Forex Trading Library

The Week Ahead – Passive aggressive

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USDJPY under pressure ahead of BoJ meeting

The Japanese yen steadies on speculation of further tweak to the BoJ’s yield curve control. The central bank is expected to stay an outlier and maintain its ultra-loose monetary policy. This means the yen may continue to be depressed as the rate gap widens with the US. While inflation has reached its target, the BoJ considers its imported component due to a weaker yen to be volatile and only substantial strengthening of domestic demand and wages would be worth a policy U-turn. Instead, the bank may raise the ceiling on its 10-year bond yield, boosting the currency in the short-term. 152.00 is a key resistance and 147.00 the first support.

GBPUSD falls as BoE may pause again

Sterling weakens as soft British economic data may lead to another pause by the Bank of England. Slowing momentum in the labour market has prompted traders to dial down their rate expectations. The market widely anticipates the BoE to leave its benchmark rate at 5.25% at the upcoming meeting. However, with headline inflation still more than three times the target, policymakers might not want to see markets price in rate cuts too soon. The upside risk for the currency would be another rate increase at the end of the year, which could help the pound reclaim 1.2400. Otherwise, a dovish message may send the pair to 1.1800.

XAUUSD rallies on safe-haven buying

Gold soars brewing geopolitical tensions boost demand for safe-haven assets. Rising US 10-year Treasury yields have little effect on the non-yielding metal, suggesting that investors are willing to take on the cost of opportunity as they keep a wary eye on the development in the Middle East. The Fed’s rate outlook might also have a substantial impact on the metal’s direction in the coming week. Bullion may see greater support should the central bank ease concerns about rising interest rates. A fall of the US dollar could compound demand for gold and lift offers to this year’s high of 2080. 1930 is the closest support on the downside.

NAS 100 tumbles as market goes risk-off

The Nasdaq 100 struggles as mixed quarterly earnings and geopolitical complication weigh on sentiment. Despite overall stronger-than-expected corporate results, cautious earnings guidance echoes investors’ concerns that a resilient US economy might prompt the Federal Reserve to keep interest rates high for an extended period of time. A pause in the rally may let the bulls ponder whether they have got ahead of themselves. In the meantime, the war in the Middle East could drive capital flows into safer assets like gold at the expense of equities. The index is drifting towards 13600 and 14800 is the closest resistance.

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