Market Analysis

The yen lost ground to the dollar following Bank of Japan’s current dovish stance


The Japanese yen lost ground to the US dollar during early Tuesday trading, following the decision by the Bank of Japan to maintain its current dovish stance. As had been expected the BoJ stood firm in its resolve to keep in place its very accommodative monetary policy – a stance that contrasts with that of other major central banks and generates weakness for the yen. The US dollar gains reflect this growing discrepancy between the monetary policy outlook for the two central banks. Controlling inflation is at the top of the US Federal Reserve’s agenda, with growing expectations of four rate hikes in 2022; a scenario markedly different from that in Japan, where consumer prices are rising at a much lower rate than in the US, allowing the BoJ to maintain a dovish approach to monetary policy making.

Ricardo Evangelista – Senior Analyst, ActivTrades


Source: ActivTrader


Global shares retreated on Tuesday, from Tokyo to US future contracts on the S&P500, amid lingering uncertainties and the prospect of rate hikes in the US. Investors fled bond markets, driving yields to new highs as the Fed’s dovish switch, the spread of the omicron strain and the upcoming corporate results keep denting market sentiment. However, today’s bearish price action is still seen as temporary, with most market operator looking to hedge their portfolio with other asset classes ahead of what is going to be a crucial earnings season. Volatility is likely to stay high today, and market directionality is unlikely to be registered prior to any major macro development. Investors will adopt a cautious approach, monitoring benchmark reaction over their major technical supports. Tuesday saw the  DAX-30 index bring one of the worst EU performances so far with prices trading well-below the strong 15,820 support zone. Price actions over 15,675 or 15,530, for an extended correction, will be interesting to watch.

Pierre Veyret– Technical analyst, ActivTrades


Source: ActivTrader


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