Safe-harbour currencies, including the Japanese yen and U.S. dollar, exchanged hands near multi-month highs against the riskier British pound and Australian dollar on Tuesday. Investors’ concerns about a rampant Delta coronavirus variant hindering the global economic recovery are growing. Even cryptocurrencies are sinking, with bitcoin tumbling below $30,000 for the first time almost in a month.
On Tuesday, the Japanese yen traded at 80.09 per Aussie dollar, remaining near the more-than-five-month top of 80.05 it touched on Monday. Furthermore, the currency stood at 149.48 to the sterling, approaching the almost-three-month high of 149.35 reached overnight.
Meanwhile, the greenback skyrocketed to an almost-eight-month high of $0.7317 per Aussie dollar on Tuesday before exchanging hands at $0.7319. The U.S. currency traded at $1.36625 to British Pound after jumping to the highest level since early February at $1.3655 during the previous session.
The Australian dollar accelerated decreasing after some economists saw minutes of the Reserve Bank of Australia’s policy meeting this month to sign that the central bank may reverse a decision to taper stimulus aid.
What about the JPY/USD pair?
The Japanese yen outpaced the greenback, surging forward to 109.07 per U.S. dollar on Monday for the first time since late May. A steep decline in benchmark U.S. Treasury yields to a low 1.1740 for the first time since mid-February boosted the currency. On Tuesday, USD/JPY traded at 109.46.
It seems the fast-spreading Delta COVID-19 variant is becoming the dominant strain around the globe. The surge in infections around the United States, especially in areas where vaccinations have lagged, also increased trader’s concerns.
Even Boris Johnson’s “Freedom Day”, which marked the ending of over a year of pandemic lockdown restrictions in England, was marred by soaring infections. The British prime minister was forced to isolate himself after Health Minister Sajid Javid tested positive for the COVID-19.
What’s happening in Australia?
In Australia, almost half the country’s 25 million people live under lockdowns to stop an outbreak of the Delta variant.
National Australia Bank analyst Tapas Strickland stated that what is likely concerning forex markets is a jump in COVID-19 infections occurring in developed markets with high vaccination levels. Such an increase suggests we may need to leave virus restrictions in place for longer and, consequently, delay global recovery.
In Europe, the common currency declined by 0.1% to $1.17885 on Tuesday. Beforehand, it fell down overnight at $1.1764, its lowest level since early April.
The European Central Bank plans to announce its new policy on Thursday, with traders eager to see what changes the monetary authority will implement to its strategy unveiled earlier this month.
Rabobank strategist Jane Foley stated that the investors expect the ECB to reinforce its dovish policy settings at this week’s policy meeting. That would give the euro scope to soften in the coming months.
On the other hand, safe-haven demand will probably support the greenback shortly, pushing the common currency toward $1.17 by year-end.
How did the NZD/USD pair trade today, and what is the forecast for the pair?
The kiwi struggled on Tuesday, plummeting down below 0.6900. It traded at a low of 0.6896 against the U.S. dollar during the European morning trade.
Commodity currencies are currently under pressure as the charts expose technical vulnerabilities that could show a sharper decrease in the sessions ahead. NZD/USD pair plunged to its lowest levels since November. Thus far, there is not much support on the way down.
Even though there is a 61.8 retracement level of the jump higher from September 2020 to February this year at 0.6876, it still doesn’t pose massive significance. Sentiment influences markets most, and investors are very stressed right now, despite broader risk trades taking more of a breather.
What about the Canadian dollar?
The greenback has soared higher against the Canadian dollar for a conclusive break above the major cluster of resistances at 1.2632/53. That includes the 200-day average, as well. Analysts at Credit Suisse think there is a scope for a move to 1.3024. This would be the 38.2% retracement of the 2020/2021 decline.
According to the experts, USD/CAD has surged dramatically higher for a conclusive break. It remained close above the major cluster of resistances at 1.2632/53. The latter includes the 200-day average. It also includes the 23.6% retracement of the entire 2020/2021 bear trend and a cluster of price peaks. All that has seen a major base established as looked for to turn the broader risks much higher.
Credit Suisse’s analysts also added that they see resistance at the highs for the year at 1.2870/81. Even though a new cap here should be allowed for, they also look for a break in due course to move to 1.2957/59 and afterwards, to 1.3024. That would be the 38.2% retracement of the entire 2020/2021 drop.
On the other hand, near-term support moves to 1.2732. If the pair moves below that point, it can ease the immediate upside bias for a drop back to 1.2689 initially and then to yesterday’s low at 1.2626/08, though.