Dollar strength drives EUR/USD and GBP/USD lower but possible FX intervention sees yen strengthen
More good US data drove the dollar higher yesterday, but the Japanese Ministry of Finance appears to have moved to strengthen the yen following a test of the ¥150.00 level.
EUR/USD at new 2023 low
EUR/USD pushed to a fresh low for the year, though declines slowed after Monday’s sharp losses.
Sellers remain firmly in charge, after reasserting control on Monday. The next possible areas of support may lie around $1.035 and then $1.029. In the short term, any rebound may be capped by trendline resistance from the July peak.
A close above $1.055 might suggest that a short-term low is in place.
GBP/USD pushes on towards $1.20
A similar picture prevails here with GBP/USD, as hawkish commentary from the Federal Reserve (Fed) officials revived the long dollar trade.
We have seen daily stochastics turn lower from low levels, indicating firm bearish momentum. Further declines would target $1.196, and then down to $1.183.
Buyers will need a close back above $1.22 to indicate that a low could be in place in the short term. This is where Friday’s bounce stalled as selling pressure revived.
USD/JPY drops back from ¥150.00
‘Verbal’ intervention on USD/JPY prompted a swift drop on Tuesday, but without the backing of actual cash the impact was short lived.
Nonetheless, Tuesday’s move was a signal that Tokyo is poised to intervene to halt the yen’s weakness, at least temporarily. The uptrend is still firmly intact, but the risk of volatility has surged. A close below ¥148.00 could signal the beginning of a short-term pullback.
A firm move above ¥150.00 would likely trigger a move from the Japanese Ministry of Finance to prop up the yen.
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