London 08/04/2022
The USD Index is very close to the milestone price of 100 as it is getting stronger against its major competitors. The last time that the Index was above 100, was in May 2020, under the risk-off mood which was dominating the markets as the pandemic was spread out. There is a risk-off mood now as well due to the war in Ukraine that carries many risks for the global economies. Moreover, the Federal Open Market Committee (FOMC) Minutes on Wednesday revealed a more hawkish tone on the intentions of the Fed and the dollar becomes even stronger.
Most of the stock indices are in a downtrend this week except for the UK FTSE100, which is helped by the oil, mining, and banking sectors. Gold is in consolidation during the last few days but oil prices have dropped significantly. The bond yields have a tremendous positive performance this week: the US 10-year bond yield has reached the 2.67%, starting the week from 2.40% (that’s an 11.25% rise).
EURUSD (current price at 1.0862) is much bearish this week, following the strength of the USD and the latest sanctions of the European Union on Russia that hurt the European countries as well. In April, there’s France’s Presidential Election and most analysts agree that the current President Macron is more markets-friendly and his possible re-election could help the euro recover. The retail sales in the Eurozone in February rose by 5% but pre-war news is totally ignored by the markets. Until the final results in France, EURUSD has room to extend its drop at least to the important support around 1.08 because below this level is a 2-year low price too.
GBPUSD (current price at 1.3020) has finally reached the critical price area of 1.30 after two bearish weeks in a row. The strength of the dollar, caused by the negative sentiment in the markets, the hawkish profile of the Fed, and the rising US bond yields have affected the pair seriously. The economic calendars of both US and the UK are relatively empty so there are no scheduled announcements that may change things. The recent view of the Bank of England was a bit conservative as there are certain worries and fears regarding the war’s results on the UK economy. The trend is strongly bearish but we cannot exclude bullish reactions as the strong support and the oversold conditions may help buyers to occur.
USDJPY (current price at 124.37) is getting bullish momentum again with serious attempts to approach the price area of 125.10 again which is very critical as it is the highest price in the last 6.5 years. The price is also close to the resistance of 125.85 which is the highest price in the last 20 years! There is an obvious divergence between the two central banks’ policies: the Fed is applying a tight monetary policy and a series of interest rate hikes and the Bank of Japan insists on a loose monetary policy and negative interest rates. Mr. Asahi Noguchi (member of the policy board of the BoJ), declared on Thursday that they will maintain the loose monetary policy, even though rising fuel costs are expected to cause higher inflation. The rising bond yields also help in the bullish direction. The strong uptrend can boost the pair up to 125.85 but since it is a multi-year high level, corrections may occur.

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

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