Yellen disappointed, USDJPY under pressure
Markets were expecting Yellen will tell them something comforting, but she let them down on all counts, in addition, investors have already, and so are losing faith in the ability of central banks to control the situation. The main reaction to this event was held in a pair USDJPY.
– The market reacted to Yellen speech delayed and in any case negative
– USDJPY – a litmus test for the risky asset market
– The pound remains the weakest currency in the current environment
Yesterday’s speech of Fed Yellen was unable to build confidence on world markets, but the striking thing is that investors took a long time to come to this conclusion.
Only in the end of the speech, in the course of answering questions or even later, it became clear that investors were waiting for something more than a simple Yellen agreement with the increased threat due to the deterioration of the situation on the financial markets. Lax series of questions and answers also failed to strengthen the credibility of the Fed.
The USDJPY has taken the baton and run with it last as long as risk appetite has not started to fade, in this regard can be made earlier conclusion: Comments of the central bank is not enough to change the dynamics of the market, and the divergence of monetary policy topic has lost its urgency.
Perhaps someone thought that a less cautious than expected comments Yellen support USDJPY, but now, apparently, there are other catalysts, as we continue to adapt and try to understand what will happen now that the central banks are not able to move the economy off the ground .
It is unlikely that today Yellen dramatically change its position and say something new, apparently, being in the spotlight, it can not adequately play its role, which means that risk appetite will continue to fall. Under these conditions, in addition to falling USDJPY, we are watching the area 1815 to S P500, which is still holding back the onslaught.
Today will be a meeting of the Riksbank, it is assumed that the Stockholm regulator once again lowered the rate due to adverse financial conditions and another drop in oil prices; but after the rapid growth EURSEK and lack of a stable market reaction to the decision of the Bank of Japan to introduce negative interest rates, it is possible that the Riksbank will postpone this decision.
All attention is focused on USDJPY, GBPJPY but also shows a large-scale movement; Local key support is now is below 165, it will cause a breakthrough towards new lows.
Currency overview B10
USD: Bulls are looking for shelter in the dollar since yesterday’s attempt bearish reversal in EURUSD failed, and USDJPY swooped. Hard to say what will be able to restore confidence in the dollar, until we see a significant increase in risk appetite and a good economic statistics for the United States.
EUR: The market yesterday tried to change course in a pair EURUSD, but it was not successful, as the pair resumed growth; The next area of resistance – 1.1500. Euro continues to demonstrate an inverse relationship with interest for risk, though not as strong as that of the yen.
JPY: The yen will be in demand, while not improve attitude to risk, in addition, hedging by exporters may also play an important role due to the release of currency outside the former range in anticipation of the new fiscal year, which begins in Japan on April 1st.
GBP: Pound is under pressure in the current situation, because the lack of interest in risk aversion strengthens the currencies of countries with high current account deficits, and with the United Kingdom among the developed economies in this respect, few can compare. EURGBP The pair tried to turn around, but failed; Returns above 0.7800 further movement will cause to 0.80 / 81.
CHF: Frank goes hand in hand with the euro, perhaps the ECB will have to do something to resolve the crisis in the European banking sector, only if the pressure on the EURCHF weakened.
AUD: Australian Dollar is trying to grow, but it is a bad thing is possible, as demand for some hard assets (gold) is offset by lower prices for other raw materials, in addition, the Australian has a hard time in low risk appetite.
CAD: Another dark day in the oil market supported USDCAD – pair could soon break through the key 1.4000 area if the situation does not change.
NZD: a broken record: NZD running ahead of its fundamentals, but we do not know what will encourage the markets to sell the kiwi, which is now clearly in the spotlight.
SEK: Today will be a meeting of the Riksbank; Central Bank can not lower the rate because, apparently, negative interest rates – this is a waste of time? It is difficult to say, because the Riksbank may be more dogmatic and continue easing monetary policy.
NOK: Norwegian Krone returned to the resistance levels above 9.70 against the backdrop of falling oil prices and the worsening sentiment on risky assets markets – I do not know what will keep it in the range, if the mood did not improve.
Dzhon Hardi, a senior currency strategist at the investment bank Saxo Bank
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