What I mean to say is that with today’s big drop in Japan’s machinery orders, it’s becoming more and more clear that Japan’s rates will stay put. Japanese machinery orders came it at a shocking -16.7% while the forecast was around-7.5%. With such a negative number, the Yen dropped like a rock against both the USD and the EUR. But I didn’t need to tell you that. All you have to do is open up a chart and you can see it for yourself.
With a clearer direction of the Japanese economy, traders were selling the Yen up the wazoo and buying currencies with potentially stronger economic futures. The USD and the EUR were the 2 that stuck out the most. Although the common consensus is that the Fed is pausing their ferocious rate hikes, it is not a complete understatement to say that the Fed could still raise rates as shown by the past few economic reports which showed dollar positive numbers. The ECB is also expected to raise rates 2 more times this year which made the Euro another good currency to purchase against the Yen.
However, if you take a look back at the EUR/USD, the most liquid currency pair in the Forex, you’ll notice that the Euro made a jump back above 2700 which means that the uncertainty battle between the Fed and ECB is still not over. On Friday, we saw a drop down to 2650 in this pair which was something we haven’t seen in a long time. Well now we are back at the 2700 level and once again we’ll have to wait for a clearer fundamental picture.