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MTrading Team • 2024-01-10

USDJPY bulls attack 145.00 despite sluggish yields

USDJPY bulls attack 145.00 despite sluggish yields

The risk complex remains downbeat amid easing odds of the Fed’s first rate cut in January, as well as due to the geopolitical tensions. The same, however, failed to propel the yields but allowed the US Dollar to rebound.

As a result, the Antipodeans and commodities edged lower but the Crude Oil remains firmer amid fears of supply outage and higher inventory draw. Further, the EURUSD and the GBPUSD bear the burden of dovish bias about the European Central Bank (ECB) and the Bank of England (BoE).

Elsewhere, AUDUSD and NZDUSD drop further on downbeat Aussie data and China woes whereas Gold Price declines to the short-term key support. Additionally, Wall Street closed mixed but the Asia-Pacific equities and the US stock futures print mild losses.

Cryptocurrencies traded mixed as Bitcoin marked a volatile session but Ethereum remained upbeat ahead of the much-awaited spot ETF approvals.

Following are the latest moves of the key assets:

  • Brent oil extends the previous day’s recovery to $78.00, up 0.60% intraday by the press time.
  • Gold price remains pressured around $2,028 at the latest.
  • USD Index prints mild gains around 102.50, keeping the previous day’s run-up.
  • Wall Street closed mixed but the Asia-Pacific stocks drifted lower. However, equities in the UK and Europe remain pressured during the initial hour.
  • BTCUSD prints mild losses around $46,000 after reversing from the yearly high while ETHUSD prints a three-day uptrend at $2,380.
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Slew of factors helping US Dollar ahead of inflation

Tuesday’s US international trade deficit eased to -$63.2 billion versus analysts’ expectations of -$65.0 billion and prior readings of $64.5 billion, which in turn favored the US Dollar buyers despite unimpressive bond yields. Also, the US NFIB Business Optimism Index for December improved to 91.9 from 90.6 prior and 90.7 market forecasts. It should be noted, however, that the Atlanta Fed’s GDPNow Model predicts the US Q4 growth as 2.2% versus 2.5% estimated on January 03.

In addition to the mostly firmer US data and preparations for the US CPI, in light of the upbeat US employment data, the escalating geopolitical tensions also underpinned the US Dollar’s run-up. That said, Peru declared an emergency on the northern border with Ecuador, the nation that uses the US Dollar as a currency, as a notorious gang boss known as Fito escaped from prison and triggered nationwide riots. On the same line, CNBC shared news of the biggest Red Sea attack on merchant ships by the Houthi terrorists.

While the US data and risk aversion helped the US Dollar, downbeat updates from the European Central Bank (ECB) weighed on the EURUSD. Elsewhere, softer Japan inflation clues and the weaker yields failed to offer any relief to the USDJPY sellers, activating the Yen pair’s recovery. Furthermore, GBPUSD also extends the previous day’s losses amid the market’s preparations for today’s speech from Bank of England (BoE) Governor Andrew Bailey.

On a different page, a higher-than-expected draw in the US weekly Oil inventories, per the American Petroleum Institute’s (API) data, joined the geopolitical risks in the Red Sea and Ecuador to trigger the Oil price recovery. However, the Gold price remains under pressure amid downbeat sentiment and the firmer US Dollar.

As per the latest ECB study, the impact of monetary policy shocks is greater on manufacturing than services, which in turn justifies the fact that European manufacturing entering recession and challenging the bloc’s growth, as well as emphasizing sooner exit from the restrictive policies. Further, the ECB policymaker Francois Villeroy de Galhau said that they will cut rates this year when inflation expectations are solidly anchored at 2%. Moreover, ECB policymaker Mario Centeno also mentioned that the rate cuts from the European Central Bank could come sooner than the market expects.

Elsewhere, Japan’s real wages in November marked another deep fall, 3.0% YoY, to defend the BoJ’s easy-money policy. Further, Aussie CPI for November eased to 4.3% from 4.9% prior and 4.4% expected.

Additionally, a senior official from the People’s Bank of China (PBoC), Zou Lan, signaled further easing in the monetary policy and rate cuts, which in turn contrasts with the latest easing in the dovish bias for the Fed to add strength to the US Dollar’s recovery. It should be observed that the news of China easing failed to inspire the Shanghai Composite which dropped to the lowest level since April 2022 and favored the market’s rush toward the US Dollar in search of risk safety.

Talking about cryptos, BTCUSD marked a stellar move the previous day, initially refreshing the multi-month high before closing in the red, as the US SEC Governor’s account got hacked and initially confirmed the spot ETF approvals for Bitcoin before denying it. That said, Ethereum remains firmer amid hopes of more cash inflow.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

BoE’s Bailey eyed…

While the economic calendar is mostly silent ahead of tomorrow’s US inflation data, speeches from central bankers will entertain the market players. Among them, BoE Governor Andrew Bailey will gain major attention as most BoE officials have been hawkish despite the looming concerns about the UK. Should the policymaker manage to hide economic hardships and defend the hawkish bias, the GBPUSD may reverse the previous day’s losses. Elsewhere, the Fed talks will need to defend the economic optimism to keep the US Dollar on a firmer footing.

May the trading luck be with you!