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Gold bulls beware! Analysts warn: Recovering 2049 is needed to resume bullish momentumDuring the Asian market on Friday ...
01/19/2024

Gold bulls beware! Analysts warn: Recovering 2049 is needed to resume bullish momentum

During the Asian market on Friday (January 19), spot gold was basically stable after yesterday's sharp rise. The price of gold is currently at $2,023 per ounce. FXStreet chief analyst Valeria Bednarik recently wrote an article analyzing the technical prospects of gold.
Bednarik pointed out that on Thursday, gold prices rebounded from levels close to $2,000 per ounce, giving short sellers a temporary break. Gold corrects recent oversold conditions.
Spot gold closed up $16.86, or 0.84%, on Thursday at $2,023.04 per ounce. Analysts pointed out that the safe-haven demand brought about by the conflict in the Middle East has driven up the price of gold.
Iran said that on Thursday local time, the Pakistan Air Force launched an air strike against Iran, allegedly targeting terrorist camps in Iran. The attack killed at least nine people.
The United States on Wednesday added Yemen-based Houthi rebels to its list of terrorist groups after the militants attacked a U.S. ship in the Red Sea for the second time this week.
Gold short-term technical outlook analysis
Bednarik said there is still a risk that gold prices will fall. The daily chart shows gold prices trading below a mildly bearish 20-day simple moving average (SMA); while the 100-day and 200-day moving averages are well below current gold price levels and provide no directional clues. Meanwhile, technical indicators have lost their bearish strength but remain in negative territory, giving no hint that gold has hit a short-term bottom.
Bednarik added that in the short term, gold's recovery appears to be corrective based on the 4-hour chart. Gold remains well below all of its moving averages, with the 20-period SMA moving firmly lower below the directionless longer-term moving average. Finally, technical indicators rebounded from oversold data, but only with limited strength and remain well below their mid-lines. Gold needs to at least rise back above $2,049.20 an ounce to have a chance to resume its bullish momentum.
(Spot gold 4-hour chart)
Bednarik gives the latest key support and resistance levels for gold prices:
Support levels: $2001.60/ounce; $1988.60/ounce; $1973.00/ounce
Resistance level: $2033.10/ounce; $2049.20/ounce
At 11:22 Beijing time, spot gold was trading at $2,022.32 per ounce.

Japan CPI inflation falls as expected in Dec, points to ultra-dovish BOJInvesting.com-- Japanese consumer inflation ease...
01/19/2024

Japan CPI inflation falls as expected in Dec, points to ultra-dovish BOJ

Investing.com-- Japanese consumer inflation eased as expected in December, furthering bets that the Bank of Japan will keep its ultra-dovish policy largely unchanged when it meets in the coming week.
Core consumer price index (CPI) inflation, which disregards volatile fresh food prices, rose an annualized 2.3% as expected in December, data from the Statistics Bureau showed on Friday. The reading fell further from the 2.5% seen in November.
The core CPI index was also at its lowest level since July 2022.
A core reading that disregards both fresh food and energy fell to 3.7% from 3.8% in the prior month. The reading is closely watched by the BOJ as an indicator of underlying inflation, and was now well below a 40-year peak hit in 2023.
Headline CPI inflation fell to 2.6% in December from 2.8% in the prior month.
Softer fuel and utility prices were the key drivers of easing inflation, while food prices continued to grow at a rapid pace. Utility prices were also brought lower by government subsidies on electricity and gas, which were introduced in 2023 to help curb inflation.
Friday’s reading gave further credence to expectations that the BOJ will keep its ultra-dovish policy unchanged when it meets this coming Tuesday. Easing inflationary pressures and recent signs of sluggish wage growth give the BOJ little urgency to begin tightening policy.
The central bank is also expected to hold its ultra-dovish course amid uncertainty after a devastating earthquake at the beginning of the year. Rebuilding and stimulus measures in the wake of the disaster are widely expected to offset any monetary tightening by the central bank.
The BOJ is set to decide on monetary policy on Tuesday.
Still, increased fiscal stimulus may push up Japanese inflation in the near-term. Renewed weakness in the yen through January may also elicit a stronger inflation reading for the month.
The yen traded sideways after Friday’s inflation reading, but was close to its weakest levels since early-December.
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Global payments company: GBP may benefit from elections due in the second half of the yearGlobal payments company Argent...
01/19/2024

Global payments company: GBP may benefit from elections due in the second half of the year

Global payments company Argentex says 2024 will be marked by further resilience for the pound and could benefit from elections due in the second half of the year.
In a research report setting out forecasts and scenario analysis, Joe Tuckey, head of foreign exchange analysis at Argentex, said that the 2024 elections in the United Kingdom and the United States will have a significant impact on the foreign exchange market.
"In the UK, Labor's indication that they will integrate more closely into Europe is seen as a potential positive for the pound," he said. "With a general election approaching, possibly in the autumn, certain sterling-positive themes may emerge and be priced in," he added.

For analysts, Trump's return could re-disturb the relative calm of the Biden era, and U.S. markets could become more volatile.
"Markets could become particularly concerned if Trump insists on withdrawing from NATO and withdrawing support for foreign wars, thereby putting more fiscal pressure on other economies," he explained.
Argentex's base-case GBP/USD forecast for 2024 suggests that the pound will continue to maintain its recent resilience, gradually rising as the dollar weakens.
The Bank of England will maintain a more dovish stance than the Fed, while economic data is likely to remain "flat" but in line with expectations for modest economic growth in 2024 of 0.5% to 1%.
"The UK will once again successfully avoid the annual doom and gloom narrative as falling interest rates, falling inflation and low unemployment continue to drag on the post-Brexit recovery," Tuckey said.
(Image source: Argentex)
Argentex's base case forecasts GBP/USD in a range of 1.30-1.33.
However, if inflation remains higher in the UK, which could mean the Bank of England cuts interest rates later and to a smaller extent than some other G10 central banks, then a bullish scenario of 1.35-1.37 could emerge.
A pessimistic scenario could lead to 1.18-1.20. This scenario could involve a major economic slowdown and a bond sell-off as markets question election-related fiscal changes.
Regarding the outlook for the GBP/EUR exchange rate, Argentex believes that the broad fundamental drivers in both countries are likely to remain similar, with growth expectations ranging from +0.5% to 1%.
(Image source: Argentex)
With deflation heading steadily toward 2%, the central bank is expected to cut interest rates through 2024. Economic data can be a complex picture, depending on employment, energy prices, consumer behavior and global demand themes.
"The Bank of England is leaning towards being less dovish and the ECB is likely to remain, while there could be an election rally later this year," Tuckey said.
Argentex expects GBP/EUR to trade in a range of 1.15-1.17, but if the 'sticky' inflation scenario mentioned above emerges, a bullish scenario of 1.18-1.19 is possible.
Another bullish scenario would see a new Labor government drive sterling higher amid "replacement" and "market-friendly" pricing, Tuckey said.
A pessimistic scenario would lead to 1.12-1.14 as the ECB is unable to deliver as many rate cuts as the market expects.
"The euro will strengthen as underperforming economies such as Germany start to outperform downturn expectations," Tuckey said.
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Analyst: Be cautious about the outlook for gold prices to “double and soar”, but it seems to be close to a phased bottom...
01/17/2024

Analyst: Be cautious about the outlook for gold prices to “double and soar”, but it seems to be close to a phased bottom

Bob Moriarty, founder and analyst of a precious metals finance website, outlined his investment layout plan for 2024, emphasizing that the precious metals market has shown negative sentiment in the past three weeks. He called on investors to be cautious about the prospect of a doubling of gold prices, emphasizing that they will only become cheap when dramatic events occur in the financial system.

Bob agrees with the common view among many in the market that the U.S. domestic economy may enter a recession in 2024.

“The past three weeks have been negative for the gold and silver markets from a sentiment perspective. The signals are that we are close to a bottom, and I believe that to be true. But it is just a belief, and if it is true, Then there are a large number of junior miners who are about to explode higher," he said in his outlook.

He continued: “Have you ever heard the saying ‘prices are always right, opinions are often wrong’? It’s strange that so many gold cheerleaders, close to hundreds of them, are constantly talking about manipulation and suppression , they give investors the idea that somehow the price of silver/gold will double or triple overnight.”

"However, this is not true."

Bob explained to investors that if you carefully examine the price charts of nine different metals, including aluminum, iron, copper, nickel, zinc, gold and silver, you will find that gold and silver have performed best on most time frames over the past hundred years. Inside is rising.

He emphasized: "It is a fiction to say that gold and silver are cheap. They will only become cheap when something dramatic happens in the financial system."

"I believe that's actually going to happen, but that's what it takes to move gold and silver prices."

He also noted that contrarian investing can be crucial to successful speculation, and traders can mix sentiment indicators to identify key market turning points.

In addition to the gold market, Bob also mentioned the US stock market. He suggested that when the VIX volatility index approaches 10, the market needs to pay attention to the U.S. stock market below.

David Haggith, author of The Great Recession Blog, pointed out that every major U.S. bank's fourth-quarter 2023 report exceeded the threshold for one reason or another, helping stock investors find exit opportunities. As the yield curve begins to invert, people are noticing that recession risks are higher than thought.

"Banks collapse, inflation heats up and global warming freezes over faster than hell," he warned.

He made an important point about "why the Fed has made it clear that it has zero intention of cutting interest rates in March" and that all greedy investors are constantly daydreaming about the pivot, "I don't understand these circumstances over the past six months. , how that translates into a rate cut by the Fed in just over two months.”

Schroder Investments: Will the Suez Canal shipping disruption affect interest rate cut expectations?Zhitong Finance APP ...
01/17/2024

Schroder Investments: Will the Suez Canal shipping disruption affect interest rate cut expectations?

Zhitong Finance APP learned that on January 17, Schroders Investment issued a document stating that geopolitical tensions in the Middle East continue to rise and have affected the global supply chain. Major shipping lines say there will be serious delays in cargo deliveries as the Houthis attack ships that need to transit the Red Sea, the Suez Canal and the world's major economies. Satellite images show that few ships are currently sailing through the Red Sea, instead detouring through South Africa to major European ports, the United States and the United Kingdom.

Before the suspension of shipping in the Suez Canal, the Panama Canal was also facing some problems, including droughts caused by climate change and changes in rainfall caused by the El Niño phenomenon, which in turn caused the Panama Canal's water levels to drop. At the same time, wet weather in Europe caused excessive water levels in the Rhine River, Germany's main shipping route. Global supply chains appear to be facing a storm.

These questions evoke the difficult experiences caused by supply chain issues during the epidemic. These factors may have contributed to the recent outbreak of a new round of high inflation in financial markets, ultimately forcing global central banks to significantly raise interest rates. Financial markets are currently digesting expectations of significant interest rate cuts in Europe, the United Kingdom, and the United States, with interest rate cuts expected to begin as soon as the first half of 2024.

This raises another question: Will new supply chain problems push up inflation and force policymakers to reassess the economic outlook?

Much depends on how long the Red Sea disruption lasts. Since the current global economic environment is different in at least three aspects, the Red Sea problem is unlikely to lead to a significant rise in inflation.

First, the current market demand is weak. In the early stages of the epidemic, in response to supply chain disruptions, countries around the world adopted large-scale monetary and fiscal stimulus measures to boost the economy. However, global economic growth is currently showing a slowdown. Schroders expects global GDP growth to be only 2.5% in 2024 and 2025. The eurozone may already be in recession, with UK growth weak and US economic activity cooling.

Secondly, in the past, countries around the world implemented blockade measures to curb the spread of the new coronavirus epidemic, which caused market demand during the epidemic to be concentrated in the field of commodities. However, the current consumption pattern has returned to equilibrium. In fact, in the context of economic restart, market demand has shifted back to the service industry in the past few years, leading to a recession in the global manufacturing industry.

Third, the supply side of the global economy has also improved significantly. By contrast, ongoing lockdown measures during the pandemic have shut down production, but the current level of disruption is not as severe as it was then. While ships detouring around southern Africa will extend delivery times, goods will still get to their destinations, so extreme supply shortages are unlikely.

Six major currency pairs, US dollar index and gold resistance/support levels on January 15This article provides support ...
01/15/2024

Six major currency pairs, US dollar index and gold resistance/support levels on January 15

This article provides support and resistance levels for the U.S. dollar index, euro, pound, Japanese yen, Swiss franc, Australian dollar, Canadian dollar and gold.

There is a "death cross" on the daily chart of the US dollar. Let's see what analysts say.A closely watched indicator of...
01/15/2024

There is a "death cross" on the daily chart of the US dollar. Let's see what analysts say.

A closely watched indicator of the U.S. dollar's performance against other major currencies showed a "death cross" on the daily chart on Friday (Jan. 12) - an ominous technical development that is often seen as a trend. Confirmation of negative changes.

The Intercontinental Exchange (ICE) U.S. Dollar Index DXY, which tracks the U.S. dollar against a basket of six major currencies, was trading around 102.16 in early U.S. trading on Friday, down 0.1% on the day, but has risen by about 0.8% since the beginning of the new year. The index fell sharply in December.

This price action brought the index's 50-day moving average close to or below its 200-day moving average near 103.40, triggering a death cross (see chart below).

While death crosses sound bearish, currency analysts question whether they provide much of a signal, preferring instead to confirm a downward trend that has already begun. The U.S. dollar index hit the so-called golden cross at the end of September last year, when the 50-day moving average rose above the 200-day moving average, which is considered a positive indicator.

Data going back to 1985 shows that death crosses do tend to see the index decline in the subsequent 1-month, 3-month and 6-month periods. The U.S. dollar index fell 1.2% over the next month, 1% over the next three months and 0.4% over the six months, according to Dow Jones Market Data. The probability of decline in 1 month and 3 months is 60%, and the probability of decline in 6 months is 52%.

Brad Bechtel, global head of foreign exchange at Jefferies, said in a note: "In my opinion, the death cross is generally a relatively meaningless indicator because I don't think its predictive power has any value, but you You may hear about it in the media."

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note that the death cross is a lagging indicator and "does not necessarily mean that the dollar will not rebound." "

On the contrary . "I think the Fed's dovish expectations have been much ahead of schedule since late last year and the dollar has some room for a positive correction," she said.

The dollar fell sharply in December as investors expected the Federal Reserve to cut interest rates by about 25 basis points in 2024.

Japan’s Nikkei 225 surges to 34-year high as BOJ pivot bets fadeInvesting.com-- Japan’s Nikkei 225 stock index rose shar...
01/10/2024

Japan’s Nikkei 225 surges to 34-year high as BOJ pivot bets fade

Investing.com-- Japan’s Nikkei 225 stock index rose sharply on Wednesday, reaching levels seen before the burst of a speculative bubble in the 1990s as investors bet on a delay in the Bank of Japan’s plans to end its ultra-loose policies.

The Nikkei 225 index jumped 1.3% and crossed the 34,000 level for the first time since January 1990, extending a raft of gains seen since mid-2023.

Technology stocks were the best performers, fueled by a mix of hype over artificial intelligence and amid growing hopes for softer U.S. inflation data later this week.

But the biggest source of support for the Nikkei was growing expectations that the BOJ will have to delay plans to end its ultra-dovish policy, following a devastating earthquake in central Japan which killed hundreds of people and caused widespread destruction in the region.

Rebuilding and fiscal stimulus efforts in the wake of the disaster are widely expected to offset any notion of monetary tightening by the central bank. The BOJ had maintained its ultra-dovish stance through 2023 despite shifting global sentiment.

An ultra-dovish BOJ was a key driver of Japan’s stock rally through 2023, as the central bank maintained its asset buying and yield control policies even as most of its global peers began hiking interest rates and ending pandemic-era stimulus measures.

Bets on a dovish BOJ were furthered this week by data showing declines in Japanese inflation and wage growth.

The Nikkei 225 was the best-performing major stock index in 2023, rallying about 30% for the year. In comparison, the S&P 500 added about 24%.

Strong corporate earnings from Japan also factored into the Nikkei’s 2023 rally, as local firms weathered a decline in global economic conditions. Slowing demand in China was a key pain point for Japanese exporters.

But Japanese businesses were also aided by a rebound in tourism, as foreign travelers flocked to the country to capitalize on a severely weakened yen. The yen was the worst-performing major currency in 2023 as it was battered by a growing rift between local and U.S. interest rates.

Still, the Nikkei’s 2023 rally comes after nearly 30 years of underperformance, as Japanese economic growth stagnated after the burst of a massive speculative bubble in the 1990s.

Recent data suggests that Japan’s economy may be cooling after seeing some strength through 2023. Gross domestic product shrank more than expected in the third quarter of 2023.

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The morning catch up: Weak open ahead of highly anticipated inflation dataFollowing a mixed session on Wall Street overn...
01/10/2024

The morning catch up: Weak open ahead of highly anticipated inflation data

Following a mixed session on Wall Street overnight, the local market is set to open lower this morning. The ASX 200 futures were trading 12 points lower, down 0.16%, as of 9:00 am AEDT.

The Dow Jones fell 0.4% while the Nasdaq inched 0.1% higher. The S&P 500 finished down 0.2% after trading as much as 0.70% lower, while the Russell 2000 small cap index underperformed as small caps came under pressure, losing 1.1%.

All eyes will be on the release of the November consumer price indicator report this morning, which is set for release at 11.30 am AEDT.

UBS expects CPI to be 0.6% higher, month on month, but in annual terms, it expects a drop to 4.6%, down from 4.9% in October. Yet it notes that the strength in November retail sales, as reported yesterday, does suggest some “lingering inflation”.

What happened overnight?

Here’s what we saw (source Commsec):

US markets

US sharemarkets were mixed on Tuesday as an uptick in US Treasury yields pressured some megacaps and traders scaled back expectations for an early start to interest rate cuts ahead of key US inflation reports due out later this week.

The Dow Jones index fell by 158 points or 0.4% after being down as much as 310 points.
The S&P 500 index dipped 0.2%.
The Nasdaq index added 14 points or 0.1%.
Shares of Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) lost 0.2% and 2.3% respectively, while chip stock Micron Technology (NASDAQ:MU) shed 1.9%. Intel (NASDAQ:INTC) fell by 0.8%. But Nvidia traded 1.7% higher, reaching a fresh all-time high. Amazon (NASDAQ:AMZN) was up 1.5% along with Alphabet (NASDAQ:GOOGL), which also rose 1.5%.

Shares of the streaming giant Netflix (NASDAQ:NFLX) slipped 0.6% following a downgrade by Citi to neutral from buy.

Boeing (NYSE:BA) shed 1.4% as the US National Transportation Safety Board continued its probe into a recent mishap.

Juniper Networks (NYSE:JNPR) surged 21.8% after a news report that Hewlett Packard Enterprise was in talks to buy the networking product maker in a US$13 billion deal. The server maker dropped 8.9%.

European markets

European sharemarkets slipped on Tuesday, as investors turned risk-off with government bond yields across Europe rising, though advancing heavyweight healthcare stocks helped limit some losses.

The continent-wide FTSEurofirst 300 index lost 0.2%.
In London, the UK FTSE 100 index dipped 0.1%.
Basic resources led sectoral declines, falling 1.4%, while banks lost 0.9%, snapping a three-day winning streak. Keeping a lid on losses, healthcare stocks extended gains to a second consecutive day, climbing 0.7%, hovering at a near 17-week high hit in the previous session.

Commodities

Global oil prices climbed about 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day's heavy losses. Prices were supported by the closure of Libya's 300,000 barrels per day Sharara oilfield, one of Libya's largest, due to political protests.

The Brent crude price rose by US$1.47 or 1.9% to US$77.59 a barrel.
The US Nymex crude price gained US$1.47 or 2.1% to $72.24 a barrel.
Base metal prices were mixed on Tuesday.

Copper futures dipped 1.3%.
Aluminium futures gained 0.6%.
Gold price:

The gold futures price fell by US50 cents or less than 0.1% to US$2,033 an ounce on Tuesday.
Spot gold was trading near US$2,029 an ounce at the US close.
On Tuesday, iron ore futures slid US35 cents or 0.2% to US$140.52 a tonne, down for a fourth day, as new home sales across eight key Chinese cities almost halved in the week to January 7, according to a Mysteel report.

Currencies

Currencies were weaker against the US dollar in European and US trade.

The Euro fell from US$1.0961 to US$1.0910 and was near US$1.0930 at the US close.
The Aussie dollar dipped from US67.17 cents to US66.76 cents and was near US66.85 cents at the US close.
The Japanese yen eased from 143.57 yen per US dollar to JPY144.61 and was near JPY144.50 at the US close.
What’s on today?

11:30 am: Australia Monthly CPI Indicator (Nov)

On the small cap front

The S&P ASX Small Ordinaries gained 1.25% yesterday, while the ASX 200 ended 0.93% higher.

You can read more about the following throughout the day.

Reward Minerals Ltd (ASX:RWD) is seeking to raise $22.785 million via an entitlement offer to complete the acquisition of the Beyondie SOP Project and commence R&D activities at the site.
Globe Metals & Mining Ltd (ASX:GBE) has appointed Paul Smith as its chief operating officer effective immediately.
Kali Metals Ltd (ASX:KM1) announces that preliminary exploration programs completed pre-IPO have identified and sampled lithium-bearing pegmatites across multiple locations within the Higginsville District Scale tenement holding.
Maximus Resources Ltd (ASX:MXR, OTC:MXRRF) has defined a number of high-priority lithium targets at its Lefroy Lithium Project joint venture with the South Korean Government mining corporation KOMIR, on receiving assay results from the first phase of a project-wide soil geochemistry program.
Read more on Proactive Investors AUD

01/05/2024

2024 investment strategy: It is dangerous for the Federal Reserve to "boost" Biden's re-election! The US dollar may face “heavy pressure” in 2024

On Thursday (January 4), Peter Schiff, CEO and chief global strategist of Pacific Capital, issued a stern warning in his latest podcast: “2024 could be terrible for the dollar One year."

Peter explained: "In an environment where the dollar is so weak, there is no way that inflation will come down because that would really drive up commodity prices. That would drive up our trade deficit and put heavy pressure on the dollar."

Peter said this was a classic scenario where currency depreciation leads to domestic inflation. The trade deficit is not only a symptom of economic problems, but also a factor in the depreciation of the dollar. #

As long as the United States continues to run these deficits, pressure on the dollar will continue. Meanwhile, investors have flocked to other safe-haven assets such as the Swiss franc.

In 2023, the franc rose sharply by 10%: this is a very negative signal for the US dollar in 2024 and a positive signal for gold, because people are buying the Swiss franc as a safe haven. Gold is a safer haven than the Swiss franc, but the fact that the Swiss franc has appreciated so much against the US dollar shows skepticism towards the US dollar. "

Here are three reasons why Peter thinks inflation could rise further this year.

1. The Federal Reserve wants to help Biden be re-elected

The Fed is heavily influenced by political dynamics, and as the 2024 presidential election approaches, it is already taking actions to align with current politicians.

"I think the Fed will do everything it can to try to get Biden re-elected, and the Fed chair always wants to work with any administration that's in power," Peter said.

This has less to do with blatant political bias and more to do with self-preservation.

The president plays a decisive role in appointing the chairman of the Federal Reserve. Given this, Powell is motivated to prioritize monetary policies that could boost Biden's reelection. This is exactly what we saw.

The Federal Reserve has announced that it will significantly reduce interest rates from 2024 to 2025. The strategic timing is for this year's US election.

Peter predicts that the Fed will continue to pursue a dovish inflation policy through the end of this election year.

2. The “strength” of the U.S. economy depends on inflation

The perceived strength of the U.S. economy is largely illusory, the result of inflationary policies rather than real economic growth.

Peter explained that higher stock market indexes and other financial indicators in 2023 reflect investor expectations for inflationary stimulus from the Fed, rather than real economic progress: "Investors expect bonds to rise sharply. That's what they think. The Fed There will be a return to zero or close to zero quantitative easing. They are now betting that this easing cycle will be priced into the market.”

The Fed would rather keep monetary policy loose than ruin its bets on the broader economy and suffer a massive stock market crash. Congress would also rather keep the budget high than risk losing re-election.

This all drives up inflation, which Peter calls "their only magic trick."

3. Contribution to the U.S. trade deficit

Peter linked the dollar's weakness to the United States' recent large trade deficit. A weaker dollar would mean higher commodity prices and even an increase in the trade deficit, which in turn would further weaken the dollar.

The market reassessed the differences between the monetary policies of the United States and Japan, and the weakening tr...
01/05/2024

The market reassessed the differences between the monetary policies of the United States and Japan, and the weakening trend of the yen intensified

Zhitong Finance APP has learned that the yen's decline looks set to intensify in the coming weeks as traders recalibrate their expectations for U.S. and Japanese monetary policy.

A key options-based short-term positioning indicator showed traders were the least bullish on the yen since August, with speculative accounts from Japan to the United States selling the yen on Thursday. However, there is still room for the yen to weaken further, with technical indicators showing that a rebound late last month pushed the yen into overbought territory.

It all comes down to the diverging trends in Japanese and U.S. monetary policies. The possibility of the Bank of Japan exiting negative interest rates as early as January now seems unlikely, given that Japan has recently suffered a severe earthquake and the government is mobilizing aid. In the United States, expectations for a rate cut by the Federal Reserve are easing in light of solid employment data, causing the 10-year Treasury yield to exceed 4%. This has helped the U.S. dollar outperform other major currencies, while the Japanese yen has lagged.

"The rise in USD/JPY has more to do with the pickup in U.S. yields than Japan-specific reasons," said Aroop Chatterjee, macro strategist at Wells Fargo in New York. "The market may have priced in too much of a Fed rate cut too quickly," he added.

It is understood that when market conditions change, such as changes in the direction of interest rates or expected adjustments in monetary policy, investors and traders will quickly adjust or close their trading positions to adapt to the new conditions, resulting in a surge in trading activity. CME futures trading volume on Wednesday reached its highest level since Dec. 19. Meanwhile, yen options activity on Thursday was the highest since Dec. 14, according to data collected by the Depository Trust & Clearing Corporation.

The yen fell as much as 1.1% against the dollar on Thursday, falling to its lowest level in more than two weeks. The yen has fallen more than 2% this year.

The yen's underperformance in currency markets is a familiar story. Analysts ended each of the past two years bullish on the yen, but that optimism faded as it became clear that bond markets were overheated. In 2022, a dramatic shift in Bank of Japan policy brought new calls for yen strength; in 2023, bullish bets on the yen increased in anticipation of Fed policy easing.

Alan Ruskin, macro strategist at Deutsche Bank, said: "It feels like everything is repeating itself, and the trading market in early 2024 will be mainly affected by whether the U.S. bond market bulls were correct in late 2023, or whether the market overreacted."

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