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Will the Acceleration in Bond Buying Lead to a Weakening in the Foreign Exchange Market?

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Will Accelerated Bond Buying Lead to a Weak Currency?

20.07.2021

Today's Highlights
  1. U.S. Housing Starts
  2. Number of Building Permits in the U.S.

Yesterday, stock prices fell in the U.S. market, creating a risk-off sentiment characterized by falling stock prices, falling crude oil prices, and falling interest rates.With the Delta variant of the coronavirus spreading, funds have flowed from the stock market into the bond market, and WTI crude oil has fallen to $66.0. The Russell 2000 has dropped to 2,100, the lower boundary of its daily trading range, and investors need to be on guard against a break below this level.

The yield on the 10-year U.S. Treasury note has fallen to the 1.19% range, and the USD/JPY pair has dropped by about 100 pips from 110.09 to 109.06.From a technical perspective, the pair has broken below the daily trend line, and since there is no clear support level until the next support at 108.73, we should be wary of further declines. However, the AUD/USD pair, which is part of the broader weakness in Oceania currencies, has fallen for four consecutive days and is currently trading around 0.731.

Today, the German Producer Price Index and the Swiss Trade Balance are scheduled to be released at 15:00 Asia time, while the Canadian Housing Price Index, U.S. Housing Starts, and U.S. Building Permits are scheduled for release at 21:30 U.S. time.We will monitor currency strength and weakness while cautiously observing the situation to see if this recent decline in financial markets has peaked.

桜井 慶介

Author: Keisuke Sakurai

He has over 10 years of experience in FX trading. In the financial sector, he has been involved in investment management focused primarily on foreign exchange markets and has experience as an asset management advisor. Drawing on his extensive experience, he specializes in technical and fundamental analysis.

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