The current market trends suggest a brake on the Yen’s strength and the Dollar’s weakness, moving towards a Christmas week mood. Following the conclusion of major central banks’ monetary policy announcements last week, including the U.S. Federal Reserve (Fed), the market experienced a surprise dollar selling pressure. This was primarily due to Fed Chair Powell’s remarks about the possibility of rate cuts next year. However, recent comments from U.S. financial authorities have been more negative regarding the start of rate cuts, restraining the market’s excessive expectations for rate cuts.
Speculation about the Bank of Japan (BoJ) unwinding its negative interest rate policy had been rising since last week, leading to buying pressure on the Yen. The market reacted sensitively to BoJ Governor Ueda’s statement about facing challenging conditions towards the end of the year and into next year. However, the BoJ’s meeting yesterday confirmed the continuation of its easing policy, as reaffirmed by Governor Ueda in his press conference, leading to a pause in the Yen’s rise against the Dollar.
Currently, a decline in U.S. Treasury yields is making the upside for USD/JPY heavier. However, the lack of new material suggests limited additional downward pressure. With major events for the year passed, the market is likely to gradually shift towards a wait-and-see mood ahead of the Christmas weekend.
Upcoming economic indicators in the overseas markets include the U.S. current account balance (Q3), U.S. existing home sales (November), and the U.S. Conference Board’s Consumer Confidence Index (December).
In terms of speech events, there are talks and interviews by Lane, the ECB Chief Economist, Goolsbee, President of the Chicago Fed, as well as the release of the minutes from the Bank of Canada’s meeting on December 6th, U.S. weekly crude oil inventory data, and the U.S. 20-year bond auction ($13 billion).
Moving forward, I plan to continue exploring opportunities for selling USD. However, given the expected reduction in volatility during Christmas, I intend to decrease my trading activities.
