FX.co ★ 29.04.2024: USD knocked down by Japan’s forex intervention. Outlook for S&P 500, EUR/USD, and Brent

On Monday night, Japan’s Ministry of Finance or the Bank of Japan may have intervened in the forex market. Today there is a public holiday in Japan. So, it makes no sense to wait for comments from policymakers now. Thus, traders have to rely on intuition and fundamental indicators of market movement.

The first and main sign of Japan’s intervention on Forex was the movement of the dollar/yen pair. At the same time, the economic calendar is empty today.

During the Asian session today, the yen recovered from 160.17 to 154.5. That is, more than 3.5%! On the back of such a sharp decline in the dollar/yen pair, a ripple effect began that weakened the dollar across the board.

Oddly, the Chinese yuan does not benefit from the greenback’s weakness. On the contrary, the yuan has fallen by 2.1% since the beginning of the year under the pressure of low yields and the outflow of foreign investment from a flagging stock market. On Monday, the Chinese currency was ready to test 5-month lows against the US dollar.

The US dollar, after the turmoil caused by the yen, again easily rebounded against its rival currencies. The US dollar index measures the greenback’s strength relative to its six major basket partners. Today the dollar index was trading very close to its previous high of 106.

The index is trading today within the intraday corridor between 105.4 and 106.1 points. Despite the red indicator, the US dollar did not look defeated today. Moreover, the main drivers of its growth remain the later timing of rate cuts by the Federal Reserve as well as the American economy, which is resistant to these high rates.

Tomorrow the US central bank is opening its 2-day policy meeting. It will end with a policy statement by the Chairman on May 1. Several recent economic reports were not as optimistic as forecasts had expected. In addition, inflationary pressure is tightening its grip over the US economy.

Investors had to revise the expectations for interest rates for this year in a more hawkish direction. How Jerome Powell views the current situation and its prospects will determine the reaction of the market.

As for the stock market, Wall Street is trading higher today. The main S&P 500 index posted its biggest weekly jump on Friday since early November last year. The index received support from US high-tech giants as they released strong quarterly reports on corporate earnings. Today, the main Wall Street index S&P 500 is trading again in the green range of 5,105 to 5,123 in anticipation of the reports by the Seven US heavyweights.

Commonly, when stocks fall, the US dollar advances due to higher demand for safe haven assets. However, today the greenback was supported by news from the EU. The indicator of economic sentiment in the eurozone declined by 0.6 points in April to 95.6. Markets expected it to rise at 96.9 points.

Interestingly, ECB policymaker Pierre Wunsch suddenly said today that “the July rate cut is not a done deal.” This year, according to the official, the regulator is going to carry out at least two rate cuts, with the first of them in June.

Differences in the timing of the first rate cut play in favor of the US dollar. Traders continue to invest in the US currency amid bullish fundamentals and technical factors.

As a result, speculative long positions on the US dollar against the yen, pound sterling, Swiss franc, Canadian and Australian dollars continue to grow. Certainly, the greenback is rising against the euro in April.

Today, the euro/dollar pair is struggling to keep growth above the critical level of 1.07. The instrument is trading in the intraday corridor of 1.0688 to 1.0737. However, traders are cautious ahead of the release of key economic reports in the Eurozone: preliminary data on GDP for the first quarter and the consumer price index for April. They will be published on Tuesday.

Preliminary German inflation data for April turned out to be mixed. For example, the annual consumer price index, including volatile food and energy prices, remained unchanged at 2.2%. Analysts had predicted a higher figure of 2.3%.