“Last Thursday, the Bank of Japan may have intervened in the currency market to support the hurting Yen , ” said market analyst Konstantin Oldenburger at CMC Markets.
This intervention may be easier in the future with the possibility of changing monetary policy from the US Federal Reserve (FED).
Oldenburger said that US stocks are especially beneficial during periods of high interest rates, because liquidity returns to the USD.
"When interest rates fall, this liquidity flows out of the USD and moves to other investment channels around the world. The Yen can now benefit from this redistribution" - this expert commented.
Following the release of the US June CPI last Thursday, USD/JPY fell more than 2%, with rumors spreading that the Japanese Ministry of Finance had intervened.
"If last week's trend - driven by lower CPI and expectations of a Fed rate cut - continues, the yen could rise along with gold prices towards all-time highs," Oldenburger said. Historically, a strong Yen has had a positive correlation with gold, suggesting gold may also benefit.
Oldenburger noted that gold prices have traded around $2,290 - $2,431 per ounce over the past three months. Since early July, investors have been trying to break out of this range, which could push prices up to $2,700 an ounce. Conversely, if gold falls below 2,290 USD/ounce, the price may adjust further to 2,220 USD/ounce and then to 2,189 USD/ounce.
Gold prices dropped partly due to the strengthening of the USD. Recorded at 11:00 p.m. on July 19, the US Dollar Index measuring the fluctuation of the greenback with 6 major currencies was at 104,035 points (up 0.14%).
