EUR/USD to Maintain Downtrend, USD/JPY Tests Resistance: 3 FX Trades to Profit Now
The advent of autumn in the currency markets brings with it sustained volatility, primarily influenced by the actions of central banks to combat stubbornly persistent inflation.
The notable exception among the world's major central banks is the Bank of Japan, which has steadfastly maintained negative interest rates, leading to a renewed decline in the Japanese yen, approaching the 150 yen per dollar threshold once again.
Another currency pair worth monitoring is NZD/CHF, where the possibility of the corrective phase coming to an end arises after the Reserve Bank of New Zealand opted to maintain its current stance of no further interest rate hikes.
Meanwhile, the key currency pair EUR/USD has been on a southward trajectory since mid-July. This is attributed to the likely conclusion of the European Central Bank's interest rate hike cycle, while the Federal Reserve remains open to further rate hikes, which has reflected on bond yields, thus brining hungry carry traders into the paring.
Loretta Mester, the head of the Fed's Cleveland branch, a leading advocate for hawkish policies, recently emphasized a high likelihood of another 25bp rate hike this year. In light of this divergence, EUR/USD is under pressure, with the potential for further declines.
However, the demand side has currently initiated a local correction, the completion of which may serve as the catalyst for another leg of downward movement.
On the downside, the scenario anticipates a possible assault on the next support area, which hovers just below the key level of 1.04.
Sustaining the current policy of yield control is becoming increasingly expensive for the BOJ. This became evident in Wednesday's emergency auction, where a total of $4.52 billion worth of
Read more on investing.com
