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The Week Ahead – BoJ intervention may not halt yen’s slide

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USDJPY consolidates post-BoJ intervention

The Japanese yen clawed back some losses after the BoJ intervened in the FX market for the first time since 1998. The central bank has loaded up on its currency in an attempt to ease the imported inflation pressure. However, this symbolic move may only offer the battered yen relief and is unlikely to reverse the current trend. Policymakers have stuck to the loose policy to support the fragile recovery, in a contrarian move to the global race to tighten financial conditions. Diverging yields between Japan and the US may still favour the latter’s currency. August 1998’s high at 147.50 is the next hurdle and 139.00 the closest support.

EURUSD slips as Fed stays hawkish

The US dollar soared to a two-decade high after the Fed raised interest rates by another 75 basis points. Officials have signalled more similar hikes by the end of the year. An update on US rates projection shows a 4.4% by year’s end, a full percentage point higher than last June’s forecast. In Europe, the economic slowdown, energy strains and an escalation in Ukraine could keep traders away from the single currency. This divergence mirrors the fate of other riskier currencies. In a world full of uncertainties, high yield and safety raise the dollar’s relative appeal. The pair is sliding towards 0.9600 after being capped at 1.0040.

UKOIL softens as global growth at risk

Brent crude struggles over geopolitical tensions and demand uncertainty. Russia announced a mobilisation of more troops in an escalating move in the Ukraine conflict. Additional sanctions could be expected from the west along with Russia’s retaliation in energy deliveries. Meanwhile, Washington signalled little progress in reviving the 2015 Iran nuclear deal. The stalemate could keep the tight market in check. However, the global race to stifle inflation makes growth a collateral damage. Lower demand and subdued risk appetite may continue to fuel the correction. The price is hovering above 84.00 and 105.00 is an important cap.

NAS 100 struggles as rates see no ceiling yet

The Nasdaq 100 slips further as the Fed reaffirms its restrictive roadmap. As the economy became second to monetary policy, investors fear that the window for a ‘soft landing’ might be closing. The question would shift from whether the recession is around the corner to how long it would last. The central bank reiterated that growth and jobs would be impacted. A solid labour market may act as a cushion, allowing policymakers to push the tightening agenda aggressively. Growth stock investors will need to remain patient as rate cuts are not expected until 2024. The index is hovering above 11100 with 12000 as the first resistance.

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