FX.co ★ 25.05.2022: Tech giants incur huge losses; USD bounces off its lows. USDX, USD/JPY, AUD/USD)

Yesterday, forex traders witnessed how one figure or some comments of well-known policymakers could affect the movements of assets. For instance, earlier, the US dollar soared to a 20-year high of 105 amid the expectations of rate hikes and hints about future plans of the regulator. However, it has lost steam recently, sliding from its highs. Yet, it is not ready to give up. In today's Asian session, the US dollar index pulled away from the overnight low of 101.64, a level not seen since April 26. It was trading at 102.78, moving in the range of 101.73-102.22.

The greenback kicked off the week on a rather pessimistic note. In the first two days, the index, which measures the strength of the US currency against six main rivals, fell by another 1.23%. Yesterday, it retreated again as the euro grew to 1.0748, a level not seen since April 25. The euro asserted strength amid strong Manufacturing PMI data for Germany and Lagarde’s speech. To illustrate how one figure could boost a currency, we present a summary table. As seen, expansion in the manufacturing sector in May was recorded only in Germany compared to the April reading.

Today, the Fed will unveil its May meeting minutes. They will contain clues about the rate increases in the future. This week, traders are mainly focused on the comments on monetary policy. They are going to look for hints about the pace of monetary policy tightening by the Fed until the end of the year. The heads of the major central banks are scheduled to make speeches this week, giving investors food for thought. In his testimony yesterday, Jerome Powell reaffirmed traders that the regulator would stick to a hawkish stance. ECB President Christine Lagarde also spoke in favor of an aggressive approach. Risk sentiment is likely to impact currency movements on Forex today.

Yesterday, at the close of Wall Street, the NASDAQ index declined sharply by 2.35% due to risk aversion. At the same time, the shares of digital advertising companies incurred the biggest losses. The main loser was Snap with a 43% decrease. Meta, Alphabet, Amazon, Netflix, and Pinterest stocks also dipped considerably. The S&P 500 index lost 0.81% following a drastic fall in the shares of tech giants. Only the Dow Jones gained 0.15% at Tuesday’s close. However, the risk appetite crept back in the Asian trade. Futures on the main US indices were able to advance.

Stocks in Japan were also up. The Bank of Japan is extremely worried about such growth. Besides, the core consumer price index climbed higher as well. It means that inflation in the country is accelerating like in other large countries. However, its pace is much slower. On an annual basis, consumer prices in Japan rose to 1.4% from the previous figure of 1.1%. However, the yield of 10-year Japanese notes, on the contrary, fell to a 7-week low of 0.214%.

The yen, which is vulnerable to changes in long-term government bonds, dipped. After hovering at a five-week low of 126.37, the dollar/yen pair began to climb again. In the Asian session, the pair edged higher to 127.08. It was trading in the range of 126.63-127.29. Analysts see several scenarios for the yen to recover. For example, it may regain ground amid a key rate increase by the BoJ or a slowdown in the US economic expansion.

As for the Australian dollar, its trajectory depends on slightly different factors such as oil prices and China’s economic growth. The Aussie is now trading mixed because of them. Market uncertainty is mounting in China. While Shanghai is planning to ease lockdown restrictions, Beijing has stepped up quarantine efforts to end its month-old COVID-19 outbreak. Oil prices jumped by 1% today, which should have stimulated a rise in commodity currencies. Nevertheless, the Australian dollar failed to flex muscles versus the greenback. Analysts explain that this is due to the widening rate gap between the Fed and the RBA. Unlike the RBA, the Fed is more hawkish on monetary policy. So, its cash rate is higher. In the Asian session, the Aussie was consolidating in the corridor of 0.7078-0.7122. At the time of the making the video, the Aussie was trading at 0.7085 with a bearish bias.