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[IFX Gertrude]

USD/JPY: simply the best



Yesterday, the foreign exchange market experienced a strong storm. At first, the dollar took off like a rocket in all directions, and then it also sharply sprung back. But it still looks good against the yen.

The bouncing dollar

On Wednesday, the US currency showed another parabolic growth against all its major competitors. The springboard for the greenback was the shocking data on inflation in the United States.

Statistics for September showed that consumer prices in America rose more than expected. On a monthly basis, the indicator rose by 0.4% against the forecast of 0.2%.

As for the annual dynamics, inflation also exceeded the preliminary estimate of economists and amounted to 8.2%. This is only 0.1% lower than the value recorded in August.

The market saw that the growth of consumer prices in the United States is still stable, despite the aggressive anti-inflationary campaign launched by the Federal Reserve this year.

This significantly increased traders' expectations about the continuation of the hawkish course in America and the next increase in the interest rate by 75 bps.

Moreover, the hot inflation data again provoked a wave of speculation about a possible rise in the indicator in November by a full percentage point. The probability of such a scenario has increased to 13.4%.

Optimism about a more aggressive tightening served as an excellent springboard for the dollar. Literally overnight, the DXY index jumped by more than 0.5%.

One of the most productive majors was the USD/JPY pair. The quote soared by 0.7% and set another record at 147.665.



The last time the dollar traded against the yen at this level was in 1990. However, the USD/JPY pair did not stay at the 32-year high for long.

Shortly after the release of the consumer price index, the large-scale triumph of the greenback was replaced by an epic failure of the same power.

Analysts explain this by the fact that the market has already fully embedded in the value of the dollar expectations about sustained inflation and its impact on the future course of the Fed. Now a new trigger is needed for the USD to grow steadily, and we will get it soon. Now everyone's focus is switching to the Fed's monetary policy meeting next month.

As we approach the moment X, the dollar will grow on strong US economic data.

The yen is an obvious loser

Despite its recent rebound, the USD/JPY pair still maintains a strong upward mood. This morning, the asset is staying near the 32-year peak reached a day earlier.

Even the growing risk of currency intervention cannot weaken the grip of dollar bulls. At the start of Friday, the Japanese government again threatened to intervene in the market if there is a rapid fall in the yen.

Recall that last month, for the first time since 1998, Japan intervened in support of its national currency, when it fell against the dollar below the level of 145.90.

Given the recent statements of Japanese officials regarding the intervention, it can be assumed that now they will not protect any specific levels.

The other day, the Japanese Finance Minister and the head of the Bank of Japan stressed that at this stage the focus is shifted to the rate of change in the exchange rate.

According to analysts, this approach can keep dollar bulls only from sudden movements, but in general USD/JPY will remain in a bullish trend.

In the future, the asset will move to new price highs quietly for several weeks. Perhaps at some point it will get bogged down in consolidation again, but the upcoming rate hike in the US will not allow it to go into suspended animation for a long time.

The monetary divergence of America and Japan, which has already collapsed the yen against the dollar by almost 28% since the beginning of the year, will continue to intensify and put pressure on the JPY.

This week, BOJ Governor Haruhiko Kuroda once again reaffirmed his commitment to a dovish monetary exchange rate.

He again stressed that he does not consider the current inflation a reason to raise rates, especially since the Japanese economy has not yet recovered from the COVID-19 pandemic and still needs incentives.

Kuroda's comment further aggravated the divergence in the policy of the BOJ and the Fed, especially amid the fact that the market is now expecting further tightening in America.

This suggests that the yen's downward trend against the dollar will not change in the near future, even if the threat of further interventions will contribute to slowing the growth of the USD/JPY pair.

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[IFX Gertrude]

US stock market closed lower, Dow Jones down 1.34%



At the close on the New York Stock Exchange, the Dow Jones fell 1.34%, the S&P 500 index fell 2.37%, and the NASDAQ Composite index fell 3.08%.

The leading performer among the Dow Jones index components today was JPMorgan Chase & Co, which gained 1.82 points or 1.66% to close at 111.19. UnitedHealth Group Incorporated rose 3.22 points or 0.63% to close at 513.13. Boeing Co rose 0.75 points or 0.57% to close at 133.15.

The losers were shares of American Express Company, which lost 4.74 points or 3.35% to end the session at 136.81. Apple Inc was up 3.21% or 4.59 points to close at 138.40, while Chevron Corp was down 3.11% or 5.14 points to close at 160.14. .

The leaders of growth among the components of the S&P 500 index following the results of today's trading were shares of U.S. Bancorp, which rose 3.36% to 42.76, Delta Air Lines Inc, which gained 2.30% to close at 31.08, and Wells Fargo & Company, which rose 1.86%, ending the session at 43.17.

The losers were First Republic Bank, which shed 16.45% to close at 112.57. Shares of The Mosaic Company shed 9.88% to end the session at 46.86. Quotes of CF Industries Holdings Inc decreased in price by 8.40% to 98.04.

Leading gainers among the components of the NASDAQ Composite in today's trading were Agrify Corp, which rose 53.75% to hit 1.45, Fednat Holding Co, which gained 48.02% to close at 0.52, and shares of Imara Inc, which rose 46.90% to end the session at 3.79.

The drop leaders were shares of TOP Financial Group Ltd, which fell in price by 73.47%, closing at 5.49. Shares of Alfi Inc lost 69.90% and ended the session at 0.25. Quotes of Novo Integrated Sciences Inc decreased in price by 61.94% to 0.29.

On the New York Stock Exchange, the number of depreciated securities (2506) exceeded the number of closed in positive territory (579), and quotes of 85 shares remained virtually unchanged. On the NASDAQ stock exchange, 2,720 stocks fell, 1,005 rose, and 229 remained at the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, rose 0.25% to 32.02.

Gold futures for December delivery shed 1.67%, or 28.05, to hit $1.00 a troy ounce. In other commodities, WTI crude for November delivery fell 3.75%, or 3.34, to $85.77 a barrel. Futures for Brent crude for December delivery fell 2.93%, or 2.77, to $91.80 a barrel.

Meanwhile, in the Forex market, EUR/USD was down 0.51% to hit 0.97, while USD/JPY was up 1.00% to hit 148.68.

Futures on the USD index rose 0.82% to 113.18.

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[IFX Gertrude]

US stock market closes higher, Dow Jones gains 1.12%



At the close of the New York Stock Exchange, the Dow Jones was up 1.12%, the S&P 500 was up 1.14% and the NASDAQ Composite was up 0.90%.

Salesforce Inc was the top performer among the components of the Dow Jones index today, up 6.35 points or 4.31% to close at 153.53. Quotes of American Express Company rose by 4.45 points (3.14%), closing the session at 145.99. JPMorgan Chase & Co (NYSE:JPM) rose 2.98 points or 2.57% to close at 118.84.

The losers were shares of Intel Corporation, which lost 0.55 points or 2.08% to end the session at 25.87. Johnson & Johnson was up 0.58 points (0.35%) to close at 166.01, while Nike Inc was down 0.29 points (0.32%) to end at 89. 68.

Leading gainers among the S&P 500 index components in today's trading were Carnival Corporation, which rose 11.28% to 8.09, Lockheed Martin Corporation, which gained 8.69% to close at 431.84, and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), which rose 8.57% to close at 14.31.

The biggest losers were Moderna Inc, which shed 3.71% to close at 134.09. Shares of Hasbro Inc lost 2.88% to end the session at 65.76. Quotes of DexCom Inc decreased in price by 2.81% to 96.93.

Leading gainers among the components of the NASDAQ Composite in today's trading were COMSovereign Holding Corp, which rose 170.14% to hit 0.12, Akouos Inc, which gained 88.16% to close at 13.19, and shares of Helbiz Inc, which rose by 58.07%, ending the session at around 0.42.

The biggest losers were Agrify Corp, which shed 58.60% to close at 4.43. Shares of Cosmos Holdings Inc lost 47.33% and ended the session at 0.08. Quotes of Salarius Pharmaceuticals Inc decreased in price by 45.18% to 2.74.

On the New York Stock Exchange, the number of securities that rose in price (2293) exceeded the number of those that closed in the red (825), while quotes of 115 shares remained virtually unchanged. On the NASDAQ stock exchange, 2441 companies rose in price, 1295 fell, and 277 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, fell 2.77% to 30.50.

Gold futures for December delivery lost 0.43%, or 7.10, to hit $1.00 a troy ounce. In other commodities, WTI crude for December delivery fell 2.33%, or 1.97, to $82.56 a barrel. Futures for Brent crude for December delivery fell 1.43%, or 1.31, to $90.31 a barrel.

Meanwhile, in the Forex market, the EUR/USD pair remained unchanged 0.20% to 0.99, while USD/JPY edged up 0.12% to hit 149.21.

Futures on the USD index fell 0.02% to 111.88.

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[IFX Gertrude]

GBP/USD. A feast during the plague



Deputies quarrel, ministers are leaving, Truss' chair is shaking, inflation is rising.

The pound has started a black streak again, although the presence of a white one can be questioned. The burden of problems hangs over the British currency and it does not get better, on the contrary, there are new reasons to think about the potential achievement of parity for the GBP/USD pair.

The dollar gaining strength, the equally rapidly growing inflation in the UK, which the Bank of England continues to ignore, the specter of a recession. All this is happening during a possible change of power in Britain. The new prime minister has not had time to settle in the chair, as MPs want to send her after Boris Johnson. The government's twists and turns are not at the right time, but apparently there is no other way out.

Inflation

The pound fell for a moment after the release of inflation data. The new indicator turned out to be disappointing, the price index in the UK continued to accelerate, reflecting, among other things, the passivity of the local central bank.

In September, inflation moved to double digits, increasing from 9.9% to 10.1% against the consensus of economists of 10%. More importantly, the core inflation rate rose just as quickly, amounting to 6.5% compared to 6.3% in the previous month.

The highest figure in four decades, but succeeding figures are expected to be higher.

"The overall inflation rate will rise to almost 11% in October, primarily due to a 27% increase in energy prices. But in the first quarter, the overall figure should decrease to 9%, since the peak of growth in food and motor fuel prices has probably been reached," Pantheon Macroeconomics economists comment.

High inflation could be made an argument for strengthening the pound due to the aggressive rhetoric of the BoE, which, in theory, should have followed after another record price increase. Now nothing is keeping the central bank from raising the rate sharply at the November meeting, which was raised to 2.25% in September and is expected to rise to about 4% by the first months of the new year. In practice, things may be different.

However, some economists say this may now be less likely after recent scenes in the government. Most of the September budget plan was canceled this week in favor of a return to "austerity."

This leaves the economy on the path to a barely mitigated recession, which, according to the August monetary policy report, could last for about a quarter.

Everything is too complicated, and the authors of this confusion are British politicians.

Downing Street

The inflationary picture in the UK has been erased by reports of new layoffs in the ranks of high-ranking political officials. Following the sudden departure of former Chancellor Kwasi Kwarteng, who was forced to resign on October 14, Interior Minister Sewelluella Braverman left her post.

The pound tried to grow amid large-scale losses on Wednesday. This movement, apparently, was a reaction to the departure of another high-ranking member of the government, followed by a decline in the yield of UK government bonds, which did not correspond to the internal inflationary picture.

Braverman was replaced by Grant Shapps, whom the prime minister had previously pushed to the back of the government.

Who's next? What other reshuffles are waiting for Britain and will this save the country from collapse?

Anyway, the pound likes what is happening with the change of the main characters.

The drop in yields on Wednesday did not correspond to the global background against which US bond yields were pushing other countries higher.

Dollar

Government reshuffles have a short-term impact on the pound. The reality is that the British currency lags behind not only the strong dollar, but also the weak euro.

The pound continued its downward trend, despite extremely high inflation and the rates of the financial markets on the increase in US bond yields after even more hawkish comments from the Federal Reserve representatives.

The pound's illogical reaction to the consumer price index data highlights that the currency is "trading in a structural, not cyclical way. In a cyclical world, higher inflation will be accompanied by higher yields and a stronger currency," HSBC noted.

When markets are most concerned about structural risks, "higher inflation and higher yields are seen as symptoms of a broader problem," the economists explain.

The pound is likely to continue trading structurally until the country's authorities make more efforts to contain the domestic budget deficit or until inflation reaches a peak. In this case, stabilization of the bond market and the pound is possible. In the meantime, the downward trend is the main one. Sterling is waiting for a difficult few months, during which the GBP/USD exchange rate risks falling to 1.0800 and below.



The dollar rally, fueled by even more aggressive Fed rhetoric, will put more pressure on the lifeless pound.

Traders are revisiting US interest rate hikes closer to 5%. In November, the rate can be raised immediately by 100 bps.

The dollar rally in the middle of the week followed statements from Minneapolis Fed chief Neel Kashkari. The official signaled that he had "very little confidence in what inflation will be in six months" and argued that the central bank should keep raising rates until there was "convincing evidence" that the inflationary peak had passed.

As for rates, September forecasts suggested an upper limit of 4.5% by the end of the year. Concerns were also raised about a rise to 4.75% early next year.

Core inflation rose from 6.3% to 6.6% y/y in September, while the official or headline inflation rate remained stubbornly elevated at 8.2%.

After the reversal of the dollar index, expectations about reaching new highs again became more active. The current range is 112.00-114.00. These notes will remain relevant until the next FOMC meeting. If bulls manage to break above 114.00, gains will accelerate to a 2022 peak at 114.80.

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[IFX Gertrude]

US stocks closed lower, Dow Jones down 0.30%



At the close of the New York Stock Exchange, the Dow Jones was down 0.30%, the S&P 500 was down 0.80% and the NASDAQ Composite was down 0.61%.

The leading gainer among the components of the Dow Jones index today was International Business Machines, which gained 5.79 points (4.73%) to close at 128.30. Salesforce Inc rose 3.83 points or 2.49% to close at 157.50. Verizon Communications Inc rose 0.43 points or 1.18% to close at 37.00.

The biggest losers were Home Depot Inc, which shed 6.03 points or 2.19% to end the session at 269.46. Caterpillar Inc was up 2.10% or 3.87 points to close at 180.54 while Nike Inc was down 1.96% or 1.74 points to end at 86.83. .

Leading gainers among the S&P 500 components in today's trading were Lam Research Corp, which rose 7.81% to 355.87, AT&T Inc, which gained 7.72% to close at 16.74, and shares of Quest Diagnostics Incorporated, which rose 6.32% to close the session at 134.66.

The biggest losers were Allstate Corp, which shed 12.90% to close at 117.71. Shares of Union Pacific Corporation shed 6.80% to end the session at 186.45. Quotes of Tesla Inc decreased in price by 6.65% to 207.28.

Leading gainers among the components of the NASDAQ Composite in today's trading were Nextplay Technologies Inc, which rose 107.31% to hit 0.41, Cabaletta Bio Inc, which gained 50.77% to close at 1.96, and also shares of Save Foods Inc, which rose 31.33% to end the session at 1.97.

The biggest losers were Talaris Therapeutics Inc, which shed 43.39% to close at 1.37. Shares of LMF Acquisition Opportunities Inc shed 34.55% to end the session at 6.82. Quotes of Gaucho Group Holdings Inc decreased in price by 30.40% to 0.21.

On the New York Stock Exchange, the number of securities that fell in price (2067) exceeded the number of those that closed in positive territory (1018), while quotes of 114 shares remained virtually unchanged. On the NASDAQ stock exchange, 2037 stocks fell, 1694 rose, and 240 remained at the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, fell 2.54% to 29.98.

Gold futures for December delivery lost 0.17%, or 2.85, to hit $1.00 a troy ounce. In other commodities, WTI crude for December delivery rose 0.50%, or 0.42, to $84.94 a barrel. Futures for Brent crude for December delivery rose 0.25%, or 0.23, to $92.64 a barrel.

Meanwhile, in the Forex market, the EUR/USD pair remained unchanged 0.12% to 0.98, while USD/JPY rallied 0.19% to hit 150.18.

Futures on the USD index fell 0.07% to 112.81.

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[IFX Gertrude]

US stock market closes higher, Dow Jones gains 2.47%



At the close on the New York Stock Exchange, the Dow Jones rose 2.47% to hit a monthly high, the S&P 500 rose 2.37% and the NASDAQ Composite rose 2.31%.

Caterpillar Inc was the top performer among the components of the Dow Jones index today, up 10.88 points or 6.07% to close at 190.22. JPMorgan Chase & Co rose 6.10 points or 5.25% to close at 122.23. Goldman Sachs Group Inc rose 14.29 points or 4.60% to close at 325.10.

The losers were shares of Verizon Communications Inc, which shed 1.65 points or 4.46% to end the session at 35.35. American Express Company rose 1.67% or 2.38 points to close at 140.04, while Procter & Gamble Company rose 1.25% or 1.59 points to close at 128.58.

Leading gainers among the components of the S&P 500 in today's trading were Schlumberger NV, which rose 10.33% to 50.41, Freeport-McMoran Copper & Gold Inc, which gained 9.99% to close at 32. 03, as well as Huntington Bancshares Incorporated, which rose 9.47% to end the session at 14.45.

The drop leaders were SVB Financial Group shares, which lost 23.95% to close at 230.03. Shares of Robert Half International Inc lost 8.55% and ended the session at 73.01. Quotes of HCA Holdings Inc decreased in price by 5.69% to 196.74.

Leading gainers among the components of the NASDAQ Composite in today's trading were Huadi International Group Co Ltd, which rose 89.27% to hit 58.92, Altamira Therapeutics Ltd, which gained 58.64% to close at 0.52 , as well as shares of Missfresh Ltd ADR, which rose by 57.50%, ending the session at around 2.52.

The drop leaders were shares of Immunic Inc, which fell 77.39% to close at 2.08. Shares of Nextplay Technologies Inc lost 33.23% and ended the session at 0.28. Quotes of Kalera PLC decreased in price by 35.61% to 0.28.

On the New York Stock Exchange, the number of securities that rose in price (2282) exceeded the number of those that closed in the red (835), while quotes of 104 shares remained virtually unchanged. On the NASDAQ stock exchange, 2503 companies rose in price, 1265 fell, and 238 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, fell 0.97% to 29.69.

Gold futures for December delivery added 1.40%, or 22.95, to $1.00 a troy ounce. In other commodities, WTI crude for December delivery rose 0.73%, or 0.62, to $85.13 a barrel. Futures for Brent crude for December delivery rose 1.24%, or 1.15, to $93.53 a barrel.

Meanwhile, in the Forex market, EUR/USD rose 0.80% to hit 0.99, while USD/JPY shed 1.75% to hit 147.51.

Futures on the USD index fell 0.90% to 111.80.

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[IFX Gertrude]

US stocks closed higher, Dow Jones up 1.34%



At the close of the New York Stock Exchange, the Dow Jones rose 1.34% to a one-month high, the S&P 500 was up 1.19% and the NASDAQ Composite was up 0.86%.

Amgen Inc was the top performer among the components of the Dow Jones index today, up 9.38 points or 3.72% to close at 261.32. Quotes Coca-Cola Co rose by 1.61 points (2.88%), ending trading at 57.57. Home Depot Inc rose 7.73 points or 2.81% to close at 283.26.

The least gainers were Nike Inc, which lost 0.49 points or 0.55% to end the session at 88.01. The Walt Disney Company (NYSE:DIS) was up 0.32 points or 0.31% to close at 101.72, while Chevron Corp was down 0.06 points or 0.03% to end the trading at 173.13.

Leading gainers among the S&P 500 index components in today's trading were HCA Holdings Inc, which rose 7.02% to hit 210.47, Tractor Supply Company, which gained 5.30% to close at 207.83, and also shares of Regions Financial Corporation, which rose 5.28% to close the session at 20.55.

The least gainers were Las Vegas Sands Corp, which shed 10.29% to close at 35.05. Shares of Starbucks Corporation shed 5.47% to end the session at 83.76. Quotes of Wynn Resorts Limited decreased in price by 3.86% to 56.53.

Leading gainers among the components of the NASDAQ Composite in today's trading were Applied Genetic, which rose 62.43% to hit 0.39, Vaxcyte Inc (NASDAQ:PCVX), which gained 60.35% to close at 33. 00, as well as shares of Mullen Automotive Inc, which rose 32.94% to close the session at 0.50.

The least gainers were Tricida Inc, which shed 94.48% to close at 0.60. Shares of Alfi Inc lost 54.32% and ended the session at 0.11. Quotes of Huadi International Group Co Ltd decreased in price by 43.99% to 33.00.

On the New York Stock Exchange, the number of securities that rose in price (1,751) exceeded the number of those that closed in the red (1,344), while quotes of 124 shares remained virtually unchanged. On the NASDAQ stock exchange, 1925 companies rose in price, 1828 fell, and 253 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, rose 0.54% to 29.85.

Gold futures for December delivery lost 0.15%, or 2.55, to hit $1.00 a troy ounce. In other commodities, WTI crude futures for December delivery fell 0.26%, or 0.22, to $84.83 a barrel. Futures for Brent crude for January delivery rose 0.13%, or 0.12, to $91.46 a barrel.

Meanwhile, in the forex market, the EUR/USD pair remained unchanged 0.14% to 0.99, while USD/JPY edged up 0.98% to hit 149.09.

Futures on the USD index fell 0.04% to 111.93.

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[IFX Gertrude]

Gold still attractive for buyers



The price of gold dropped in the short term after reaching the 1,675 level. Now, it is traded at 1,664 at the time of writing. XAU/USD slipped lower as the DXY tried to rebound. Still, Gold could try to develop a new bullish momentum as the Dollar Index is under downside pressure.

Today, the fundamentals will drive the price, so you have to be careful. The ECB is expected to increase the Main Refinancing Rate from 1.25% to 2.00%. The Monetary Policy Statement and the ECB Press Conference could really shake the markets.

Also, the US Advance GDP is expected to register a 2.3% growth, Advance GDP Price Index may report a 5.3% growth, Unemployment Claims could be reported at 219K, Durable Goods Orders could register a 0.6% growth, while Core Durable Goods Orders may report a 0.2% growth.

As you can see on the H1 chart, XAU/USD found resistance at 1,668. The bias remains bullish as long as it stays above the uptrend line. Technically, after its strong growth, a temporary drop was natural.

Staying near the 1,668 resistance may signal an imminent breakout. Temporary consolidation could bring more bullish energy and attract more buyers.

XAU/USD Forecast!

Staying above the minor uptrend line and making a valid breakout above 1,675 could confirm further growth. A new higher high is seen as a buying opportunity. The 1,700 psychological level and the R2 (1,699) represent upside targets.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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[IFX Gertrude]

The Bank of Japan pushes the yen into a loop again



Today, the Bank of Japan has once again confirmed its status as an outsider among global central banks. Despite the global tightening trend, the BOJ has decided to maintain ultra-low interest rates.

No changes on the Japanese front

At the end of the week, traders on the USD/JPY pair are focused on the BOJ meeting. At the start of Friday, the central bank issued its verdict on the further monetary exchange rate.

As expected, the BOJ did not present a hawkish surprise.

The central bank has maintained its policy guidelines: it left interest rates at -0.1% and promised to keep the yield of 10-year bonds at around 0%.

The BOJ continues to follow the dovish route, even despite the next jump in consumer prices. The report published today showed that in October, annual inflation in the country increased at the highest rate since 1989.

This month, the core CPI jumped to 3.4%, which is significantly higher than the BOJ target, which is at 2%. Nevertheless, the BOJ still considers the acceleration of inflation unsustainable.

The central bank expects consumer price growth to slow down to 1.6% over the next 12 months, although it has raised its inflation forecast for the current fiscal year.

According to BOJ estimates, the CPI will remain around 2.9% until March 2023, which is significantly higher than the previous estimate of 2.3%.

Another argument in favor of maintaining a soft monetary policy of the BOJ is the slow recovery of the economy after the COVID-19 pandemic.

Now the central bank is concerned that a total increase in interest rates in the world could trigger a global recession, which would negatively affect the state of the already fragile Japanese economy.

Given this risk, the BOJ sharply lowered its economic growth forecast for the current fiscal year. Now the central bank expects GDP to rise not by 2.4%, as before, but by only 2%, followed by a slowdown to 1.9%.

Such gloomy prospects are the BOJ's main obstacle on the way to normalizing its monetary policy. It forces the BOJ to take a marginal dovish position, which condemns the yen to further depreciation.



What is happening with JPY now?

This year, the yen is experiencing the worst drawdown in almost all directions in history, but most of all against the dollar. Since January, due to the strong monetary divergence of Japan and the United States, the JPY rate has fallen against the USD by more than 20%.

Unlike the BOJ, the Federal Reserve has embarked on a hawkish track this year and has significantly outpaced other central banks in terms of rate hikes.

In order to curb record high inflation in the country, American politicians have already raised interest rates five times during the year and are preparing to hold another round of hikes next week.

Now the markets expect that in November the Fed will again increase the indicator by 75 bps, which is an excellent driver for the dollar, especially when paired with the yen.

However, at the same time, most traders believe that by December, the US central bank may slow down the rate of tightening to 50 bps, as the American economy begins to show signs of slowing down.

The emergence of speculation about the Fed's less hawkish policy caused the greenback to sharply weaken on all fronts this seven-day period, including against the yen.

Recall that last week the dollar reached a new 32-year high relative to the yen, approaching the 152 mark. Since then, the USD/JPY pair has fallen by almost 4%.

In part, the greenback's position was undermined by two cycles of interventions, which Japan is supposed to have conducted in support of the yen. But the main pressure on the dollar was still exerted by increased expectations of a slowdown in the pace of rate hikes in America.

Now that the USD/JPY pair has received another powerful boost from the BOJ, analysts expect it to return to growth.

At the time of preparation of the material, the yen really moved into the red zone and fell against the dollar by 0.35%. According to experts, in the short term, the yen's decline may accelerate significantly.

Memories of last month are still vivid in the minds of many, when the dovish comments of BOJ Chairman Haruhiko Kuroda caused a sharp weakening of the yen. And just half an hour after Kuroda finished his speech, the Japanese Ministry of Finance conducted the first currency intervention in 24 years.

Some analysts do not rule out that in the near future the market may catch deja vu.

If the dollar bulls break loose again, the Japanese government will most likely not hesitate for a long time and press the red button.

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[IFX Gertrude]

De-dollarization or de-eurozation? Analysts consider both scenarios possible



Analysts have been discussing the possible ditch of the US dollar in foreign settlements for a long time. However, now, they do not exclude a similar scenario for the euro. Analysts are mulling over what could lead to such outcomes. They fear that in the near future the European currency will face the same challenges as the Us dollar. Currently, many countries are trying to replace the US dollar in mutual settlements.

Analysts pinpoint that the euro has more disadvantages than advantages. Settlements in the euro and its support are getting more expensive. According to the Eurobarometer, the euro is popular with 60% of the population. However, now many EU citizens are skeptical about the future of the euro. Some economists reckon that some EU states may leave the eurozone and ditch the euro.

Earlier, economists suggested a possible replacement of the US currency by many countries. However, the euro is now facing such a risk as well. De-eurozation looks quite feasible. However, the situation in the global financial market is unlikely to change in the near future, economists believe.

Currently, the authorities of many countries are trying to diversify their foreign exchange reserves to reduce dependence on the greenback. However, a sharp decline in the dollar share of international reserves looks unlikely as roughly 40% of the world's transactions are done in dollars.

The use of national currencies in international settlements spurs their demand and reduces dependence on the Fed's monetary policy. At the same time, the current geopolitical turmoil is fueling a rally of the US dollar as many countries prefer to keep the US currency in their reserves.

At the start of the week, the euro was trading almost at the same levels. On October 31, the EUR/USD pair was fluctuating near 0.9952, slightly below the previous pivot level of 0.9963.

Investors are now awaiting the release of the euro area's important macroeconomic report, namely GDP for the third quarter of 2022. According to preliminary estimates, from July to September, the economy declined slightly to 2.1%. In the second quarter of 2022, this figure totaled 4.1%.



The greenback has been rising for some time thanks to the Fed's hawkish stance. On November 2, the Bank of England and the Fed will hold their meetings. The Fed is widely expected to raise the key rate by 75 basis points to the range of 3.75-4%.

The Fed's key rate decision may significantly impact market sentiment. Some analysts believe that the regulator could switch to less aggressive tightening despite a 75 basis point rate hike. However, other analysts are certain that the regulator will hike the rate by 75 basis points at the next meeting scheduled for December 14.

At the February meeting in 2023, the watchdog is expected to increase the key rate by 25 basis points to 4.50-4.75%. Analysts suppose that three will be more 25 basis point rate increases next year. Such a scenario is bearish for the US dollar. The euro is also unable to regain long-term rise. Thus, it is recommended to buy the EUR/USD pair with a long-term target level above 1.0500.

Many economists are afraid that sentiment will become more bearish on the US currency. Last week, large traders initiated a sell-off of the greenback. As a result, the number of short positions during the week increased by 21%. If there are no positive fundamental favors, the greenback may drop lower.

Nevertheless, the US dollar remains the most popular currency, with close to 90% of all currency trades having the dollar as one leg of the transaction. It has been rallying for some time amid the Fed's aggressive tightening. In the last few months, the US dollar has reached multi-year highs against the euro, the pound sterling, the yen, and the yuan. It also took advantage of a recession in the eurozone as investors got rid of the euro in favor of the US dollar.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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