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24.06.2022: Recession fears hanging over global stocks (DXY, USD/JPY, AUD/USD)

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Hi, dear traders! Asian stock markets are inspired by optimism on Wall Street. The major Wall Street indices closed with gains yesterday. Of course, investors have not dispelled recession fears. The linchpin of trading is impartial evaluation and market vision. What exactly influenced market sentiment? How did it impact on the Asian trade? Let’s discuss everything in this video!
The market is digesting the testimony of the Fed’s Chairman in Congress, trying to puzzle out whether aggressive rate hikes could entail recession in the US. Judging by robust buying yesterday, traders have regained confidence and recession fears are taking the back seat.

The US dollar index jumped to the peak of 105.5 and took a nosedive later on. The index lost nearly 1 point in 6 hours. Currently, the index is trading at about 104.37. Importantly, all six rival currencies are also soft. The key support for the greenback, yields of US Treasuries declined overnight to the lowest level in two weeks. Recessions worries pushed yields down. In turn, the US dollar index is also trading in the red. Its corridor for the Asian session is seen between 104.18 and 104.51.

Interestingly, the greenback suddenly depreciated against the weakest currency in the basket, the Japanese yen. The dollar/yen pair traded at about 134.77 in the Asian session. Massive selling pushed the US dollar 0.1% down. The yen benefits from falling yields of US Treasuries. Amid zero yields in Japan’s government bonds, the yen is very sensitive to any changes in dynamics of Treasuries. In the Asian trade, the yen asserted strength against the dollar, moving from resistance at 135.23 to support at 134.33.

Investors’ optimism about the yen is dampened by rumors about a possible forex intervention by the Bank of Japan. There are weighty reasons for that.

The inflation report revealed today that the CPI exceeded the central bank’s target level in May. Notably, the actual CPIs have not matched the regulator’s expectations for the second month straight. It means that the ongoing growth in consumer prices is not transitory. As soaring global commodity prices are putting a strain on the fragile Japanese economy, the scenario of withdrawing stimulus by the Bank of Japan is getting more realistic. Analysts foresee a correctional decline of the dollar/yen pair to 133.5 in the short term.

The US dollar finds support from market jitters and investors’ doubts in the efficiency of major central banks to tackle global inflation. So, investors are still attracted by the greenback’s safety. It is holding the upper hand over its Australian counterpart. The AUD/USD pair traded at nearly 0.6895 in the Asian session. While the greenback is growing amid the hawkish Federal Reserve, the risk-vulnerable aussie is extending its weakness. The currency pair is trading on a seesaw. The intraday corridor for the pair is seen between 0.6887 and 0.6920.

In his testimony yesterday, Fed’s Chairman Jerome Powell again confirmed the central bank’s commitment to the fight against inflation. So, it is the right time for optimists to come back to earth. Indeed, signs of recession are getting more evident. Follow developments in financial markets on InstaForex TV channel! You are welcome to leave your feedback and questions!


00:00 Intro
00:51 USDX
01:35 USD/JPY
03:16 AUD/USD

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