4 Global Market Updates- 19 January, 2023

In this article, we have covered the highlights of global market news about the EUR/USD, AUD/USD, USD/JPY and USD/INR.

EUR/USD Price Analysis: It’s still probable to climb to the 1.0900 area.

The EUR/USD continued its upward trend from Wednesday and retook the zone above the crucial 1.0800 level on Thursday.

The pair is moving inside a range-bound theme ahead of the likely continuation of the rally. In opposition to that, the first point of resistance is the YTD high, which is at 1.0887. (January 18). Once passed, it may pave the way for a likely trip to the round level at 1.0900 very shortly.

Furthermore, further gains should continue to exceed the short-term support line at 1.0610.

While above the 200-day SMA at 1.0307, the positive stance is unaffected over the longer term.

AUD/USD falls to a one-week low below 0.6900 on risk-aversion.

The AUD/USD pair continues its rapid overnight decline from the 0.7060-0.7065 range, or its highest level since August 16, and is again under intense selling pressure on Thursday. The negative trend continues during the middle of the European session, pushing spot prices to a one-week low in the past hour, in the vicinity of the 0.6875 area.

One of the main factors pushing flows away from the risk-sensitive Aussie is the pervasive risk-off climate, as shown by the sea of red that covers the equities markets. The lower US macroeconomic data reported on Wednesday follows worries about economic headwinds caused by the worst COVID-19 outbreak to date in China. As a result, recession worries grow and hurt the perception of risk worldwide.

In the meantime, the AUD/USD bulls cannot benefit from a lower US Dollar as it continues to decline on hopes for a more gradual tightening of monetary policy by the Fed. The markets are confident that the US central bank would adopt a more accommodating approach and implement a modest 25 bps rate rise in February. This weakens the Dollar and causes the rates on US Treasury bonds to decrease further.

USD/JPY rebounds off daily low in the risk-off atmosphere.

The USD/JPY pair continues to see selling pressure on Thursday after extending the previous day’s steep retracement decline from the 131.55-131.60 region, or the weekly high. However, the pair bounces back a few pips from the daily low and is trading just around mid-128.00s, still down over 0.50% for the day.

The red covering the stock markets reflects the general risk-off sentiment, favors the safe-haven Japanese Yen, and puts downward pressure on the pair. Investors are nonetheless worried about challenges brought on by the worst COVID-19 outbreak to date in China. Worries of a deeper global economic slowdown have been fueled by this and the extended Russia-Ukraine conflict.

Additionally, the poor US economic data presented on Wednesday raises recession concerns and dampens market confidence. The rate-sensitive two-year US government bond yield has fallen to its lowest point since October due to the anti-risk movement and betting for lesser Fed rate increases. This puts proponents of the US dollar on the defensive and prevents the USD/JPY pair from finding support.

However, after the Bank of Japan’s (BoJ) dovish policy announcement on Wednesday, the downside seems limited, at least temporarily. Contrary to the anticipation of more hawkish signals, the Japanese central bank kept its yield curve management measures unaltered with ultra-low interest rates. As a result, aggressive bearish traders should exercise care before preparing for the continuation of the current slump seen over the previous three months or so.

USD/INR: Near 81.00, the RBI will intervene more forcefully – Credit Suisse

The Dollar’s recent decline caused the USD/INR to go under 82.00. Credit Suisse economists have expanded their USD/INR trading range to 81.00-84.0 and draw attention to the possibility of RBI intervention close to 81.00.

The target for USD/INR increased to 81.00-84.00. “Although we continue to believe that the Rupee would depreciate against the US Dollar over the long run, REER stability implies that USD/INR will reflect general US Dollar weakness in the near term, as the RBI sometimes adjusts its intervention corridor in line with this.”

“Now that the 82.00 level has been violated, we anticipate more forceful central bank intervention around 81.00.”

“Although more US Dollar weakening might force the RBI to reposition its intervention zone, recent experience shows that 81.00 is a more reliable “red line.” As a result, we expand the range of our USD/INR projection for Q1 to 81.00-84.00.

Please click here for the Market News Updates from 18 January, 2023.