USDJPY retreats amid mixed BoJ concerns, lackluster US Dollar

Traders reassess the market dynamics after an active day and witness a lack of incentives amid a light calendar, as well as a cautious mood ahead of some more US consumer-centric data.

Against this backdrop, the US Dollar struggles to extend the previous day’s gains, marked by upbeat US inflation data and softer US Federal Budget Deficit. However, calls about the Fed’s rate cuts test the Greenback’s gains.

Amid these plays, Gold price remains sidelined after snapping a nine-day winning streak whereas crude oil remains pressured due to mostly downbeat demand-supply forecasts.

Further, EURUSD picks up bids to pare weekly loss whereas GBPUSD prods a two-day losing streak. Moving on, USDJPY fades the previous day’s rebound on the Bank of Japan (BoJ) concerns whereas USDCAD and USDCHF edge higher.

On a different page, BTCUSD picks up bids to reverse the previous day’s retreat from the all-time high whereas ETHUSD also stays mildly bid at the highest level since late 2021.

Following are the latest moves of the key assets:

• Brent oil remains pressured around $82.70 after closing in the red the previous day.
• Gold price seesaws near $2,160 as bears jostle with the key support.
• USD Index hovers around 103.00 while struggling to extend the previous three-day recovery.
• Wall Street closed with mild gains while the Asia-Pacific stocks edged lower. Further, the shares in Europe and the UK remain lackluster during the initial hour.
• BTCUSD and ETHUSD both remain firmer around the latest peaks close to $73,000 and $4,040.

Momentum traders take a breather…

After witnessing the US inflation-linked volatility the previous day, the market players appear inactive as traders reassess the odds favoring the US Fed’s June rate cut, especially when the Retail Sales and Consumer confidence data are yet to be released. With this, the US Dollar lacks recovery momentum but the risk appetite remains thin.

That said, the US inflation numbers per the Consumer Price Index (CPI) gauge came in firmer than expected and pushed back the dovish bias about the Federal Reserve (Fed). On the same line was a reduction in the US Federal Budget deficit. However, the odds of favoring the Fed’s rate cut in June remain mostly intact and join the optimism in the equity market to test the Greenback’s upside afterward.

Elsewhere, Russian President Vladimir Putin boasted of the capacity to start a nuclear war and challenged the sentiment while the US-China tension and concerns about the health of the Chinese real estate market also challenged the optimists and put a floor under the US Dollar.

Amid these plays, the EURUSD fails to cheer the hawkish bias of the European Central Bank (ECB) while the GBPUSD buyers also lack confidence in the hawkish comments from the Bank of England (BoE) officials after Governor Andrew Bailey said, “Question of policy restrictiveness is now key.” Further, Gold price licks its wounds after falling the most in one month the previous day while Crude oil fails to cheer higher inventory draw per the US API stockpile report amid mixed supply-demand forecasts from OPEC and the EIA.

USDJPY, however, hesitates to portray the US Dollar’s strength as Japanese wage talks challenge the Bank of Japan’s (BoJ) defense for the ultra-easy monetary policy. It should be noted that the USDCAD and USDCHF remain idle as policymakers in Canada and Switzerland hesitate to confirm calls for further rate cuts.

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

Sluggish day ahead…

A lack of a major catalyst could allow the traders to remain inactive on Wednesday. However, upbeat prints of Thursday’s US Retail Sales and Friday’s UoM Consumer Sentiment Index could allow the US Dollar to snap a three-week losing streak and challenge commodity buyers ahead of next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

May the trading luck be with you!