London 28/12/2022

Very low volatility in the currency markets, this last week of 2022. The USD Index is almost unchanged at 104 and most of the currency pairs perform slow and subtle movements. It is the lack of interest in the investing community due to the holidays and the lack and the lack of economic news that has caused low volatility. As per some news, the housing price index in the US dropped to 0% in October from 0.1% in the previous month. Important was the speech of the head of BoJ Hirohiko Kuroda as we will see in the USDJPY section below. In China, the restrictions easing was a positive signal for the markets but there are certain concerns regarding the number of COVID cases & deaths.
There is a mild correction for the dollar with a relative strengthening of other, more risky currencies. Commodities such as gold and oil have a slightly bullish trend and the bond yields have further increased as the US 10-year yield is currently above 3.80%.
EURUSD (current price at 1.0651) is mildly bullish this week as a result of the dollar’s weakness and the relative strength of the euro. Since there are no economic announcements in the Eurozone and other European countries this week, the EURUSD is moving through the echo of the past central banks’ movements and perceptions. The ECB seems determined to act aggressively because the inflation in the Eurozone remains at high levels. High inflation in the USA as well but the last interest rate hike of 0.50% is a sign of a Fed easing. The next resistance of the pair remains in the price zone around 1.0740.

GBPUSD (current price at 1.2099) is bullish this week, having walked away from the milestone price of 1.20. It seems that the markets digest the recent interest rate hike of 0.50% from the Bank of England which came along with the voting of two out of nine committee members for leaving the interest rates unchanged. It was a blow for the sterling which performed a mini downward rally. This week the UK has no news to release so the perception regarding the central banks’ actions and the market sentiment will prevail. A drop below 1.20 is a strong bearish signal for the GBPUSD while any bullish breakout above 1.2450 may endure the uptrend.

USDJPY (current price at 133.75) is bullish this week although the dollar is relatively weak. There is a little help from the rising bond yields but the main reason is the weakness of the yen. Yesterday, the head of the Bank of Japan Hirohiko Kuroda in his speech said that the bank will maintain the ultra-easy monetary policy and that the decision to widen the yield band is not a step toward an exit from this policy. The yield widening was the main reason for the USDJPY’s drop last week but now it seems that this reason exists no more, at least according to Kuroda. The unemployment rate in Japan was announced at 2.5% in November and theĀ  Jobs-to-Applicants ratio was 1.35. In case of a bullish breakout above 135, we may see an accelerated uptrend.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not consider your objectives, financial situation, and personal needs.

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