Forex News

MUFG’s Head of Research Derek Halpenny notes the Japanese Yen (JPY) is starting to benefit as risk aversion rises and the US Dollar still leading G10 performance. He highlights that further safe-haven flows into US Treasuries could improve Yen performance, while persistent Middle East conflict may reduce the likelihood of an April BoJ rate hike and keep intervention risks alive near 160 level against USD.

Yen caught between risk-off and BoJ

"The US dollar remains the top performing G10 currency with the Canadian dollar the next best followed by the Japanese yen. If risk aversion continues to intensify and we begin to see more substantial safe-haven flows to the UST bond market, the yen is likely to be begin performing better."

"BoJ Governor Ueda has been speaking this morning in the Diet and did repeat the usual comment that the BoJ would raise the key policy rate if the economy evolved as the BoJ expected. However, there was obviously an added factor in determining the outlook for policy with Governor Ueda stating that the conflict in the Middle East could have a “significant impact on the global economy” and therefore the Japanese economy."

"Expectations of an April BoJ rate hike have held up reasonably well given current circumstances – a hike then is currently priced at 15bps versus 17bps last Friday. That will certainly come down we believe if the conflict persists as it would be difficult for the BoJ to hike in these circumstances."

"There is the added risk of yen intervention at weaker levels that could also discourage yen selling. Finance Minister Katayama today spoke of the “shared understanding” amongst G7 countries that currencies should move in a “stable manner” and given intervention in current circumstances would be easier to justify, the MoF would likely be encouraged on a move toward the 160-level."

"However, the scale of yen strength due to mass liquidation of yen short positions will be less given positioning has been lightened considerably prior to the conflict. As of last Tuesday, Leveraged Funds’ short yen position had been reduced to the smallest size since August last year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• AUD/USD may rebound toward the nine-day EMA of 0.7067.
• The 14-day Relative Strength Index has eased to around 53, suggesting upside momentum has normalized.
• The primary support is seen at the lower ascending channel boundary around 0.6950.

AUD/USD pares its daily losses but remains in the negative territory for the second successive day, trading around 0.7030 during the early European hours on Wednesday. Daily chart analysis indicates that the pair is remaining within the ascending channel pattern, indicating a persistent bullish bias.

The near-term bias stays mildly bearish as the AUD/USD pair holds below the nine-day Exponential Moving Average (EMA) and remains comfortably above the 50-day EMA at 0.6930, preserving the broader uptrend.

The 14-day Relative Strength Index (RSI) has eased to around 53 from previously overbought readings, indicating that upside momentum has normalised rather than reversed, with buyers still defending the short-term trend structure.

Immediate resistance is seen at the nine-day EMA of 0.7067, followed by the three-year high of 0.7147, reached on February 12. Further advances would support the AUD/USD pair to test the upper boundary of the ascending channel around 0.7260.

On the downside, the initial support lies at the lower ascending channel boundary around 0.6950, followed by the 50-day EMA at 0.6929. A daily close below the medium-term average would neutralise the current bullish bias and open a deeper retracement toward the “Rebound Support” area around 0.6400.

(The technical analysis of this story was written with the help of an AI tool.)

ING’s Chris Turner notes that US data, including ADP jobs, ISM services prices and the Fed’s Beige Book, could reinforce expectations of limited Fed easing in 2026. Turner doubts DXY will sustainably break above 100.35 without an improvement in energy markets.

Focus on data and Fed’s Beige Book

"As to central banks, we have been writing this week about how the inflationary risk of the energy shock is re-pricing the short-end of the curve. That trend briefly reversed yesterday after equity losses intensified. But unless we see another major equity sell-off today, the hawkish re-pricing of the short-end of the curve looks the dominant theme. That is a dollar positive."

"We see a few inputs into this theme today. Assuming the monthly ADP release comes in near +50k, investors will assume that the Fed has been right to assume that downside risks to the labour market have abated. We will then be looking at the prices paid component of the ISM services index. A high reading there can support the dollar."

"And then tonight we'll see the Fed's Beige Book ahead of the 18 March FOMC meeting. Any signs that price pressures remain sticky could see the market further scaling back expectations for two Fed cuts this year. 45bps of easing is currently priced this year."

"DXY traded as high as 99.68 yesterday. We doubt investors will want to chase it through the 100.00/100.35 highs seen over the last eight months. But equally, we will need to see some clear improvement in the energy story before investors are prepared to enter short dollar positions again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)