The Japanese yen rose for a second straight day against the US dollar, boosted by comments from a senior Japanese politician.
The Bank of Japan (BOJ) is being urged by Toshimitsu Motegi, a senior official of Japan’s ruling party, to more clearly signal its intention to normalize monetary policy.
Normalizing monetary policy refers to moving away from BOJ’s ultra-loose monetary policies it has maintained for over a decade, primarily aimed at combating deflation and stimulating economic growth.
This comes as Japan faces economic challenges due to the excessive decline of the yen, which impacts the cost of imports.
The yen has found some support on the back of Tokyo’s recent bouts of intervention to prop up the currency.
The market is now focused on the BOJ’s next move.
Speculative short positions in the yen have decreased following an unexpected intervention by Japan earlier this month. The U.S. Commodity Futures Trading Commission reported a significant drop in yen short positions, indicating traders’ caution ahead of the Bank of Japan’s upcoming policy meeting.The BOJ is expected to discuss potential interest rate hikes at its upcoming policy meeting, and a shift away from its large-scale stimulus measures could be announced.
Recent weakness in consumer spending does complicate their decision on whether to raise rates next week.
Opinions are mixed about what the BOJ will decide and how it will affect the yen’s value.
Meanwhile, the US dollar was higher as traders waited for inflation data later in the week.
The Australian and New Zealand dollars continued to struggle after China’s surprise interest rate cuts.
When China cuts its rates unexpectedly, it can create concern about the overall health of the Chinese economy. China is a major trading partner for both countries, particularly for exports like minerals from Australia and agricultural products from New Zealand.
A cut in China’s interest rates often signals economic challenges, which can lead to lower demand for these exports.
Currency Market Movers
Let’s review the price action in forex today.
Which currency pairs gained the most today?
GBP/NZD was the leader of the pack, gaining 0.22% or 46 pips.
As shown by our FX Market Movers page, USD/CHF and GBP/AUD weren’t far behind, both gaining over 0.20%.
Looking at the GBP/NZD Trend Following Rating, it’s showing a strong Bullish rating.
Its bullish price action can be clearly seen with the currency pair trading above its moving averages:
But the GBP/NZD Overbought/Oversold Rating is showing “Overbought” so be careful if you’re looking to go long.
Which currency pairs lost the most today?
NZD/JPY was the biggest loser, falling 1.32% or 123 pips.
Looking at the NZD/JPY Trend Following Rating, it’s showing a strong Neutral rating.
Currency Strength
What was the overall strength or weakness of individual major currencies today?
Based on the Currency Strength Meter on MarketMilk™, JPY was, by far, the strongest currency, while NZD was the weakest currency.
If we dive a little deeper and look at just how major currency pairs moved over the past 24 hours, we can see just how weak USD/JPY was.
Let’s look at how JPY pairs moved over the past 24 hours
Currency Short-Term Trends
When it comes to short-term trend strength, JPY shows the most bullish strength.
The New Zealand dollar (NZD) shows the most bearish strength.
But the Australian dollar (AUD) isn’t far behind.
Currency Heat Map
If we take a look a look at our Currency Heat Map, we can see the continued weakness of NZD.
Currency Volatility
Which currency was the most volatile today?
Based on our Currency Volatility Meter, it’s the JPY.
Check out the JPY volatility over the last 24 hours:
Which currency PAIR was the most volatile today?
Given that JPY was the most volatile currency, which pair?
A tie between AUD/JPY and NZD/JPY. Both moved about 1.4% or 145 pips (AUD) and 130 pips (NZD)
Bonus: Is JPY oversold?
According to the Williams %R indicator, 100% (all 7) of the major JPY pairs are showing “oversold”
And almost all of the JPY pairs (86%) are trading below their lower Bollinger Band:
