Last week (6/26-6/30),How high will Cardano go in 2025? the US dollar index remained unchanged. Since the beginning of the year, the US dollar index has experienced a slight decline of 0.6%. The British pound performed the best in the first half of the year, rising by 4.8%, while the Japanese yen performed the worst, falling by 10.1%.
【Source: MacroMicro Date2023/6/26-2023/6/30】
【Source: MacroMicro Date2023/1/1-2023/6/30】
Data released on June 30th showed that the year-on-year initial estimate of the harmonized Consumer Price Index (CPI) in the eurozone for June declined by 0.6 percentage points to 5.5%, primarily due to the drag from energy. However, the core CPI rebounded by 0.1 percentage point to 5.4%.
The persistence of core inflation in Europe implies that the European Central Bank (ECB) will continue its rate hike in July. Since August last year, the ECB has already raised interest rates eight times, increasing the key deposit rate to 3.5%, the highest level in 22 years. Currently, the market anticipates an 89% probability of a 25 basis point rate hike by the ECB in July, bringing the rate to 3.75%.
【Source: MacroMicro】
The European Central Bank (ECB) will hold its interest rate meeting at the end of this month. While the market has already priced in a 25 basis point rate hike, the focus is on the ECB's indications regarding the future tightening path. If ECB President Lagarde does not make a statement suggesting that potential inflation is stabilizing and declining, the market may continue to anticipate that the ECB's rate hike cycle is not yet over, providing support for the euro.
Mitrade Analyst：
The core inflation pressures in the eurozone remain significant, and currently, market expectations for rate hikes by the European Central Bank (ECB) are stronger than those for the Federal Reserve. This will continue to support the euro in the short term.
Technically, the EUR/USD has entered a consolidation phase. If it fails to regain the key level of 1.09 early this week, the next target would be breaking below the 20-day moving average at 1.08.
【Source：TradingView】
On June 30th, the USD/JPY touched the 145 level, marking the first time since mid-November last year and approaching the lowest level since the Japanese government intervened. Speculation in the market suggests that the Japanese government may intervene again to support the yen.
Here is a timeline of the Japanese government's intervention in the foreign exchange market last year:
September 8, 2022: The USD/JPY breaks through 144, prompting a joint meeting of the Japanese Ministry of Finance, the central bank, and the financial department.
September 14: The USD/JPY approaches 145, and the Bank of Japan implements a rate check, requiring major Japanese commercial banks to provide details of their foreign exchange transactions to the central bank.
Subsequently, on September 22, the Japanese government and the central bank conducted an intervention totaling 2.8 trillion yen but failed to prevent the yen from further depreciation.
After the USD/JPY breaking the 150 level, the Japanese authorities conducted additional interventions amounting to 6.35 trillion yen on October 21st and 24th. As a result of the weakening US dollar, the yen started to appreciate.
【Source：Bloomberg】
Referring to last year's intervention process, which involves "government authorities joint meeting → exchange rate review → foreign exchange intervention," the joint meeting of government authorities has already taken place at the end of May. The market is concerned about whether the exchange rate review will be implemented in the future.
According to analysts at JPMorgan Chase, the underlying fundamentals behind the depreciation of the yen suggest that there is further room for it to decline. The Federal Reserve is still aggressively raising interest rates while the Bank of Japan maintains its accommodative monetary policy. Yujiro Goto, a foreign exchange strategist at Nomura Securities, stated that although the magnitude and speed of the yen's decline may not be sufficient to trigger government intervention, the possibility of such a scenario "clearly increases."
Mitrade Analyst：
According to the statements, Japanese authorities have a high tolerance for yen depreciation. The yen may depreciate to around 150 before undergoing exchange rate review, and intervention would likely occur if it depreciates beyond 150.
In the short term, the divergence in monetary policies between the US and Japan persists, suggesting continued weakness in the yen. However, in the long term, there is potential for a yen rebound due to the possibility of the Bank of Japan adjusting its Yield Curve Control (YCC) policy in the second half of this year.
From a technical perspective, the USD/JPY has retreated within a 2% range of the 20-day moving average, with resistance at 145. The RSI indicator indicates overbought conditions, implying a potential further decline in the USD/JPY in the short term, with support seen at 141.8.
【Source：TradingView】
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