JAPANESE YEN UNCHANGED AS BOJ CONTINUES SUPPORTING THE BOND MARKET
The Japanese Yen was little changed today as the Bank of Japan (BOJ) moved to support the bond market. This was the third support since last Monday. The bank did this by purchasing $14.76 billion of government bonds after the yields on the 10-year government bonds moved above 0.11%, which was the highest level since 2017. The yield of bonds moves inversely to their prices. The current rally on the bonds come as traders expect the BOJ to alter its language after the MPC meeting tomorrow. Many analysts expect the bank to announce changes to the balance of the $54 billion ETF buying program. Earlier today, the country announced that retail sales rose by an annualized rate of 1.8% in June, which was higher than the expected 1.7%.
The dollar index fell today after yesterday’s tweet from the US president who threatened to shut down the government if Congress failed to fund the border wall. This will be the second government shutdown and will present fresh challenges for Republicans as they head to the midterm elections. The dollar’s decline also comes as traders wait for the Federal Reserve and the jobs numbers. The Fed is not expected to raise interest rates in this meeting, but traders will want to hear the outlook for the remaining part of the year. They have priced in a rate hike in September and another one in December. They will also want to hear the Fed’s response to the US president.
The euro moved up slightly after the EU’s consumer sentiment numbers improved in July. The numbers from the European Commission showed that the business and consumer survey was at 112.1, which was higher than the expected 112.0. The sentiment on services rose to 15.3, which was higher than the expected 14.2. The laggard was the sentiment of the industrial sector which fell to 5.8, from June’s 6.9. The sentiment of consumers and businesses is a very important indicator of the current feeling about the economy.
This month, the EUR/USD pair has moved up and down in response to the different economic and political news from the EU and the US. The pair’s monthly high was 1.1790 while its low was 1.1575. In the final half of the month, the pair established important support and resistance levels as shown below. It is now trading at 1.1683, as it tries to reach the support level of 1.1740. This price is above the 50 and 25-day Exponential Moving Averages, with the RSI at 39. There is a likelihood that the pair will move higher as traders wait for the jobs numbers and the outcome of the Fed meeting.
The price of gold has fallen this month from above $1250 to a low of $1210. This was the lowest level since November last year. Today, the XAU/USD pair is little moved and is currently trading at $1220. In the past few days, it has consolidated within this level. This consolidation is an indication that the pair could be bottoming in this range. Traders should watch for a break below the $1210 level, which could be an indicator for further downward movements.
In the past one week, the USD/JPY pair has been moving in a sideways direction as shown below. This sideways direction started after the sharp decline on the pair that happened mid-this month. Today, the pair is little changed, even with the continued support by the Bank of Japan. This is an indication that traders are waiting for the Bank of Japan, which will release a statement tomorrow. Before then, the pair will likely continue trading in a sideways direction.