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MTrading Team • 2023-01-18

USDJPY rallies as BOJ drowns yields

USDJPY rallies as BOJ drowns yields

Markets remain cautiously optimistic on early Wednesday as the Bank of Japan (BoJ) defied hawkish bias by holding the monetary policy unchanged. Adding strength to the firmer sentiment could be the expectations of upbeat growth concerns for China and Europe, as well as the Fed policymakers’ acceptance of dovish bias.

With this, the stock future and Asian equities remain firmer while Treasury yields across the board slid, which in turn renewed the US Dollar demand.

As a result, commodities please bears but Antipodeans also rise amid an active start to the key Wednesday. Gold drops for the third consecutive day and Brent Oil retreat from a six-week high.

GBPUSD also rallied despite softer inflation while USDJPY cheered BoJ’s inability to justify bullish bias. Further, AUDUSD and NZDUSD are up nearly half a percent whereas USDCAD drops 0.2%.

Further, BTCUSD reverses the previous day’s pullback from a four-month high while ETHUSD stays firmer around the highest level since early November.

Following are the latest moves of the key assets:

  • Brent oil retreats from a six-week high, mildly offered near $86.00.
  • Gold drops for the third consecutive day as sellers attack $1,900 at the latest.
  • USD Index struggles for clear directions after rising the most in a week earlier in the day.
  • Wall Street closed mixed but stocks in the Asia-Pacific region, as well as equities in Europe and the UK, remain firmer at the latest.
  • BTCUSD and ETHUSD print mild gains around the multi-day high, close to $21,300 and $1,580 as we write.
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Bond buyers trigger risk-on mood

Given the BoJ’s rejection of further alterations to the Yield Curve Control (YCC), bond buyers across the board return to their desks. Also exerting downside pressure on the Treasury bond yields was the hope of no or limited global recession, mainly fuelled by concerns surrounding China and Europe. That said, USDJPY leads the bulls while the USDCNY struggle for clear directions.

Gold price remains pressured around $1,900 while the oil buyers struggle after rising to the highest levels since early December 2022. USDCAD justifies hawkish bias for the Bank of Canada (BOJ) after upbeat Canadian inflation data, published the previous day.

Furthermore, equities in the Asia-Pacific region were positive, led by Japan’s Nikkei, whereas those from Europe and the UK also offer a positive start to the day.

Elsewhere, Cryptos remained on the front foot as 2023 feel-good vibes continue to help BTCUSD and ETHUSD bulls despite concerns surrounding SEC leaks.

  • Strong buy: GBPUSD
  • Strong sell: ETHUSD, USDJPY
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

US Retail Sales, PPI in focus

As the US Dollar struggle to defend the BoJ-inspired gains, market players will be interested in reading upbeat US Retail Sales and Producer Price Index for December to keep the hawkish bias for the Fed. However, fewer odds are there for the outcome and hence the greenback is likely to remain depressed unless witnessing too strong data.

May the trading luck be with you!