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Dollar Up, Extends Gains as Fed Taper Talk Continues Ahead of U.S. Data

The dollar was up on Wednesday morning in Asia. Investors now await U.S. inflation data, with bets increasing on strong data that would push the U.S. Federal Reserve to begin asset tapering sooner than expected.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.01% to 93.062 by 12: 28 AM ET (4:28 AM GMT).

The USD/JPY pair inched up 0.09% to 110.66.

The AUD/USD pair edged down 0.12% to 0.7341. Australia’s Westpac consumer sentiment index dropped 4.4% in August compared to the previous month’s 1.5% growth. The NZD/USD pair inched down 0.03% to 0.7005.

The USD/CNY pair inched down 0.05% to 6.4830 and the GBP/USD pair inched down 0.10% to 1.3830.

Investors expect the U.S. currency, already boosted by Fed hints that asset tapering could begin soon, to continue its gains.

“With what we have in hand now, we would expect this pattern of dollar gains to continue,” JFD Group head of research Charalambos Pissouros told Reuters, ahead of U.S. inflation data, including core consumer price index, which is due later in the day.

“Another set of extremely high numbers, well above the Fed’s objective of 2%, could add to the view that the surge in inflation may not be transitory, and thereby, increase further the chances for an earlier normalization by the Fed,” he added.

Although Fed Chairman Jerome Powell has maintained that inflationary pressure is likely to be temporary, some of his colleagues, most recently Chicago Fed Bank President Charles Evans, are starting to disagree. Other officials, including Kansas City Fed Bank President Esther George, will also speak throughout the week.

The continuous uptick in COVID-19 cases globally also remains concerning, with Australia extending a lockdown in Melbourne.

“Investors have to take on board the possibility of news on Fed tapering at a time when COVID is still very apparent in various parts of the world,” Rabobank analyst Jane Foley told Reuters.

“The consequence of this is likely to be a firmer dollar,” she added, particularly if the euro breaches its 2021 low. The euro traded at $1.1720 against the dollar, early in the Asian session.

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EURJPY Price: Double Bottom Chart Pattern at $129.6, Price Increase Envisaged

EURJPY Price Analysis – August 06

When the bulls increase their pressure, this may increase the price to $30.9, which may extend the price to $132.0 and $132.5 price levels. Inability to break up $130.9 level, price may decrease towards the support levels at $129.6, $128.2 and $127.3.


Key Levels:

Resistance levels: $130.9, $132.0, $132.5

Support levels: $129.6, $128.2, $127.3

EURJPY Long-term Trend: Ranging

EURJPY is ranging on the long-term outlook. The bulls and the bears are at logger head with each other in the EURJPY market on the daily chart. When the price reached the support level at $128.2 price level. Sellers’ pressure fails at the just mentioned level. The bulls gained more pressure to push up the price; this is seen on the daily chart with the formation of more bullish candles but the bear’s momentum is opposing an increase of EURJPY price.

EURJPY Daily chart, August 06

The fast moving average (9 day EMA) remains below the slow moving average (21 day EMA), and the price is trading below and around the 9 periods EMA and 21 periods EMA which indicate ranging market. When the bulls increase their pressure, this may increase the price to $30.9, which may extend the price to $132.0 and $132.5 price levels. Inability to break up $130.9 level, price may decrease towards the support levels at $129.6, $128.2 and $127.3.

EURJPY medium-term Trend: Bearish

EURJPY is bearish on the 4-hour chart. The currency pair was under the control of bulls’ last week. The price increase was interrupted before it reaches the resistance level of $130.9. It reversed and reduces to test the support level of $129.6. The dynamic resistance levels have been penetrated downside.

EURJPY 4 hour chart, August 06

The price is trading below the 9 periods EMA and 21 periods EMA. The relative strength index period 14 is at 50 levels with the signal line pointing down to indicate a sell signal.

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Interest In Online Investment Platform Surges Among Kiwi Investors

Kiwi Investors who use online investment platforms have revealed that they are more likely to continue with online investment platforms than to access financial markets.

New Zealand’s Financial Markets Authority (FMA) recently published the result of its survey, which indicated an increase in interest for online investments compared to other investment platforms.

The research was carried out by the regulator in collaboration with Kantar Public, a data and consulting firm.

More investors are trooping online despite the risks

When it comes to risk, the online investment platform always presents a lot of challenges to users and regulators. But with the increased regulatory standards, such risks have been reduced drastically. Now more people are confident in placing their money on securities via online platforms.

The report also revealed that the surveyed investors consulted at least four sources of information before finally taking their investment decisions. Everett added that the investors are encouraged as they are making high returns due to the high market rally.

Online platforms provide ease

According to the published data, about 80 percent of the surveyed investors favor going online to access investing and financial markets.

From the report, about 31 percent of the respondents stated that they enter an investment due to Fear of Missing Out (FOMO). They opined that new investments are usually more profitable at their inception rather than joining late. 45% of the respondents agreed that they invested in shares through an online platform.

Chief Executive Officer of FMA NZ, Rob Everett, commented on the research results. He stated that the investors are choosing online platforms over other options because they have introduced simplicity to investments. Everett added that the platforms provide enormous resources for people to easily learn about the market and buy their shares at any time.

The result of the survey also showed that 34 percent of the surveyed investors agreed that they have learned a lot about investing from online platforms.

The majority of those that invested online are holding them for the long term. Again, it shows an increasing level of trust they have in the online platforms.

Everett says the convenience of the online platform is making more people patronize them.

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Dollar Rallies as Strong Jobs Report Stokes Bets on Fed Tapering

The dollar jumped Friday, underpinned by move higher in U.S. Treasury yields after a better-than-expected monthly jobs report stoked expectations the Federal Reserve will begin to tighten policy sooner rather than later. 

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.59% to 91.69, as U.S. bond yields gained, with the 10-yield rate trending close to 1.3%.

“[W]e continue to see the risks skewed towards earlier Federal Reserve stimulus withdrawal with a QE tapering announcement before year end and the first interest rate hikes coming next year,” ING said in a note following a better-than-expected U.S. jobs report released Friday. 

The U.S. economy created 943,000 jobs in July, above forecasts for a gain of 870,000, while  the unemployment rate fell to 5.4% from 5.9%.

Average hourly earnings rose to 4% to from 3.7%  as employers were forced to hike wages to attract new workers amid dearth in labor supply. The trend of rising wages is expected to continue, and could keep inflation higher for longer. 

If the Fed fails to act quell inflation, then it runs the risk of policy misstep. 

“The recovery in employment is getting to a place where the Fed needs to seriously consider tapering its asset purchases to avoid an unnecessary overshoot on inflation,” The economy has become more resilient through outbreaks. That ups the risk of a misstep and the need for the Fed to extinguish unwanted inflation, something it has not had to do in decades. 

The dollar has been raking up gains after bottoming in May, but there are some signs that investors are pausing their bullish bets on the greenback.

Speculators’ net long positions on the dollar were cut in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The value of the net long dollar position was $2.11 billion for the week ended Aug. 3, compared with a net long bets of $2.99 billion for the prior week.