With yesterday’s hawkish remarks from the Bank of Japan, saying that interest rates may be raised to 1% in the second half of the year, the yen extended its recent strong performance, with the dollar/yen hovering near 151.60 on Friday (February 7). The price rebounded from the recent low of 150.96 at the overnight low, but there is significant supply zone resistance above the 151.80 line.
Another currency focus yesterday came from the British pound. The Bank of England cut interest rates by 25 points as scheduled, but two members voted to cut rates by 50 basis points, which surprised the market.
Money markets have increased their bets on a rate cut, fully pricing in two more cuts and an 80 per cent chance of a third cut, up from around 40 per cent before the meeting.
The pound fell from 1.2450 to 1.2350 yesterday by about 100 basis points. However, at present, the Asian city has returned to the 1.2430 line on Friday, almost recovering the lost ground before the interest rate cut.
“It is clear that the message is dovish,” said Emmanouil Karimalis, macro strategist at UBS. He expects the central bank to ease an additional 1.25 percentage points this year. “We expect UK inflation to moderate further and, given the weak growth outlook, this should incentivise the committee to cut rates further – particularly in the second half of the year.”
The yield on 10-year gilts fell as much as 6 basis points to 4.38 per cent before easing back to 4.45 per cent. Ubs’s Karimalis said this could be temporary, with the risk of more aggressive easing eventually pushing yields down to 4.1 percent by the end of the year.
In an interview on Thursday, Bessant said: “The strong dollar policy has not changed at all under President Trump. We want the dollar to stay strong.”
But he added, “We don’t want other countries to devalue their currencies and manipulate trade.”
Technical analysis:
Gold: We arranged 3 buy points on gold yesterday, the middle yellow after refreshing liquidity to buy, perfect hit. After breaking through the yellow liquidity zone, the price achieves a V-shaped reversal. During the day, we continue to recommend paying attention to the momentum breakout of 2870/75, but also pay attention to the demand area support of the 2840 line. Please consult the plugin for details.
(Gold 15min chart)
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Poundme: Our strategy for Poundme yesterday was to buy low in green and connect yellow refresh liquidity and continue to buy. As shown in the plug-in in the figure, although the green low buy fails once, the yellow area immediately pulls out the V inverse after scanning the liquidity. At present, it has basically recovered most of the lost ground yesterday. During the day we continue to focus on the performance of the momentum breakout zone of 1.2445/55. Please consult the plugin for details.
(Pound-US 15min chart)
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Japan: The yen has been strong recently as the Bank of Japan is likely to raise interest rates to 1% in a row. Japan and Japan fell below 151. There may be a small rebound in the intraday price, but the top line at 151.80 will face a strong resistance structure, we recommend to consider selling. Please consult the plugin for details.
(US and Japan 60min chart)
To experience the same plug-in in the picture, please contact V: Hana-fgfg
Today’s key financial data and events:
21:30 US January Adjusted Non-farm payrolls (thousands)
21:30 US unemployment rate in January
The ECB’s statement on the neutral rate is not scheduled to be published
