USDJPY grinds higher past 150 on firmer US Dollar, yields

The return of full markets roils sentiment early Tuesday as traders reassess China-inspired optimism, especially after the People’s Bank of China’s (PBoC) rate cut. Adding strains to the mood are the headlines from the Middle East, as well as growing confirmations about the US Federal Reserve’s (Fed) delayed rate cuts.

Amid these plays, the US Dollar Index (DXY) snaps a four-day losing streak while posting mild gains around 104.40 by the press time. That said, equities in the Asia-Pacific zone edged lower while yields defended the previous week’s run-up amid a sluggish start of the day.

EURUSD and GBPUSD print mild losses while the USDJPY grinds higher. Further, AUDUSD justifies the risk-barometer status by printing mild losses whereas NZDUSD remains pressured on China-inflicted wounds.

Despite the US Dollar’s upbeat performance, prices of Gold and Crude Oil stay firmer, challenging the previous week’s moves.

Elsewhere, BTCUSD and ETHUSD tread water at the multi-month high marked last week as crypto buyers take a breather after witnessing impressive whale activities and on-chain numbers amid spot ETF optimism.

Following are the latest moves of the key assets:

• Brent oil defends week-start gains around $83.60, up 0.20% intraday by the press time.
• Gold price rises for the fourth consecutive day to around $2,021 at the latest.
• USD Index snaps four-day losing streak while posting mild gains near 104.10 as we write.
• Asia-Pacific stocks edged lower and so do the shares in Europe and the UK.
• BTCUSD and ETHUSD both seesaw near the multi-month highs marked last week, close to $51,800 and $2,920 respectively by the press time.

USDJPY bulls ignore policymakers’ verbal intervention…

After witnessing a dull start to the week due to the US and Canadian holidays, the market’s risk appetite worsens early Tuesday. That said, stock indices in the UK and Europe printed minor gains despite growing geopolitical tensions surrounding the Red Sea. Major currency pairs maintained the familiar trading range while commodities marked small gains.

On Tuesday, the People’s Bank of China (PBoC) announced a record cut in the five-year Loan Prime Rate (LPR), also known as the benchmark for long-term mortgages, to 3.95% from 4.20%. The PBoC, however, kept the one-year LPR unchanged at 3.45%. The resulting move drowned the Chinese Yuan (CNY) and prodded the commodity buyers.

Elsewhere, a group of transport ministers from the Group of Seven (G7) countries will join the key diplomats from the European Union, the International Maritime Organization and the International Transport Forum to discuss the terrorist attacks in the Red Sea as the closure of the Suez Canal hampers global trade route.

Also worth observing is the fact that the US inflation numbers released so far signaled the need for keeping the rates higher for longer, which in turn backs the odds of witnessing the Fed’s rate cuts in June 2024 versus the previous notion of experiencing such action in March. The same keeps the US Dollar firmer and challenges the commodity buyers even as the optimism in the Asia-Pacific zone defends the latest rebound.

It should be noted that the benchmark US Treasury bond yields remain firmer and join the Bank of Japan (BoJ) officials’ rejection of an imminent rate hike to propel the USDJPY prices. In doing so, the Yen pair ignores the verbal intervention from Japanese diplomats to defend the national currency versus the Greenback.

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Full markets eyed…

Although the economic calendar appears mostly light for Tuesday, apart from Canada inflation data, the markets are likely to witness an active as the US and Canadian traders return to their desks after a long weekend. Also, likely to entertain the momentum traders are the headlines surrounding the G7 verdict on the Red Sea saga. Amid these plays, the US Dollar is likely to extend the day-start recovery while the riskier assets, like equities and Antipodeans, may witness a pullback. That said, this week’s Fed Minutes and global PMIs will be the key to watch for clear directions.

May the trading luck be with you!