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MTrading Team • 2023-06-07

USDJPY drops as challenges for yields escalate

USDJPY drops as challenges for yields escalate

The risk appetite dwindles during early Wednesday as previous economic optimism fades due to the recently downbeat data from major economies. Also challenging the sentiment is the looming fears of nearly $1.0 trillion worth of bond issuance by the US Treasury Department because of the debt-ceiling deal commitment.

With this, the USDJPY plays its role as the risk barometer pair while falling the most among the G10 currency pairs. Adding strength to the downside bias for the Yen pair are the fears of witnessing more declines in the yields, as well as a hawkish BoJ.

On the other hand, the AUDUSD hesitates in declining despite the downbeat Aussie GDP and China trade numbers. The reason could be linked to the hawkish comments from RBA Governor Philip Lowe.

Elsewhere, prices of gold and crude oil drop whereas US stock futures and Asia-Pacific stocks grind lower. That said, USDCAD remains on a dicey floor ahead of the key Bank of Canada (BoC) monetary policy announcements.

It should be noted that the cryptos return to the bear’s radar after the previous day’s corrective bounce amid industry fears.

Following are the latest moves of the key assets:

  • Brent oil drops for the second consecutive day, down 0.55% intraday to $75.80 at the latest.
  • Gold price also declines and snaps the two-day winning streak with mild losses around $1,956 as we write.
  • USD Index struggles for clear directions but stays mildly bid near 104.20 by the press time.
  • Wall Street closed with mild gains while the Asia-Pacific shares edged lower. That said, the equities in the UK and Europe are mostly downbeat as we write.
  • BTCUSD and ETHUSD drop nearly 1.0% to around $26,800 and $1,880 respectively by the press time.
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Sentiment sours but US Dollar lacks upside momentum

While the aforementioned catalysts reverse the previous optimism, the US Dollar fails to justify its haven status due to a lack of major data/events, as well as the pre-Fed silence. Even so, the greenback manages to print mild gains versus the Euro, Cable and the Antipodeans. However, the latest reduction in the hawkish Fed bets for June, in contrast to the increase in rate hike expectations for July, cap the greenback’s rebound.

On a different page, traders remain cautious amid downbeat prints of the mid-tier data and expectations of no halt in the rate hike trajectory by major central banks.

Elsewhere, fears of the US SEC’s lawsuits on Binance and Coinbase weigh on the leading cryptocurrencies like BTCUSD and ETHUSD even if industry players show readiness to fight with the government on this matter.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

BoC, second-tier EU data eyed

While the sluggish markets allow the US Dollar bears to take a breather, BoC’s monetary policy meeting will join the third-tier statistics from Eurozone and the UK PM Rishi Sunak’s diplomatic US visit to entertain the traders moving forward. Though, major attention will be given to the risk catalysts and economic fears for a better guide.

May the trading luck be with you!