Dollar Weakness Pauses, Searching for the Next Direction: Focus on EUR and GBP Selling
Tokyo Market Trends: Volatile Movement
In the Tokyo market, the announcement that President-elect Trump nominated Janet Yellen for the next Treasury Secretary gained attention. She is considered relatively less aggressive on high tariff policies, which led to a retreat in concerns about rising US prices, triggering a brief wave of dollar selling and yen buying.
USD/JPY Movement
- Last Friday: Around 154.70
- This Morning: Started in the low 154 yen range, briefly falling to 153.55 yen.
EUR/USD
- There was a brief move to the 1.05 level, reflecting overall dollar weakness.
- The subsequent dollar weakness eased, and yen buying strengthened, resulting in a volatile market.
Key Points for the Next Move
- Policy Influence of Janet Yellen
She is expected to be more active on tax cuts and deregulation, which could help alleviate concerns about a slowing US economy.
On tariff policies, she is likely to seek a realistic compromise, which could act as a dollar bullish factor. - Thanksgiving Week Impact
There are no major US data releases this week, and markets will be closed on Thursday for Thanksgiving.
Many participants may take Friday off as well, leading to thin trading conditions with limited directionality.
As usual, there could be a stronger wait-and-see mood early in the week.
Major Currency Outlook
- USD/JPY
- Outlook: Expected to remain in the 154 yen range, looking for direction.
- Focus:
- US stock market movements.
- Impact of lower liquidity due to Thanksgiving week.
- EUR/USD
- Outlook: After trying the 1.03 level last week, the pair rebounded to the 1.05 level. However, expectations of a significant rate cut at the ECB’s December meeting are capping the upside.
- Strategy: Leaning slightly bearish, focusing on selling.
- GBP/USD
- Outlook: Weakening due to the uncertainty in UK economic data and geopolitical risks.
- Strategy: Continue with a bearish stance on GBP.
- Cross Yen
- Outlook: Slightly volatile with a dollar-led movement. If US stocks rise and risk appetite strengthens, there may be a temporary move to test higher levels.
Impact of the Ukraine Situation
- The ongoing conflict between Ukraine and Russia has heightened market concerns about missile attacks.
- Geopolitical risks remain strong, and there is a possibility that risk-off movements could resume.
Today’s Strategy
- EUR Selling: Focus on selling EUR/USD, as ECB rate cut expectations are weighing on the euro.
- GBP Selling: Given the uncertainty in the UK economy and risk-off factors, focus on selling GBP.
- USD/JPY: Adopt a wait-and-see approach, as direction is unclear in thin trading conditions.
Summary
Today, the focus remains on EUR and GBP selling. Stay alert for sudden market movements in thin liquidity, while being mindful of geopolitical risks and liquidity decline due to Thanksgiving. Aim for flexible responses in this environment.
