USDJPY jumps to a six-week high despite BOJ inaction

The risk complex appears dubious early Friday even as fresh hawkish bias about the US Federal Reserve (Fed) joins geopolitical woes surrounding Europe, China, Russia, and the Middle East. The same, however, allows the US Dollar to remain on the front foot while bracing for a two-week uptrend, despite Wednesday’s US CPI-inflicted slump.

EURUSD remains pressured at a six-week low whereas GBPUSD extends the previous day’s losses but stays on the way to posting a weekly gain by the press time. Further, AUDUSD and NZDUSD also dropped for the second consecutive day amid a broadly firmer US Dollar and cautious mood, as well as mostly downbeat data at home.

USDJPY gains the market’s attention by rising the most among the G10 currency pairs as the Bank of Japan (BoJ) surprises traders while rejecting the widely expected reductions in the BoJ bond purchases.

USDCAD defends the previous day’s recovery even as Crude Oil prices reverse Thursday’s pullback from the key resistance line. That said, WTI Crude Oil prices brace for the biggest weekly gain since early April while snapping a three-week downtrend amid hopes of more energy demand and a supply crunch due to geopolitical tensions.

BTCUSD and ETHUSD reverse the previous day’s losses with mild gains as record BTC ETF inflows join optimism about Ethereum ETF S1 approvals.

Following are the latest moves of the key assets:

• WTI Crude oil reverses the previous day’s losses near $78.30 by the press time.
• Gold struggles to regain upside momentum near $2,310 after snapping a three-day uptrend the previous day.
• The USD Index rises to the highest level since early May, up 0.16% intraday near 105.40 as we write.
• Wall Street closed mixed but the Asia-Pacific shares edged higher. British and European shares lack clear directions during the initial trading hour.
• BTCUSD and ETHUSD both pare the previous day’s losses by rising to $67,000 and $3,520 respectively at the latest.

US Dollar braces for second weekly gain on hawkish Fed concerns…

US Dollar Index (DXY) traces upbeat Treasury bond yields to jump to a five-week high as traders reassess the odds of the Fed’s rate cuts in 2024. That said, the Greenback dropped heavily after a downbeat US Consumer Price Index (CPI) on Wednesday and failed to justify the Fed’s hawkish dot plot suggesting only one rate cut for the current year, versus a previously estimated two. However, the market players rechecked the FOMC view despite Thursday’s softer Producer Price Index (PPI) and slightly upbeat Jobless Claims while renewing the US Dollar demand.

Apart from the Fed bias, the US State Department’s concerns about Iran’s nuclear program and Treasury Secretary Janet Yellen’s comments suggesting strong US growth also favor the Greenback buyers.

On the contrary, the market’s lack of confidence in the European Central Bank (ECB) officials’ hawkish statements and looming political pessimism in France and Germany weigh on the EURUSD prices. Furthermore, GBPUSD also bears the burden of the UK’s political woes but the mixed British data and the upbeat statements from the Bank of England (BoE) policymakers allow the Cable to fight with the bears.

Bank of Japan (BoJ) keeps overnight rates unchanged at 0.1% while ruling out the market’s expectations of reducing the Japanese Government Bond (JGB) purchases. The BoJ also said, “Uncertainties surrounding economic and financial developments at home remain high.” With this, the USDJPY leads the G10 currency pairs while rising to a seven-week high, up nearly 0.80% intraday around 158.20 by the press time. It’s worth noting that a pick-up in the US Treasury bond yields adds strength to the Yen pair’s latest run-up, especially amid broad-based US Dollar strength.

Elsewhere, downbeat prints of New Zealand’s Business NZ PMI and Food Price Index join the US-China tensions and chatters about witnessing the Reserve Bank of Australia’s (RBA) rate cut in 2024 weigh on the NZDUSD and AUDUSD prices. Moving on, the Bank of Canada’s (BoC) dovish bias supersede the upbeat performance of Oil prices to propel the USDCAD prices.

Tensions surrounding the Israel-Hamas war, global ire towards Russia and the US-Iran tussles join the hopes of witnessing more energy demand in 2024 due to China stimulus and the US soft landing to propel the Crude Oil prices. It’s worth noting that the Gold prices seesaw amid the market’s anxiety about the future growth of the top-tier economies and concerns about the interest rates in 2024.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

UoM Consumer Sentiment Index, ECB’s Lagarde eyed…

Looking ahead, the first readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) and the Consumer Inflation Expectations will be important to watch for intraday directions. Additionally, comments from European Central Bank (ECB) President Christine Lagarde and Federal Reserve Governor Lisa D. Cook, as well as from Chicago Fed President Austan Goolsbee, will also direct the traders. It’s worth noting that the EURUSD pair is likely to decline more in case of upbeat US data as traders appear biased after the ECB’s rate cut and the Fed’s hawkish dot plot. Also, the Gold price may witness a heavy fall on breaking the $2,289 support backed by the strong US Dollar.

May the trading luck be with you!