Will the foreign exchange market turn bearish as bond buying accelerates?
20.07.2021
- U.S. Housing Starts
- Number of Building Permits Issued in the U.S.
Yesterday, stock prices fell in the U.S. market, creating a risk-off sentiment characterized by falling stock prices, lower oil prices, and declining interest rates. With the Delta variant of the coronavirus spreading, funds have shifted from the stock market to the bond market, and WTI crude oil has dropped to $66.00. The Russell 2000 has fallen 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 with no clear support until the next support level at 108.73, we should be wary of further declines. However, the AUD/USD pair, which is showing further weakness among the Oceania currencies, has fallen for four consecutive days and is currently trading around 0.731.
Today, the German Producer Price Index and Swiss Trade Balance are scheduled for release at 3:00 p.m. Asia time, followed by the Canadian House Price Index, U.S. Housing Starts, and U.S. Building Permits at 9:30 p.m. U.S. time. We will monitor currency strength and weakness closely to determine whether the recent decline in financial markets has peaked, and we intend to remain cautious and watch the situation unfold.
Author: Keisuke Sakurai
