BUZZ-COMMENT-US recap: EUR/USD up as market awaits BOJ, Fed in event-packed week

Dow Jones Industrial Average -0.16%
S&P 500 index -0.38%
NASDAQ -0.13%

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- The dollar index fell 0.4% as a bounce in risk sentiment spurred flows away from the safe-haven U.S. currency while investors also prepared for this week's BoJ, Fed and BoE meetings, as well as a raft of key economic data culminating in Friday's U.S. employment report.

The BoJ's announcement on Tuesday could be the most interesting of the three if it announces an increase in the current 1% 10-year JGB yield cap and a move away from aggressive JGB buying that a Nikkei article suggested would be debated.

USD/JPY fell 0.4%, and had already been down on the day before the Nikkei story sent it below key kijun support at 149.04. A raised, or removed, yield cap would relieve the BoJ from using aggressive QE and would support to the yen.

A close below the kijun, which caught the Oct. 3 150.165-147.30 flash-crash, could see that day's lows tested. Traders will also be watching Tuesday's MoF intervention report for certainty as whether the MoF induced that Oct. 3 dive.

According to market pricing, the BoJ is the most likely among the Fed, ECB and BoE, to hike rates next year, and the only one not expected begin cutting rates at some point in 2024.

EUR/USD rose 0.47%, hitting a high of 1.0625. Its upward correction from October's oversold bottom will need to clear the 55-day moving average that capped last week's October highs, now at 1.0675.

The German economy contracted 0.1% in Q3 versus Q2 and 0.3% drop forecast. October inflation at 3.0% year on year was less than the 3.3% expected and 4.3% rate in September.

Sterling rose 0.3%, again staying above October's low and but below the downtrend line from July, with UK lending data adding to a mostly dreary run of data.

Aussie rose 0.67%, with a twin lift from robust retail sales and the broader trimming of USD longs amid retreating risk aversion.

Tuesday's data focus is on euro zone inflation and GDP, then U.S. ECI, home prices, and consumer confidence. Wednesday brings MBA, ADP, ISM manufacturing and JOLTS before Fed Chair Jerome Powell's post meeting presser.

For more click on FXBUZ

(Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.)


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