From Bloomberg, markets saw big swings across the currency markets during the Asian session on Monday, with the biggest impact on USD/JPY and AUD/USD. The USD/JPY pair has fallen back below the mid-143.00s. This steep drop reflects how a confluence of damaging economic forces are putting it on shaky ground. At the same time, the AUD/USD exchange rate continued to climb consistently, supported by a mild U.S. dollar selloff.
The USD/JPY’s drop is due to various factors weighing on the safe-haven currency’s appeal. The duo fights back close to a multi-day bottom. Market participants are responding to increasing warnings about U.S. fiscal irresponsibility and deteriorating relations between China and the United States with respect to trade issues. Combined with these geopolitical risks, the continued uncertainty around the Fed’s path seems to be taking the steam out of demand for the dollar.
“USD/JPY languishes near multi-day low; seems vulnerable below mid-143.00s” – [“USD/JPY languishes near multi-day low; seems vulnerable below mid-143.00s” – source]
Relative strength
During the same period, the AUD/USD has continued to benefit from its more recently established strong uptrend and an overall weaker U.S. dollar. The strength of the Australian dollar’s rise stands out even more as it hits a several-day high within the same trading session.
“AUD/USD builds on its steady Asian session move up amid a weaker USD” – [“AUD/USD builds on its steady Asian session move up amid a weaker USD” – source]
That said, analysts warn a softer risk tone may be an ongoing headwind for the Aussie. This positive sentiment comes despite the Reserve Bank of Australia’s dovish outlook which makes uncertain the future course of monetary policy. Investors continue to be concerned about the effects of U.S. fiscal issues and geopolitical conflicts on international markets.
In addition to volatility across major currency pairs affecting gold prices, XAU/USD has not mustered a lot of bullish momentum. In the broader gold market, prices are still trapped in a multi-day range without strong conviction in either direction. Traders are very much on edge this week’s important U.S. macroeconomic releases for possible catalysts that could change the market’s game.
Gold prices continue to hold firm thus far today, buoyed by a combination of supportive factors. They are still holding above that major support level as of the start of Asian trade on Monday.
“Gold price retains intraday positive bias amid a combination of supporting factors” – [“Gold price retains intraday positive bias amid a combination of supporting factors” – source]
Looking ahead, speculation is increasing regarding the timing of rate cuts by the U.S. Federal Reserve. In fact, new entrants are purposely going after the U.S. dollar. These rising bets are bolstered by emerging signs of easing inflation within the United States, further complicating the landscape for traders.
As the complex interplay between new economic indicators and continued geopolitical tension plays out, focus now turns to the currency markets. These factors are ever-present influences on trading strategies. Investors continue to exercise caution while working through these changes and looking for more clarity from the next wave of economic releases.