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On October 25th, local time, the second round of ceasefire talks between Pakistan and Afghanistan began in Istanbul, Turkey. The talks were hosted by Turkey and held at an Istanbul hotel. The Pakistani delegation included the militarys director of operations and security and intelligence officials. The Afghan delegation was led by Deputy Interior Minister Rahmatullah Najeeb.On October 25th, Belgorod Oblast Governor Ilya Gladkov announced that Ukrainian armed forces had damaged the Belgorod Reservoir Dam. He stated that Ukrainian forces might attempt to attack and destroy the dam again. If this were to happen, several streets in riverbanks and settlements near Kharkiv Oblast would be flooded, impacting the lives of approximately 1,000 residents. Gladkov stated that local authorities have advised residents at risk of flooding to move to temporary relocation sites. The Ukrainian side has not yet responded to this request.On October 25th, Bank of France Governor François Villeroy de Villeroy warned lawmakers debating the 2026 budget that the deficit must not exceed 4.8% of economic output to ensure France can cope with its growing debt burden. The French National Assembly is currently debating a draft budget that targets 4.7% GDP growth, but Prime Minister Jean-Claude Le Cornu has said the ultimate target should be within 5%, and he is seeking a compromise with opposition lawmakers. "It is absolutely necessary to keep the deficit below 3% between now and 2029, which would imply a maximum deficit of 4.8% next year," Villeroy de Villeroy said in an interview with La Croix. He also stated that France faces the risk of "progressive suffocation" from debt and that additional deficit spending will fail to stimulate economic growth. According to calculations by the Bank of France, if debt uncertainty is reduced, a 1% reduction in the household savings rate would boost economic growth by 0.4%. However, Villeroy de Villeroy stated that the French economy has strong momentum this year and growth will be "at least" as strong as the Banks forecast of 0.7%.On October 25th, the U.S. federal government shutdown entered its 24th day. More and more federal employees forced to take unpaid leave are facing the dilemma of not being able to pay their bills or mortgages, and many are forced to queue up at food banks for assistance. Jacobs, president of the local CDC union, stated that both parties are using the livelihoods of federal employees as bargaining chips in political negotiations, and that the current chaotic situation is unprecedented.On October 25, Lizhong Group responded to investors on an interactive platform, saying that the second phase of the companys project to produce 3.6 million ultra-lightweight aluminum alloy wheels annually in Mexico, with an output of 1.8 million wheels, has now been put into initial production. The company is actively promoting the running-in of the production line and the release of production capacity, striving to achieve the goal of full production and sales as soon as possible.

Risk sentiment improves. USD/JPY trading fluctuates, "short trap" strengthens the upward trend

Oct 26, 2021 11:04

On Thursday (October 7), the US dollar against the yen fluctuated within a narrow range, fluctuating between slight rises and slight declines, and is currently trading at around 111.30.


A series of factors helped USD/JPY gain some positive traction in the first half of Thursday, despite the lack of further bullish momentum. The risky urge in the market weakened the safe-haven yen. After the Bank of Japan lowered its assessment of 5 of Japan’s 9 regional economies, the yen was under further pressure.

On Wednesday, after Russian leaders assured Europe of natural gas supplies, global risk sentiment took a dramatic turn. In addition, the US Senate Republican leader McConnell said that the party will allow the federal debt ceiling to be extended to December to avoid a federal debt default. This has further stimulated investors' interest in high-risk assets such as stocks.

But the weaker dollar tone inhibited any meaningful upside of the dollar against the yen. Due to the market expectation that the Fed will tighten its policy early and the recent widening of the US-Japan Treasury bond yield gap, the downward momentum of the exchange rate has still been cushioned.

Since the Fed hinted at the end of September that it would start reducing the scale of monthly bond purchases by the end of 2021, US bond yields have been rising. Fearing that soaring energy prices will trigger inflation, the market seems to have begun to digest the possibility of the Fed raising interest rates in 2022. This will boost the U.S. dollar and the U.S. dollar against the yen.

The fundamental background seems to be favorable to the bulls and supports the prospect of continuation of the recent appreciation trend of the past three weeks or so. However, investors seem to be reluctant to bet heavily, preferring to wait and see before the closely watched US Monthly Employment Report (NFP) is released on Friday.

At the same time, traders may get clues from the weekly unemployment claims data released by the United States on Thursday, which will be released in the North American market in early trading. In addition, US bond yields and broader market risk sentiment will affect the dollar against the yen and allow traders to seize some meaningful opportunities.

From a technical point of view, the “short trap” under the 38.2% retracement level of 110.95 for USD/JPY has strengthened the overall upward trend. There is room for the exchange rate to rise to 112.08, 112.23, and 112.40. These three levels are 2021. , 2020 and 2019 highs.

If it goes down, 110.95, 110.60 and 110.25 are all expected to provide support.

(Daily chart of USD/JPY)

At GMT+8 16:38, the USD/JPY traded at 111.37.

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