As hawkish sentiment intensified last week, market also expect higher and longer-term interest rates. Against this backdrop, US Treasury yields soared, with 2-year Treasuries breaching the 5% level.

The US dollar index, which measures the performance of the greenback against six other major currencies, ended its ninth week with an overall gain of 0.3%. On Monday, it remained near the 6-month high near 105.3.

As investors await the most important decision of the week and the month, the US dollar also went into consolidation. In Asian trading, it traded higher within a narrow range of 105.2-105.4.

Meanwhile, interest rate decisions from the Bank of England and the Bank of Japan are also expected this week. The Japanese regulator's meeting will take place on Friday and will be the main event of the week in Asia.

Recent statements from Bank of Japan head Kazuo Ueda have drawn investor attention. The governor touched upon an inevitable drifting from the ultra-loose monetary policy. However, some analysts believe that markets may have misinterpreted the Japanese regulator's comments.

The fact is that wages in the country are falling because of the weak yen. The country's authorities are urging companies to increase payments to reduce this imbalance. In any case, the Bank of Japan may be forced to remain ultra-loose in the face of the recent weakening of wages and a possible softening of the price level.

At the same time, other arguments in favor of tightening are still not very strong. As a result, the dollar/yen pair begins this week consolidating in a narrow range between 147.5 and 147.9. The yen depreciated by 1.3% in the week following Kazuo Ueda's statement on the possible monetary policy change.

Since the beginning of 2023, the yen has already lost over 11%. This means that the pair may go higher if the head of the Bank of Japan sticks to a dovish stance and dispels hopes of tightening in the future.

Today, markets are cautions due to anticipation of the Fed decision on Wednesday. As a result, the yen ended Monday's Asian trading session strengthening against the US dollar at 147.7.

The antipodean currencies also strengthened slightly against their US counterpart early Monday. Tomorrow, markets will focus on the minutes from the Reserve Bank of Australia.

If investors see hints about a possible extension of the interest rate pause, bulls will unlikely appreciate it. Notably, the Australian regulator has kept its rate unchanged for three consecutive meetings. However, the Australian currency is more likely to react to external factors than domestic indicators.

Today, the aussie is growing on high oil prices and on the consolidation of the US dollar. The aussie/dollar pair moving in the range of 0.6427-0.6451. Despite today's growth, the Australian dollar still lacks technical bullish momentum.

However, the pair still has a chance to test the resistance of 0.6485 until the support of 0.6385 remains intact. At this point, the pair has slim chances of breaking through the resistance level, as the Australian dollar has retreated significantly from its morning highs and closed the Asian session at 0.6444.

Today, the kiwi/dollar pair is also trading higher near 0.591. Despite weak domestic economic data and mixed news from China, the kiwi is starting the week on a positive note within the daily range of 0.5897-0.5921. The New Zealand dollar is likely receiving support from bulls in anticipation of a dovish decision from the US Federal Reserve on Wednesday.

However, disappointing consensus forecasts for New Zealand's economic growth and inflation figures may hamper this positive sentiment. In addition, there is a risk of further deterioration due to the decline in New Zealand exports to the Chinese market.


00:00 Intro
00:44 Wall Street stocks
01:13 Oil
01:47 Evergrande Group
02:24 China
03:02 CME FEDWATCH TOOL
04:07 USDX
04:59 Kazuo Ueda
05:33 USD/JPY
07:02 AUD/USD
08:27 NZD/USD

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