Trends and Outlook of Major Forex Currencies and Trading Pairs

September has been a wild month for the markets.

The USD continued its dominance against all major currencies forcing the Bank of Japan and England to step in.

In the digital forex market, prices of trading pairs could be influenced by various factors. The price trend of major currencies is one significant element that cannot be ignored.

This guide will review recent market trends of major forex currencies, from what happened to the USD, EURO, and JPY, factors affecting the prices, to how these impact trading in USD/JPY and EUR/JPY, and finally, what we can expect in the next months.

Recent Trends of the Dollar, Yen, and Euro

September has been a rollercoaster for many major currencies. USD retains its safe-haven status, EUR struggled to return to parity, and JPY touched its highest levels.

So, here’s a quick view of how major currencies performed in the last month.

In September, USD continued to rise against its major peers. DXY, the dollar index, which measures the USD’s strength against a basket of currencies, rose 3.42%. It mainly happened due to the Fed’s policy of raising interest rates to curb inflation.

The yen has fallen below 140 per dollar for the first time in over a quarter-century, owing mostly to Japan’s central bank’s policy of maintaining ultra-low interest rates.

The euro fell below $0.99 to a fresh 20-year low in September as Russia halted gas deliveries along its major pipeline to Europe, increasing worries of a regional energy crisis.

What Affected the Prices

Let’s talk about some factors that are affecting the USD, EUR, and JPY.

King Dollar

Except for the USD, nearly every asset class has witnessed poor returns in 2022.

The dollar has risen considerably this year as the Federal Reserve raised interest rates to combat sky-high inflation. DXY gained about 17% this year.

But the Fed isn’t the only reason for the strong dollar. While the US economy is on the verge of a recession, it is still doing better than other advanced economies such as the UK, European nations, and Japan.

In addition, recent global shocks, particularly the Ukraine crisis, have helped boost the dollar’s value since investors, corporations, and other governments frequently stock their reserves in dollars during turbulent times.

Plunging Yen

JPY fell to a 24-year low against the USD in September. The yen is under pressure to depreciate as the Fed raises interest rates this year.

The yen, which began the year at near 115 to the dollar, approached a 24-year low of 146 yen per dollar on Sept. 22. It plunged more than 25% and attracted the attention of the world market.

The Finance Ministry said it spent 2.84 trillion yen ($19.7 billion) in September to moderate the yen’s fall, the first intervention to strengthen the currency since 1998.

BOJ Governor Haruhiko Kuroda has often stated that it is too early to reduce monetary stimulus since the lengthy battle against deflation is not yet ended.

Inflation has risen over the BOJ’s 2% objective, but the bank believes the trajectory is unsustainable and expects inflation to fall below the target in the fiscal year beginning April 2023.

Worsening EUR

The EUR dipped to its lowest levels against the dollar in September.

The Euro has been slowly declining in recent months, as concerns about the health of the Eurozone economy have grown, as inflation has reached a record high and growth has slowed.

The Eurozone’s economy is suffering from rising inflation and rising energy and borrowing costs.

A weak Euro and the price hikes it causes add to the European Central Bank’s problems, which has been criticized for starting its rate rise cycle far later than its counterparts. The bank raised interest rates to 75 bps in the September meeting to match the Federal Reserve.

To make matters worse for the central bank, tasked with containing inflation, the Euro has declined against the dollar and other currencies such as the Swiss franc and British pound.

What to look for in USD/JPY and EUR/JPY?

Amidst the market chaos, what can traders expect for USD/JPY and EUR/JPY?

Let’s find out!

USD/JPY

The USD/JPY price action will largely depend on how high the Fed rates will go.

Following the Fed’s interest rate rises earlier this year, investors bet on Japan following suit. The possibility of change remains, but it has subsided after the BOJ repeatedly demonstrated its commitment to upholding the yield ceiling.

Finance Minister Shunichi Suzuki has not suggested that direct involvement in the currency market is likely.

If the government does intervene in markets to boost the yen, it will be the first time since 1998, when it and the United States went on a big, coordinated yen-buying frenzy.

Suzuki and other authorities are hopeful that verbal warnings will be enough to halt the yen’s current decline.

The yen’s decline may end if investors have priced in the Fed’s rate rises or the US enters a recession, hurting the dollar.

EUR/JPY

EUR/JPY rose to its new highs in September, reaching above 145 for the first time since January 2015.

Although the EUR performed well against Yen this year, ECB’s stance will be the major driver for the EUR/JPY.

Russia’s invasion of Ukraine has harmed the Eurozone’s development prospects, with the region’s energy problem also contributing to the price rise. This is having a direct impact on the EUR.

Without a quick reduction in monetary policy accommodation, inflationary pressures caused by Euro devaluation may worsen.

However, the dovish stance of the BOJ will continue to affect the EUR/JPY. Unless the BOJ step in to strengthen JPY, the currency will continue to falter against EUR.

Rounding up

Some of the most historic market crashes occurred in October (2008, 1987, 1929). The primary focus will be on the Feds, ECB, and BOJ’s monetary policies.

The Fed is raising interest rates to combat the present near-constant price rise. Many Fed speakers have signaled for more rate hikes, and the dollar will rise as the Fed continues to boost interest rates.

The ECB’s Governing Council unanimously decided to raise its three main interest rates, ECB President Christine Lagarde said in the September meeting.

It can bring some bullishness for the EUR. However, any relief to the euro would be short-lived, given the growing cost of debt, the possibility of a recession, and the conflict in Ukraine.

BOJ’s dovish stance and if it can intervene in the currency markets will decide the course for JPY. As mentioned earlier, the bank is doing verbal intervention rather than a practical one. So, the JPY value can falter.

Digital Forex Pairs Using Stablecoins

GYEN, a JPY stablecoin issued by GMO Trust, is available on Coinbase, Uniswap, Sushiswap, and DFX Finance.

Find the trending GYEN pairs here:

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DisclaimerThis content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.We strongly advise our readers to conduct their own independent research before engaging in any such activities.GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in their country.

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Building Financial-Grade Digital Assets. The World’s First Regulated JPY-Pegged Stablecoin Issuer.