USDJPY bounces off two-week low despite struggling US Dollar, mixed sentiment

Tuesday saw a quiet start to the week, with the US Dollar struggling to rebound. Traders are waiting for fresh insights from upcoming August PMI reports and the big central bankers' event in Jackson Hole.

The US Dollar is hovering near its yearly low as traders look for signs that the Fed might cut rates in September. Recent US data and Fed statements have been soft, weakening the Greenback. Meanwhile, equities are doing well, and yields are lower.

The Dollar's decline is also impacting the Euro, challenging EUR/USD bulls. The British Pound (GBP/USD) and Australian Dollar (AUD/USD) are retreating from their monthly highs, though there aren't any major negative factors driving this.

The Japanese Yen (USD/JPY) has bounced back from its lowest point in two weeks, amid discussions about the Bank of Japan's difficulties in raising rates further.

Interestingly, the New Zealand Dollar (NZD/USD) and Canadian Dollar (USD/CAD) are not following the Dollar's downward trend. Crude Oil prices continue to drop for the third day, while Gold remains steady after hitting a record high above $2,500 last week.

In the crypto world, Bitcoin (BTC/USD) and Ethereum (ETH/USD) are climbing for the second day in a row, recovering from recent losses. On-chain data is supporting positive moves for both cryptocurrencies.

Following are the latest moves of the key assets:

• WTI Crude oil prints a three-day losing streak at the lowest level in a fortnight, down 0.75% intraday near $73.20 by the press time.
• Gold remains sidelined near $2,505, inactive for the second consecutive day after refreshing the all-time high.
• USD Index snaps two-day losing streak the lowest level in 2024, mildly bid near 101.90 as we write.
• Wall Street closed with minor gains and allowed the Asia-Pacific shares to grind higher. However, equities in Britain and Europe trade mixed during the initial trading hour.
• BTCUSD and ETHUSD rise more than 1.5% each, up for the second consecutive day to $61,050 and $2,680 as we write.

Dovish Fed bias challenges US Dollar bulls…

On Monday, Federal Reserve officials pushed for a September rate cut, bolstered by recent soft US inflation and consumer data. This sent the US Dollar (DXY) down, extending losses from Friday and hitting its lowest level of the year. Geopolitical issues and China's unchanged monetary policy also played a role in the Dollar's decline.

The People’s Bank of China (PBoC) kept its Loan Prime Rates steady, and halted daily updates on foreign fund flows into its stock market. This move, along with tensions in the Middle East, gave the US Dollar a bit of support after recent drops.

In Europe, the Euro (EUR/USD) pulled back from its 2024 highs due to dovish comments from ECB officials and concerns about slowing inflation in the Eurozone.

In the UK, the GBP/USD surged to a monthly high on rising homebuyer interest and the Bank of England’s recent rate cut. However, the Dollar's rebound has since pulled the pair back from those highs.

The Japanese Yen (USD/JPY) rebounded slightly from a two-week low, aided by market caution and ongoing discussions about the Bank of Japan's (BoJ) struggles with further rate hikes.

The Australian Dollar (AUD/USD) reversed its gains from the previous month despite hawkish comments from the Reserve Bank of Australia (RBA) and low inflation expectations.

The New Zealand Dollar (NZD/USD) is up for the third consecutive day, reaching a five-week high, despite mixed trade data from New Zealand. Similarly, the Canadian Dollar (USD/CAD) remains stable amidst the Dollar's rebound and Crude Oil's weakness.

Crude Oil prices have dropped to a two-week low, affected by worries over Chinese demand and US oil production growth. Gold prices are steady near record highs, with traders waiting for new data from upcoming PMI reports and the Jackson Hole speeches.

• Strong Bullish: USDCAD, USDJPY, US Dollar, Silver
• Strong Bearish: AUDUSD, NZDUSD, GBPUSD, GBPJPY
• Bullish: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Bearish: DAX, FTSE 100, EURUSD, Crude Oil

EU, Canada inflation data, Fed talks eyed for intraday directions…

After a quiet start to the week, Tuesday promises a busier day for traders. Key events include Germany’s Producer Price Index (PPI) and the final Eurozone inflation data for July. These will be followed by Canada’s Consumer Price Index (CPI) and several speeches from Federal Reserve officials.

European Central Bank (ECB) officials have already signaled a likely rate cut in September, so unless the inflation numbers from Germany and the Eurozone are exceptionally strong, they may not significantly impact the Euro (EUR/USD).

Meanwhile, growing expectations for September rate cuts by the Fed, and potential further cuts in 2024, are weighing on the US Dollar. This could keep the Greenback weak as traders look ahead to Thursday’s PMI reports and Friday’s Jackson Hole Symposium. Other major currencies and commodities might maintain their recent gains due to this Dollar weakness. However, the Japanese Yen (USD/JPY) could struggle to drop further due to ongoing uncertainties about the Bank of Japan’s stance on rate hikes.

May the trading luck be with you!