Dollar Takes Hit as Yen Intervention and Rate Hike Hints Weaken Greenback
The US Dollar's (USD) positive tone turned on its head in the American session as two external factors weighed heavily against it. The Japanese Yen (JPY) strengthened sharply after a suspected Bank of Japan intervention, causing pressure on the USD. Meanwhile, the Bank of Canada left interest rates unchanged but hinted at potential 'multiple' rate hikes, which led to a sharp appreciation of the Canadian Dollar (CAD).
The combination of JPY and CAD strength, along with a bounce in stocks, compounded the near-term weakness of the Greenback. The fundamental backdrop remains unchanged, with crude oil prices remaining near their recent highs due to the ongoing Middle East conflict, fueling concerns about mounting inflationary pressures.
In the technical analysis, the XAU/USD pair trades around $4,360, up from its Asian trading low of $4,282. However, despite the bounce, sellers still maintain dominance in the market. The Relative Strength Index (RSI) indicator resumed its decline after correcting oversold conditions, while the Momentum indicator turned south below its midline.
The technical picture is bearish after the pair broke below $4,400, with initial resistance seen at the 20-period Simple Moving Average (SMA) around $4,399.10 and stronger barriers at the 100-period SMA near $4,479.23. On the downside, the 200-period SMA at $4,305.43 is the immediate support ahead of the weekly low.