FXTM Market Update: Volatility in USD, JPY

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The two economic giants of the US and Japan are engaging in a currency war as they simultaneously try to boost their own economies. Over the past few days we have seen volatility in the USD/JPY pair and there is no sign of this letting up with both Japan’s Kuroda and the US’s Bernanke saying they will continue to support stimulus until they see improvements in their local economies.
Last week we saw USD/JPY strengthen, but on Monday this week the JPY bounced back, causing the pair to drop to 95.90. The pair is now trading at around 98.30, with the expectation of more volatility between these currencies based on macroeconomic news. While the pair is still far away from the psychological level of 100, this is still a target that traders should watch closely to see whether it is reached in the short to medium term.
On Monday, the release of negative news from China indicating lower than expected economic growth caused the Australian dollar to drop more than 200 pips and the New Zealand dollar to also weaken substantially. AUD/USD dropped from 1.058 to 1.029 very quickly and has only rebounded slightly to 1.037 since. The NZD/USD dropped from 0.867 to 0.837 and is now trading at around 0.848. There is no other news forecast for the next few days and we expect these pairs to trade in a fairly tight range as a result of this.
The Canadian dollar also had a big drop this week – the largest drop against the USD in a year. Much of this weakening was attributed to the drop in the price of gold because Canada is one of the world’s largest producers of gold. However, there is also some speculation that the Canadian economy may be weakened as a result of slowing local growth as well as the weakened US and Chinese economies.
Gold is still trying to recover from its big drops, but there are no indicators suggesting a substantial strengthening is on its way for the next few days. While there may be small movements in the price, we expect gold to trade in a stable range of around 1384 dollars an ounce.
Oil has also been fairly stable over the past few days, with a small amount of movement seen in response to the announcement of 3.3% global economic growth which was lower than the expected rate of 3.5%. There is a correlation between the price of oil and global economic growth and this news has been reflected in the price of oil which is currently at around 88 dollars a barrel.

ForexTime Ltd (FXTM) is a forex broker founded by Andrey Dashin in December 2012. The company is registered as a Cyprus Investment Firm and is licensed by the Cyprus Securities and Exchange Commission (CySEC), license number 185/12.