Скачать или смотреть 21.02.2023: USD unstoppable amid expectations of aggressive rate hikes; USDX, USD/JPY, AUD/USD

While investors are revising their forecast on the Fed's monetary policy, the US dollar is steadily rising. It is recouping losses incurred earlier this year. It has already recovered to 104 versus its main rivals.

Strong US economic data boosted the US dollar at the start of the week. In the Asian session, it was moving in the upward range of 103.8-104.2. Although it was quite volatile, it managed to reach 104.1.

The high volatility is caused not only by economic reports but also by political factors. Geopolitical tensions are mounting due to Joe Biden's visit to Kyiv and the launches of North Korean ballistic missiles into the sea off Japan's west coast.

The yen is unable to regain ground. Activity in Japan's manufacturing sector declined at the fastest pace since August 2020. Investors are assessing the prospects of a policy reversal by the Bank of Japan under the new leadership.

The central bank will be headed by an economist for the first time in its post-war history. Will Kazuo Ueda change the monetary policy stance? This is hardly unlikely.

Besides, Board members are in favor of further monetary easing. Haruhiko Kuroda may still surprise markets at the last meeting on March 10.
USD/JPY
The greenback is growing higher amid expectations of strong PMI indices and home sales data. The yen, on the contrary, is edging lower. The dollar/yen pair jumped to 134.8 in the morning.

The yen also remains weak due to uncertainty over the BoJ’s future moves on monetary policy. Therefore, the pair may rise above the range of 134.2-134.8.

The US dollar is growing across the board today. Commodity currencies are particularly sensitive to its pressure. The Australian and New Zealand dollars traded in the Asian session in the bearish corridor.

The Aussie tried to find support in the RBA meeting minutes, which were published today. The only positive news was that the regulator would not stop monetary tightening in the near term. At its first meeting in 2023, the central bank could raise the rate by 25 or 50 basis points.

It is less hawkish than the Fed, which means that the Aussie will hardly be able to advance versus the US dollar. On top of that, the US economy is strong, while consumer prices in Australia are still rising.
The AUD/USD pair again tested the key support level of 0.6870. It reached this low on January 19 and February 6. In the Asian session, the pair was trading at 0.6881, not far from that level. The bearish sentiment was strong. The pair was moving in the range of 0.6868-0.6920.

Thus, the Aussie is likely to keep declining. Sellers may push it to the support level of 0.6750. if the pair grows above the resistance level of 0.6930, the bulls may regain the upper hand.

The prospects of the kiwi are even less optimistic. New Zealand is dealing with high inflation, a crippled economy, and the consequences of a devastating hurricane.

Traders are extremely nervous in anticipation of the Reserve Bank of New Zealand's rate decision. The first meeting of this year will be held tomorrow. The regulator is likely to raise the rate by a quarter point. Overall, the watchdog hiked the rate 5 times by 50 basis points in a row in 2022.

The central bank may also take a pause in monetary tightening due to economic damage delivered by Cyclone Gabriel.

The kiwi was rather volatile. The kiwi/dollar pair was trading at 0.6232 in the Asian session. It was hovering in the downward range of 0.6208-0.6263.

00:00 Intro
00:29 Asia-Pacific region
01:09 CME FEDWATCH TOOL
01:56 USDX
02:54 USD/JPY
04:08 AUD/USD
05:49 NZD/USD

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