USDJPY pares first weekly loss in five as Fed Chair Powell’s Testimony, US NFP loom

Trading sentiment remains unclear early Monday as the US Dollar licks its wounds after posting a two-week downtrend despite hawkish comments from the Fed officials. That said, headlines from China suggest more stimulus and a cautious mood ahead of this week’s top-tier data/events.

While the US Dollar lacks clear directions, the Treasury bond yields print mild gains and challenge the major currencies’ run-up against the Greenback. With this, the EURUSD edges higher and the GBPUSD extends Friday’s recovery to reverse the previous weekly loss. Further, USDJPY justifies a rebound in the yields to print mild gains whereas AUDUSD and NZDUSD remain depressed on challenges for the restrictive monetary policies at home.

Elsewhere, Gold price seesaw at the highest level in 2024 after posting the biggest daily and weekly gains since late 2023 while Crude oil retreats after a week-start gap toward the north.

Cryptocurrency traders become suspicious of the BTCUSD and the ETHUSD’s further upside at the multi-year high amid a lack of major incentive for the bulls.

Following are the latest moves of the key assets:

• Brent oil remains mildly bid at $84.30 despite paring the week-start gap towards the north.
• Gold price remains firmer at the highest level in 2024 while poking $2,088-90 resistance by the press time.
• USD Index stays defensive below 104.00, defending the last weekly losses of late.
• Wall Street closed with minor gains but Asia-Pacific stocks drifted lower. Further, the shares in Europe and the UK remain dicey during the initial hour.
• BTCUSD and ETHUSD both seesaw near the multi-month high, close to $64,100 and $3,480 at the latest.

US Dollar struggles to justify hawkish Fed bias…

Although most of the Fed officials defend the “higher for longer” rate bias, the latest asymmetry with the US data and hawkish comments from other major central banks like the European Central Bank (ECB) and the Bank of England (BoE) stop the US Dollar from rising further. With this, Friday’s downbeat prints of the US ISM Manufacturing PMI weighed on the US Dollar Index (DXY).

With this, a major move was seen in the Gold price that crossed technical resistance, now supporting around $2,065. Also helping the XAUUSD buyers are recent headlines from China suggesting a slew of measures to boost economic activities into one of the world’s largest commodity customers. Furthermore, the strong Indian GDP and indecision about the major central banks’ rate actions in 2024 also underpin the bullish bias about the traditional haven.

On a different page, news from Japan seemed to have fuelled the USDJPY despite the sluggish US Dollar. Late in the last week, Japanese media spread the news that the Tokyo government is mulling declaring an official end to the deflation, which in turn defends the Bank of Japan’s (BoJ) ultra-easy monetary policy and weighed on the Japanese Yen (JPY) ahead of this week’s Japan inflation data.

Elsewhere, firmer inflation numbers from Europe and the hawkish commentary from the ECB speakers allowed the EURUSD to remain firmer. However, the BoE talks weren’t comforting and failed to propel the GBPUSD pair, especially amid doubts about the UK’s economic sturdiness. It should be noted that the USDCHF retreats on upbeat Swiss Consumer Price Index (CPI) data while the USDCAD remains firmer ahead of this week’s Bank of Canada (BoC) monetary policy decision and Canada employment decision.

Crude oil witnessed a week-start gap towards the north after OPEC+ unveiled readiness to extend the supply cuts through Q2 2024. The black gold, however, retreated of late amid the market’s fears of more demand due to the major central bankers’ defense of higher rates.

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

A softer start of the key week…

Moving on, today’s economic calendar carries fewer details to track, which in turn may allow the market players to consolidate the previous moves. However, major attention will be given to Fed Chair Jerome Powell’s Testimony, scheduled for Wednesday and Thursday, followed by Friday’s US Nonfarm Payrolls (NFP). Should the US catalysts defend the Fed’s delay in the rate cuts, the US Dollar will recover the latest losses, which in turn can challenge the latest upside of the Gold price.

May the trading luck be with you!