USDJPY XAUUSD Market Insight

USD/JPY 

The interest rate differential between the United States and Japan is widening because of Bank of Japan continued dovish stance and FED reservation about further interest rate increase. The data show that the gap between the inflation adjusted five years treasury yields of Japan and the United States has widened by more than 90 pips this year. This yield difference has pressured on the yen despite repeated warnings from Japanese officials of possible intervention in currency markets.  

 The USD/JPY has reached the 149.00 mark on H4 chart. There are currently no signs that Japanese inflation will remain stable on a sustainable basis, hence the BOJ will patiently continue to implement monetary easing policy under the current framework, which is an obvious negative for the yen. Although the easing policy will be conducted for longer, investors still need to pay attention on potential retracement. Therefore, the buy limit could be set from 148.00 to 148.70, stop loss is compulsory.    

 XAU/USD 

The Gold price plunged to new low on Wednesday amid rising US treasury yields and rising investment risks. High US bond return and threat of US government shutdown reinforce deteriorating sentiment, it would drive gold price lower. Investors bet that the FED would keep interest rates high that dampens the metal's appeal. On the other hand, investors now turn their attention to the Personal Consumption Expenditures (PCE) index, the FED's preferred inflation gauge, it will be released on Friday.   

Gold plummeted after trying to rebound at H4 chart. The price is currently far away from the 48 hours moving average. As long as interest rates remain elevated for longer, that will continue to put pressure on precious metals. In addition, gold dropped below 1,900 important mark which also triggered technical selling. As we mentioned before, the acceptable tactic is to set sell limit during uncertain stage, stop loss is necessary