On Tuesday, the forex market saw significant movement. USD/JPY currency pair rose back above the 143.00 level during the Asian trading session after falling to one-week lows. US Dollar, DXY modestly higher today going into weekend. It has gained back some losses, touching six-week lows against its key currency counterparts.
In the early hours of Tuesday, USD/JPY showed its strength by regaining the 143.00 level. Perhaps most importantly, analysts pointed out that this move upwards happens at the same time as a much larger trend of US Dollar recovery. The greenback continues to gain strength as the market reacts to mixed but often positive economic indicators. This dramatic shift in trader sentiment is igniting as much cautious optimism in the market.
The US Dollar’s bounce is particularly impressive following a markedly pessimistic spell that saw it sinking to six-week lows against most competing currencies. Market observers are now closely monitoring upcoming US economic data and comments from Federal Reserve officials, which could further influence currency valuations.
At the same time, gold prices retraced from recent peaks. The precious metal reached a multi-week high of $3,392, nearing the key psychological level of $3,400. As such, it did retrace a little bit during Tuesday’s Asian session. This retreat indicates the start of a changing market environment, as traders recalibrate their bets after the massive price rally we’ve seen lately.
“Gold price eases from multi-week top near $3,400; bullish bias remains” – FXStreet
However, despite this retreat, the overall sentiment towards gold is cautiously optimistic. Those new highs represent almost four weeks of consecutive positive returns. This healthy trend indicates exceptional demand for the asset even in the face of global economic turmoil. Many analysts think today’s price action could indicate at least the beginning of a pullback. But as long as those economic conditions stay positive, the bullish bias is probably going to persist.
To be sure, as the trading day develops, investors will be watching closely for any market-moving developments. In particular, they should be attuned to US developments that might affect the currency and commodity markets. What happens next as USD strength occupies the driver’s seat will be key to determining the direction and how traders should position themselves in the short term battleground.