This week saw a series of key events, resulting in volatile market conditions in the foreign exchange market. Post-Bank of Japan meeting, there was a trend towards yen depreciation, followed by dollar depreciation post-FOMC meeting. Subsequently, after announcements from the Bank of England and the Swiss National Bank yesterday, there was once again a dominant trend towards dollar appreciation. Today, there’s also mention of the Chinese yuan’s weakness providing support to the dollar. The dollar index has climbed to the 104 range, reaching its highest level since March 1st. March seems to be characterized by back-and-forth movements. Whether this trend will continue breaking upwards or not will be closely watched during the weekend.
For USD/JPY, the key level is 152 yen. Market sentiment regarding Bank of Japan’s potential removal of negative interest rates, abolition of yield curve control, and halting of ETF purchases seems to have been effectively communicated, leading to a shift from ultra-easing to easing or even accommodative tightening. The stock market is welcoming this shift, and in the forex market, there’s predominant pressure for yen depreciation. However, there’s a historical resistance around the 151.90 level from last year and the year before. In today’s Tokyo market, there’s been a push towards around 151.86, nearing the 152 yen mark again. Attention is focused on the USD/JPY movement towards the weekend.
However, there’s a lack of significant economic indicators to be announced in the foreign markets after this. The only notable one is the release of Canada’s retail sales for January during the New York session.
On the other hand, in terms of speaking events, there are scheduled speeches from a series of ECB officials such as Bundesbank President Weidmann, Austrian National Bank Governor Holzmann, and ECB Chief Economist Lane, among others. In the US-related events, Federal Reserve Chair Powell will deliver an opening speech on “Fed Listens: The Economy After the Pandemic,” followed by speeches from Vice Chair Jefferson and Board Member Bowman of the Federal Reserve Bank. Additionally, there will be participation in panel discussions by Vice Chair Quarles of the Federal Reserve Board and President Bostic of the Atlanta Federal Reserve Bank.
This week has been another rollercoaster ride from dollar weakness to dollar strength. It’s been quite challenging to keep up.
One relatively predictable trend has been the weakness in the Swiss franc. We plan to continue chasing this trend.
