Forex Trading

Subdued action continues heading into Easter holiday


Here is what you need to know on Thursday, March 28:

Major currency pairs continue to fluctuate in familiar ranges in the second half of the week. Before markets go into the Easter holiday on Friday, the US economic docket will feature weekly Jobless Claims, February Pending Home Sales and the University of Michigan’s Consumer Sentiment Index for March. Additionally, the US Bureau of Economic Analysis will release the final revision to the fourth quarter Gross Domestic Product growth before it publishes the Personal Consumption Expenditures (PCE) Price Index data for February on Friday.

The US Dollar (USD) Index closed the day virtually unchanged on Wednesday as the improving risk mood made it difficult for the currency to gather strength against its rivals. Early Thursday, the USD Index moves up and down in a narrow channel below 104.50. Meanwhile, the benchmark 10-year US Treasury bond yield extends its sideways grind above 4.2% and US stock index futures trade marginally lower. 

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.10% -0.22% -0.20% -0.05% 0.03% 0.06% 0.88%
EUR 0.12%   -0.13% -0.10% 0.08% 0.15% 0.21% 0.99%
GBP 0.22% 0.12%   0.04% 0.18% 0.26% 0.33% 1.12%
CAD 0.19% 0.09% -0.02%   0.16% 0.24% 0.30% 1.08%
AUD 0.07% -0.05% -0.17% -0.14%   0.04% 0.11% 0.93%
JPY -0.03% -0.12% -0.15% -0.22% -0.06%   0.07% 0.86%
NZD -0.10% -0.16% -0.27% -0.25% -0.11% -0.03%   0.84%
CHF -0.90% -1.00% -1.13% -1.10% -0.93% -0.90% -0.80%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 

USD/JPY retreated after touching a multi-decade high near 152.00 on Wednesday. The pair, however, stabilized above 151.00. Japan’s Chief Cabinet Secretary Yishimasa Hayashi said on Thursday that he “won’t rule out any options against excessive currency moves.” In the meantime, the Bank of Japan’s (BoJ) Summary of Opinions from its March monetary policy showed earlier in the day that one of the policymakers argued that the yield curve control, the negative interest rate and other massive stimulus tools have accomplished their roles. In the Asian session on Friday, Industrial Production and Tokyo Consumer Price Index data from Japan will be watched closely by market participants.

Japanese Yen hangs near multi-decade low against USD, not out of the woods yet.

USD/CAD closed the third consecutive day in negative territory on Wednesday and went into a consolidation phase below 1.3600 early Thursday. Statistics Canada will publish the monthly GDP growth for January later in the day.

Consumer Inflation Expectations in Australia declined to 4.3% in March from 4.5% in February, while Retail Sales grew by 0.3% on a monthly basis in February. After closing the day flat on Wednesday, AUD/USD came under modest bearish pressure and retreated toward 0.6500 early Thursday.

Australian Dollar moves sideways amid a stable US Dollar, US economic data awaited.

EUR/USD struggles to gain traction in the second half of the week but manages to hold comfortably above 1.0800. 

GBP/USD registered small gains on Wednesday but failed to extend its recovery early Thursday. The pair was last seen trading marginally lower on the day below 1.2650.

After facing rejection near $2,200 and making a deep downward correction in the first half of the day on Wednesday, Gold gathered bullish momentum and closed in the green above $2,190. XAU/USD stays relatively quiet early Friday but remains within a touching distance of $2,200.

Gold price flat lines below $2,200 mark as traders await US PCE Price Index on Friday.

(This story was corrected on March 28 at 07:15 GMT to say that USD/CAD was in a consolidation phase below 1.3600 early Thursday, not Friday.)

 

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

 



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