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MTrading Team • 2024-02-27

USDJPY retreats from fortnight high despite softer Japan inflation, US data eyed

USDJPY retreats from fortnight high despite softer Japan inflation, US data eyed

Dicey markets are in fashion as traders await more clues to confirm the latest bias suggesting a delay in the major central banks’ rate cuts, as well as a soft landing in the top-tier economies. Even so, the Asia-Pacific shares edged higher and the yields failed to defend the week-start rebound, which in turn exerts downside pressure on the US Dollar.

With this, the US Dollar Index (DXY) prods the 200-SMA support and allows the major currencies, as well as commodities and Antipodeans, to print mild gains. It’s worth noting that the USDJPY gains major attention by falling the most despite downbeat Japanese inflation whereas the EURUSD struggles to cheer hawkish comments from European Central Bank (ECB) officials.

Additionally, concerns about the British economic rebound and the Bank of England's (BoE) lack of acceptance and challenge the GBPUSD buyers whereas the AUDUSD printed minor gains amid China-inspired optimism.

It should be noted that the NZDUSD remains depressed amid expectations that the Reserve Bank of New Zealand (RBNZ) will keep the monetary policy unchanged whereas USDCAD drifts lower amid a softer US Dollar and firmer prints of Crude Oil, Canada’s key export item.

On a different page, BTCUSD and ETHUSD remain firmer at the multi-month high as crypto traders seek more gains despite mixed market sentiment.

Following are the latest moves of the key assets:

  • Brent oil extends the previous day’s rebound from more than a week’s low toward $83.00 by the press time.
  • Gold price reverses the week-start losses to around $2,035 as we write.
  • USD Index drops toward a three-week low marked last Thursday, mildly offered near 103.65 at the latest.
  • Wall Street closed with minor losses but Asia-Pacific stocks edged higher. Further, the shares in Europe and the UK post minor losses during the initial hour.
  • BTCUSD and ETHUSD both seesaw near the multi-month high to around $56,500 and $3,230.
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US Dollar ignores hawkish Fed concerns, Yen edges higher on BoJ talks…

Although the US officials are drumming soft-landing concerns and suggesting a delay in the Fed rate cuts, the US Dollar edges lower as traders prepare for the hawkish monetary policies in March and May. That said, the prepared remarks for the US Treasury Secretary Janet Yellen’s speech at this week's meeting of G20 finance officials in Sao Paolo, Brazil, showed the policymaker’s optimism about the US economy as the key driver of global growth. The same restricted pullback in the benchmark Treasury bond yields but failed to restrict the US Dollar’s fall as market players brace for this week’s key data/events.

Further, comments from City Federal Reserve Bank President Jeffrey Schmid who strongly favored no rate cuts while saying, “We are not out of the woods yet on 'too high' inflation,” also failed to inspire the US Dollar bulls. Fed’s Schmid also added that the Fed should be patient on cuts.

While the US Dollar fails to regain upside momentum, Euro grinds higher amid hawkish comments from the European Central Bank (ECB) officials. On Monday, ECB President Christine Lagarde repeated her remarks showing a preference for the restrictive policy. The policymaker said, “Restrictive policy stance acts as a safeguard against wage-price spiral.” The same allowed EURUSD to post the first daily closing beyond the 200-SMA in three weeks.

Elsewhere, media reports that China will remove tariff restrictions from Australian wine by the end of March allowed AUDUSD to pare the week-start losses, especially amid cautious optimism in the Asia-Pacific zone.

Japan’s National Consumer Price Index (CPI), CPI ex Fresh Food and CPI ex Food, Energy for January eased from December numbers but were above the market forecasts and justified the market’s expectations of witnessing a sooner hawkish tweak in the Bank of Japan (BoJ) monetary policy. The same joined broad-based US Dollar weakness to weigh on the USDJPY price, allowing it to reverse the week-start gains.

BTCUSD jumped to the 27-month high and ETHUSD rose to the highest level since April 2022 earlier in the day, before retreating from $57,050 and $3,275 respectively. In doing so, the traders ignore downbeat comments from Kansas City Federal Reserve Bank President Jeffrey Schmid who said, “(It) Would be a mistake to consider cryptocurrency as currency.”

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

US data, President Biden’s speech eyed…

Moving on, the US Conference Board’s (CB) Consumer Confidence data for February and the Durable Goods Orders for January will join updates from President Joe Biden’s meeting with the Congressional Leaders to avoid the looming government shutdown eyed for clear directions.

Should the scheduled US data keep favoring a delay in the Federal Reserve’s (Fed) rate cut, as well as US President Biden manages to provide upbeat headlines to avoid the government shutdown, the US Dollar will regain upside momentum. However, downbeat data and likely hesitance of the US politicians to respect Biden could keep the Greenback weak and allow the commodities and Antipodeans to defend the latest rebound.

May the trading luck be with you!