USDJPY renews 38-year high ahead of Fed Chair Powell’s speech

The risk complex appears slightly downbeat early Tuesday amid a cautious mood ahead of top-tier data/events. Also challenging the sentiment are the latter political jitters. However, the recent softening in the US data challenges the Greenback buyers despite a corrective bounce that challenges a three-day losing streak ahead of speeches from Federal Reserve (Fed) Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde. Also important are the first readings of the Eurozone inflation for June and the US JOLTS Job Openings for May.

The US Dollar Index (DXY) prints the first daily gains in four while pushing EURUSD toward the second consecutive daily fall. That said, GBPUSD snaps a three-day losing streak amid downbeat UK data and politics ahead of Thursday’s UK elections. In contrast, USDJPY remains firmer for the third consecutive day to refresh the highest level since 1986 amid upbeat yields and hawkish Fed concerns.

AUDUSD extends the week-start losses amid unimpressive monetary policy meeting minutes from the Reserve Bank of Australia (RBA) while NZDUSD drops to a seven-week low on disappointing data from New Zealand (NZ), as well as due to the sour sentiment. It’s interesting to note that the USDCAD rose heavily even as Crude Oil jumped to a nine-week high.

Crude Oil gains support from the bullish supply-demand matrix to remain firmer despite the upbeat US Dollar. The greenback’s strength, however, weighs on the Gold Price within a short-term trading range.

BTCUSD and ETHUSD defend the late June rebound despite the latest news of outflows and price-negative whale activities. The reason could be linked to traders’ preparations for the ETH ETF launch and the US SEC’s stand on crypto players ahead of the US elections.

Following are the latest moves of the key assets:

• WTI Crude oil remains mildly bid at the highest level in nine weeks, up 0.15% intraday near $83.50.
• Gold lacks clear directions near $2,330 by the press time, staying within a short-term trading range.
• The USD Index snaps a three-day losing streak while posting minor gains near 105.90 as we write.
• Wall Street closed with minor gains while the Asia-Pacific shares edged lower. That said, equities in Britain and Europe posted mild losses during the initial trading hour.
• BTCUSD and ETHUSD both print mild gains near $62,900 and $3,450 respectively at the latest.

US Dollar licks its wounds ahead of key catalysts…

Monday’s downbeat prints of the US ISM Manufacturing PMI and final readings of the S&P Global PMIs for June joined the mixed Fed talks to exert downside pressure on the US Dollar. Also entertaining the Greenback sellers were the concerns challenging the Fed’s one rate cut in 2024 bias, especially after Friday’s downbeat prints of the US Core PCE Price Index. However, consolidation ahead of Fed Chair Jerome Powell’s speech and downbeat catalysts outside the US allow the USD to pare recent losses amid a mostly quiet Asia-Pacific trading session early Tuesday.

On the other hand, softer German inflation and mixed signals from the ECB officials stopped the EURUSD from cheering the US Dollar’s previous fall, as well as keeping the Euro pressured on the Greenback’s latest rebound. That said, the slower UK shop price inflation growth since October 2021 exerts downside pressure on the GBPUSD prices.

USDJPY rose to the highest level since 1986 while printing a three-day winning streak as firmer Treasury bond yields join doubts about the Bank of Japan’s (BoJ) further rate hike to fuel the pair. However, the Japanese policymakers’ verbal intervention tested the buyers at a multi-year high.

Elsewhere, AUDUSD fails to justify the slightly hawkish RBA Minutes and firmer Australian inflation expectations amid sour sentiment and fears about the Aussie economic growth. Meanwhile, NZDUSD marks the biggest fall among the G10 currency pairs on disappointing NZ quarterly business confidence figures. Further, USDCAD rises to the highest level in two weeks while defending the previous day’s heavy run-up despite strong prices of Canada’s key export item, namely crude oil.

That said, the energy benchmark WTI crude oil remains mildly bid at the highest level in nine weeks as the summer demand outlook joins supply-crunch woes. In doing so, the black gold ignores the firmer US Dollar and China woes. Moreover, Gold price lacks clear directions while making rounds to $2,330, staying within a one-month-old trading range, amid the US Dollar’s rebound and the market’s cautious mood ahead of the top-tier catalysts.

• 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

Eurozone inflation, Fed Chair Powell and ECB’s Lagarde in the spotlight…

Although the early Tuesday moves appear slightly doubtful and lack momentum, the momentum traders will have ample catalysts to cheer for the rest of the day. Among them, the first reading of June’s inflation for the Eurozone will be the first to watch. That said, the headline Consumer Price Index (CPI) and the ECB’s favorite Harmonized Index of Consumer Prices (HICP) could print downbeat figures and weigh on the EURUSD ahead of Lagarde’s speech. On Monday, ECB’s Lagarde said, “It will take time to be certain that inflation is on track.”

Elsewhere, Fed Chair Jerome Powell needs to defend the hawkish bias by suggesting no more than one rate cut for 2024 to keep the US Dollar in recovery mode, failing to do so can allow traders to pare the previous gains. Additionally, US JOLTS Job Openings for May will also be important to predict Wednesday’s US ADP Employment Change and Friday’s US Nonfarm Payrolls (NFP).

May the trading luck be with you!