Forex USD/JPY: buyers fear intervention of the Bank of Japan

FOREX Fundamental analysis for EURUSD on March 21, 2023The Fed's two-day meeting starts today but it is already clear that there is no unequivocal opinion among the FOMC members on further rate hike. Some officials, who fear a banking crisis, say they will postpone a monetary tightening at least into March. Others believe that the difficulties in the banking sector are temporary, and if the tightening of monetary policy is interrupted, all the efforts spent on fighting inflation will be in vain, as inflationary pressure will return to growth, as it was in the 1970s.In the futures market, the probability that the Fed will raise rates by 25 basis points in March has reached 72%.The Fed's monetary tightening cyclesThe bond market seems to have been spooked the most by the banking crisis. Yields are showing their fastest decline since 1987. Stocks, on the other hand, are completely ignoring the banking problems. Nevertheless, the financial stress is sure to hurt the United States economy. Goldman Sachs predicts that a sharp credit contraction will cut 2023 GDP growth by 0.3%. This is equivalent to the effect of 1 or 2 25 basis point monetary cuts. But unlike a rate hike, the news will put pressure on the U.S. dollar.The uncertainty brings the idea of a dovish Fed reversal back to the market. If literally, a week ago investors were speculating about a rate hike to 6%, now they assume that the Fed's cumulative restriction will not exceed 35 basis points.The ECB deposit rate is roughly the same. Instead of the previous target of 4.2%, a ceiling of 3.2% now seems more realistic.U.S. and German bond yields indicating a lower Fed and ECB rate ceilingThe markets will know the Fed's decision tomorrow. Our purchases from 1.0575 and 1.0665 have justified, we will increase longs with targets at 1.0755 and 1.0825.

Fundamental analysis FOREX for March 20, 2023Three large credit institutions in the United States declared bankruptcy in March and First Republic bank needs urgent financial aid. This indicates the serious problems of the financial system, and the problems are global, since the banking crisis is spreading around the world very quickly. Credit Suisse of Switzerland went into a downward spiral, but it will be bought by the largest UBS, but only under the financial guarantees of the Government and the National Bank of Switzerland. All this is reflected in forex trading and, in particular, in the dynamics of EUR/USD, which returned to strengthening at the end of the week.Meanwhile, the OSER is calling on the Fed to raise rates and considers the ECB's 50-basis-point monetary tightening to be absolutely the right decision. In this regard, the markets have returned to the belief that the Fed will raise rates by 25 basis points on March 21-22, although last week it was expected that the US regulator would pause in tightening monetary policy after the banking sector crisis.Assumed dynamics of the federal funds rateIt should be noted that two opposing views are now strong in the market. A part of investors believe that the recession of the US economy is much closer than expected, so the Fed's "dovish" U-turn will come as soon as this year. Another part believes the regulator will raise the rate to 5.5%, or even 6%, and the U.S. economy, despite problems in the banking sector, will avoid recession.Forecasts for the U.S. economyNevertheless, investors are gradually moving away from forex trading on the news and switching to monetary policy divergence and macroeconomic reports. At the moment the ECB's monetary restriction rate is higher than the Fed's, which is a positive factor for EUR/USD, so we continue to buy the pair towards 1.0755 and 1.0825.

FOREX Fundamental analysis for EURUSD on March 17In the atmosphere of an impending banking crisis the main goal of the ECB was not to cause any harm. The regulator might well have abandoned the monetary restriction or conducted it in a smaller volume, but Christine Lagarde's team acted according to the initial plan and raised the rate by 50 basis points.Investors understood that the ECB is in control and still considers the fight against inflation in the Eurozone a priority. This is a good sign for the single currency, though the initial market reaction to the Central Bank's decision was a fall in EURUSD. The reason was clearly "dovish" signals of the regulator that refused a steady pace of rate hikes and lowered its forecasts for the year-end consumer price index from 6.3% to 5.3% and for 2024 from 3.4% to 2.9%.European Central Bank Inflation Forecasts.It appears that the ECB will finish the inflation battle faster than previously thought. In this regard, the futures market has quite logically lowered the maximum rate forecast from 4.2% to 3.2%. Confirmation of the fact that the cycle of monetary restriction is in the stage of completion is the fall of German 2-year bond yields below the ECB rate.Dynamics of German bond yields and the ECB rate.However, it is likely that much in the ECB's actions will depend on external factors, in particular, on the situation in the banking sector in the United States and the Eurozone. If the situation stabilizes, the regulator will continue to raise the rate, the more so since Christine Lagarde said the Eurozone banking system is in excellent condition and assured that the ECB has enough funds to support the financial structure.In the U.S. the big banks also expressed their willingness to support the First Republic Bank and provide it with additional liquidity worth $30 billion. This news supported the stock market, and through the correlation of currencies, the buyers of risky assets.It's not impossible that the banking crisis will still make itself known, but the willingness of the Fed, the ECB and the major financial institutions to help the euro buyers in trouble. Our trading method on Forex remains the same - after EUR/USD returns we open longs, and after the pair's fixation above 1.0665 we will increase the longs.

Forex analytics on USDJPY for March 16USDJPY remains in a narrow price range on Thursday, consolidating after a sharp decline.The macroeconomic statistics, published in Japan, had no effect on the dynamics of the asset. Industrial production in January lost 3.1% (y/y), which was worse than analysts' forecasts. In monthly terms the fall is even more obvious (-4.6%). At the same time, the volume of exports in February increased considerably (+6.5%), though analysts forecasted +7.1%. The volume of imports increased by 8.1%. Indicators of import-export operations helped to reduce the trade balance deficit in the Country of the Rising Sun from -3498.6 billion yen to -897.7 billion yen.The previous day the minutes of the Bank of Japan meeting were published, according to which the regulator decided to keep the course of ultra-soft policy. Members of the board think that tougher course will interfere with economic recovery, which has just started to give positive signals. Moreover, Japan has decided to adjust the wage level, although experts believe it will not be enough to support the citizens in the context of inflation reaching a 41-year high of 4.0%.Technical analysis for USDJPYOn the daily chart a downward rectangle pattern may be formed. Bollinger Bands are turned down, MACD is decreasing in the negative range. Stochastic oscillator has reversed upward and is out of the oversold area.After a confident breakdown of 134.00 resistance, we will open long positions with a target at 135.57. Stop-loss is set at 133.20.Upon fall of the pair below support at 132.00, we will start selling with take profit at 130.00. Stop-loss is set at 133.00

After a two-day decline with a renewal of the low of March 10, GBPUSD starts to recover its losses on Thursday. During the Asian session the pair tested the resistance 1.2080 to break up.Today the U.S. will release a report on jobless claims and construction industry statistics. Tomorrow, the University of Michigan will release consumer confidence index for February. The index is expected to retain its previous value of 67.0 p.Yesterday the UK Finance Minister presented to the Parliament the draft budget for the current year according to which GDP is expected to fall by 0.2% which is better than the initial version which envisaged a 1.5% decline.The Cabinet of Ministers expects the economic downturn to end this year. Next year GDP is expected to grow by 1.8%, in 2025 - by 2.5%. At the same time, by the end of 2023, inflation is projected to fall to 2.9%.In addition, the draft budget assumes support for families with children, as many parents in the UK cannot return to their jobs because of skyrocketing childcare costs.The Bank of England will meet next week, and investors are concerned about the outlook for the British regulator's monetary policy.GBPUSD Technical AnalysisOn the daily chart the Bollinger Band indicator has not chosen a definite direction and demonstrates flat dynamics.The MACD histogram is near the zero line. The indicator does not show any signalsStochastic Oscillator is declining and has already left the overbought area.In case of a confident breakdown and consolidation of the price above 1.2100, we form long positions, aiming for 1.2176. Stop-loss is set at 1.2054.Pair fixation below 1.2054 will tell about development of descending movement. The sellers' target is 1.1950. Stop-loss is set at 1.2100.

FOREX Fundamental analysis for EURUSD on March 16The banking crisis moves to Europe, with worse consequences than in the U.S. The day before the Credit Suisse bank asked for additional funding, after which the shares of the financial institution lost 31%, capturing along the way the shares of other European banks and the collapse of the single currency.Credit Suisse addressed its request for help to the largest shareholder - the National Bank of Saudi Arabia and received an instant refusal.In fact, investors have long been taking money out of Credit Suisse. The bank has been linked to drug trafficking in Bulgaria, corruption schemes in Mozambique and other nefarious affairs.But are the Swiss bankers' affairs that bad? Unlike the SVB, there are very liquid instruments in the bank assets, and the National Bank of Switzerland has never had claims to Credit Suisse. And the Bank has nothing to do with the Eurozone, although it was the European Central Bank that first announced about the emerging risks.In the derivatives market the probability of ECB rate hike by 50 basis points in March plummeted from 90% to 20%, although the market may have reacted too emotionally to the event. Of course, the Central Banks will resolve the situation and investors will go back to analyzing the macro-statistical reports. And here we have a decrease of inflation and reduction of retail sales in the United States. It is no coincidence that the idea of a "dovish" turnaround by the Fed has returned to the market.Of course, price impulses in trading are quite common, but let's use them to our own advantage. Our forex trading strategy implies buying when the EUR/USD returns to the 1.0575-1.0725 range, which will allow us to form longs at an attractive price.

FOREX Fundamental analysis for EURUSD on March 15The Fed is in a bad predicament. The regulator has to continue the fight against inflation, which does not intend to give up and at the same time ensure the stability of the financial sector. Will the Fed's refusal to further tighten monetary policy help American banks? It's a tough question. A week ago, few doubted that the FOMC would raise the rate by 50 basis points in March.At the same time, the report on inflation in the USA, published the day before, shows that the Fed cannot afford to switch to a wait-and-see attitude. On an annualized basis, consumer price growth slowed from 6.4% to 6.0% and core inflation from 5.6% to 5.5%, which matched Bloomberg's forecasts. However, a 0.5% (m/m) rise in the core rate to a five-month high suggests that inflationary pressures remain.Yesterday's statistics combined with problems in the U.S. banking sector allowed EURUSD to rise above 1.0705.Dynamics of inflation in the USAIn other words, the central bank has to continue its monetary easing in line with its own plans and objectives, so the 80% probability of a 25 basis points rate hike in March looks quite reasonable.At the same time there is a clear increase of interest in risky assets in forex trading, which is a factor supporting EURUSD.US stock indices dynamicsMoreover, the problems in the US financial sector cannot influence the European Central Bank's determination to proceed to toughening of the monetary policy and to raise the rate by 50 basis points at once in March. In this regard the press-conference held by Christine Lagarde from which investors will try to understand the perspectives of the European regulator's monetary policy is of particular interest.Sellers of EURUSD did not manage to drop below 1.0705, and the idea of the uptrend continued. At the same time, the "bulls" are facing important resistances at 1.076 and 1.08, which can slow down further strengthening.

FOREX Fundamental analysis for EURUSD on March 14The banking crisis has confused all forex trading forecasts. Yes, the United States authorities have taken unprecedented measures to save depositors' deposits, 95% of which were not insured. But the massive bailout measures could undermine the US financial system, which is what investors fear the most.At the moment, volatility, according to the VIX index, is testing its October high and EUR/USD is trading around 1.07.Two banks, valued at $209 billion (SVK) and $110 billion (Signature Bank), have stormed the system in the tens of trillions of dollars. But there may be a link here between the bankruptcy and the Fed's hard line, which means the two financial institutions may be the first swallows among the banks shot down by Jerome Powell.The dynamics of the VIX Fear IndexIt is possible that the Fed is caught between a hammer and anvil, as it has to fight inflation on the one hand and ensure the stability of the financial system on the other. Most likely, the regulator will not be able to raise the rate by 50 basis points in March, despite the high prices, as it was supposed to do just a few days ago. At any rate, derivatives suggest the probability of a 25 basis point monetary tightening is 66%. 10-year bond yields have plummeted and continue to fall, the dollar can only follow.US Treasury yield dynamicsThe US inflation report comes out today, but the release is likely to take a back seat. With great interest investors are following the news from the ECB, realizing that the European regulator is able to surprise the markets.The futures market is lowering the European rate ceiling from 4 to 3.2% after the news from the US, although there is not much of a connection between Old and New World banks. Who knows, maybe the Governing Council of the ECB will not give up and announce a 50 basis point rate hike? That will give EUR/USD a chance to rise above 1.0705, from where we plan to form short-term sales.