siege.

As a response, Russia’s deputy U.N. ambassador denied the allegations and accused Ukraine and allies of “a clear intention to present Russian soldiers as sadists and rapists.” Russia’s defence ministry said Ukraine’s government was being directed by the United States to sow false evidence of Russian violence against civilians despite what it cast as Moscow’s “unprecedented measures to save civilians.”

Apart from this, US Consumer Price Index will be the main economic data that will help to unveil the health of the global economy. With strong prices for March that reinforces the hawkish outlook at the Fed, this would be potentially supportive of the US dollar and weigh on the yellow metal. However, on the other hand, analysts at Rabobank have warned that the Fed could be hiking into recession.

XAU/USD 4 Hour Chart:

Support:  (S1),  (S2),  (S3).

Resistance:  (R1),  (R2),  (R3).

The risk averse market sentiment favors safe haven precious metal gold. We expect a bullish trend for XAU/USD.