USD/JPY near intervention zone
The yen is the worst performing major currency versus the dollar this month and in fact year-to-date. Carry-seekers currently dominate yen trading – that means borrowing cheaply in JPY to invest in assets with potentially higher returns – and it seems it may take an end to the Middle East conflict plus a BoJ rate hike to convince anyone into buying JPY. The key test in USD/JPY sits around 160 where the Bank of Japan stepped in on 30 April to intervene. The Bank of Japan sold in excess of $30bn and followed it up with more modest intervention two trading days later. But markets have clearly questioned the effectiveness of that intervention campaign, with the major back in the zone. The issue for the Japanese authorities is simply that their work has been cut out in trying to keep USD/JPY offered. Energy prices remain high and US interest rates need to fall sharply for a prolonged period, which creates stiff headwinds for any yen appreciation. The 50-day SMA sits at 158.77 with the 100-day below at 157.64.
Gold false breakdown?
Gold looked to be breaking down earlier this week from recent sideways trade. Bullion prices have remained under pressure from elevated inflation expectations linked to higher energy prices, reducing the likelihood of near‑term rate cuts. On the chart, we’ve not had a longer losing streak than four days since late March when prices spiked down to $4,098. Price action looked vulnerable on Wednesday following the break of the $4,500 mark and the move out of a major long-term triangle. The dip threatened the 200-day Simple Moving Avergage which was at $4,362 at the time, a widely watched indicator that had not been breached since November 2023 and supported prices on the March spike low. The descending triangle offers a measured move target of roughly $800 lower from current levels. But bugs have stepped in again at the 200-day SMA, while a confirmed peace deal or extension to the ceasefire could potentially support prices going forward.
NZD/USD bull bounce
The kiwi has been the standout performer this week. That is down to the previously dovish Reserve Bank of New Zealand coming very close to hiking rates on Wednesday. Faced with an economy operating with a negative output gap, some policymakers were prepared to hike rates sooner and more aggressively than before. Could this also happen at other central banks? Geopolitical uncertainty and mixed data supported the case for a RBNZ pause, and a hawkish hold was most likely. That said, new projections now show rate hikes already in the third quarter and a terminal rate at 3.25% (from the current 2.25%) – a bullish surprise for NZD. Prices bounced strongly off the 200-day SMA at 0.5835 after the meeting, where there is also a major Fib level (38.2%) of this year’s high to low at 0.5837. This support zone had previously capped the downside with the midpoint of the move at 0.5886 and the 100-day SMA at 0.5893. Today’s third straight day of gains has moved above the next major Fib level (61.8%) at 0.5934 with May highs around 0.60.