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  • XtreamForexXtreamForex Posts: 261
    Japan’s Inflation hits the ‘40-year high

    Despite the BOJ’s best efforts to contain inflation, prices are indeed rising.

    Nationwide inflation rose to its highest levels since 1984 at 3.7% y/y and core inflation is also at 3.6%. If food and energy are excluded, CPI is now 1.4% y/y- which is its highest since 1998 we exclude the pre-emptive buying ahead of 2015’s tax hikes. Services PPI is down to 9.1% but historically high after peaking at 10.2% last month.

    At 3.7%, nationwide CPI is nearly twice their 2% target. The BOJ were relatively late to the 2% inflation bandwagon by introducing their 2% target in January 2013. Of the 118 months since it was introduced, only 16.1% of them have been above 2%. There was a 12-month period from April 2014, and more recently inflation has been above 2% since April this year and still rising.
    XtreamForex
  • XtreamForexXtreamForex Posts: 261
    RBNZ seen raising rates by historic 75 bps

    Whilst there has been some less expectations that inflation around parts of the world have topped out, recent data for New Zealand is remining us that inflation can remain at elevated levels for longer than anyone would like.

    CPI rose 2.2% q/q, up from 1.7% and well above the 1.6% consensus. Annual CPI rose 7.2% y/y – slightly below the 7.3% peak – but if the quarterly is trending higher then it can send the annual higher too. Labor costs have risen to a record high of 3.8% y/y and, whilst the quarterly read pulled back from its record, at 1.1% q/q labor costs remain quite elevated from its long-term average of 0.01%.
    XtreamForex
  • XtreamForexXtreamForex Posts: 261
    FOMC Minutes, Fed Hiking Rates slowly

    At the November 2nd FOMC meeting, members unanimously agreed to hike the Fed Funds rate by 75bps to bring the key rate to 3.75%-4.0%.The statement from the meeting said members agreed that ongoing rate hikes were necessary until rates were “sufficiently restrictive”. In addition, the statement noted that “in determining the pace of rate hikes, we will consider cumulative tightening, policy lags and economic and financial developments”. However, during the press conference which followed, Fed Chairman Powell stated that the incoming data suggests that the ultimate level of rates will be higher than previously anticipated.

    The FOMC Minutes released on Wednesday showed that a substantial majority of officials said a slowing in the pace of rate hikes would be appropriate soon. In addition, participants agreed that a slower pace of rate hikes would allow the FOMC to better assess the progress towards its goal, given the associated lags with monetary policy. However, “various” Fed officials saw rates peaking at a higher level, which concurs what Powell’s comments in the press conference. Since the last meeting, numerous Fed speakers have been hinting that the December rate hike will only be 50bps.

    On November 2nd , the DXY initially took the statement to mean that the Fed would be dovish. However, it immediately went higher went higher after Powell noted that the terminal rate would be higher. The DXY closed November 2nd near unchanged at 111.55, with a long lower wick. It continued higher into Friday, reaching a high of 113.15. However, after the markets had more time to digest the comments, the DXY traded 220 pips lower near 110.72. Upon doing so, it broke through the bottom trendline of a symmetrical triangle and the Index hasn’t looked back since. The DXY paused its move lower at the 50% retracement level from the lows of March 31st to highs of September 28th near 106.34.

    The target for the break of an ascending wedge is a 100% retracement, which is 105.34. This is also the first support level. Below there, price can fall to horizontal support at the lows of August 10th at 104.64, then the lows of June 16th at 103.42. If the DXY moves highs, the first resistance is at the bottom trendline of the previous ascending wedge near 107.50. Above there, price can move to the highs of the wedge at 107.99, then the 50% retracement from the highs of November 10th to the lows of November 15th at 108.17.
    XtreamForex
  • XtreamForexXtreamForex Posts: 261
    EUR/JPY Eyes Breakout – Xtreamforex

    The US out on holiday, there’s not much point in discussing the dollar. Instead, something that could move during the Asian hours. The Japanese yen.

    After being the weakest of major currencies for an extended period this year, the yen has stormed back against the dollar, along with equities, gold and other risk-sensitive assets. Wednesday’s publication of less hawkish Fed minutes and weaker-than-forecast US business activity data further fueled speculation the Fed is going to slow down its rate increases and potentially pause in early 2023.

    As the USD/JPY slumped, other yen pairs have started to move lower with it – including the EUR/JPY – albeit to much lower extent. This is because nothing has changed in terms of the Bank Of Japan’s ultra-loose monetary policy. Thus, the USD/JPY has been hit because of dollar weakness than yen strength.

    In terms of the EUR/JPY, it is true that the euro carries some positive yield over the yen. With the ECB determined to get the 10% inflation back down by aggressive rate increases, the disparity between Eurozone and Japan monetary policies are likely to grow larger over time. This is something that should help provide a floor for EUR/JPY in the long-term outlook.

    But the short-term, especially with the USD/JPY moving lower, we could see some weakness in the EUR/JPY and other yen pairs. Also, much of the interest rate disparity is already priced in. And with the eurozone economy on its knees, there is a risk that the ECB might end its hiking cycle quicker than expected, reducing the appeal of the single currency over the safe-heaven yen.

    The EUR/JPY actually formed a bearish engulfing candle on the daily chart on Wednesday, and we saw some downside follow-through today. The selling then came to a pause as rates tested support and the bullish trend of the triangle pattern around 143.80.

    The upside was capped by the bearish trend line and resistance circa 146.00. Shorter-term resistance is seen around 144.65 to 145.00 range. Thus, conservative speculators may wish to wait for price to break out of this triangle consolidation pattern and trade in the direction of the breakout
    XtreamForex
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