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MTrading Team • 2023-08-02

USDJPY reverses from multi-day top as US credit rating cut joins hawkish BoJ rhetoric

USDJPY reverses from multi-day top as US credit rating cut joins hawkish BoJ rhetoric

Market sentiment roils on early Wednesday as the US lost its AAA credit rating from Fitch which highlighted the debt crisis to downgrade the world’s biggest economy to AA+. The risk aversion escalated on Washington’s readiness to use funds allocated for Ukraine to help Taiwan with arms.

With the US-negative headlines, the US Dollar retreats from a three-week high and joined a pullback in yields to weigh on the USDJPY. Adding strength to the corrective move could be the chatters about the Bank of Japan’s (BoJ) exit from easy-money policy.

Even so, the NZDUSD drops the most among the G10 currencies due to the downbeat NZ employment report whereas AUDUSD joins the Yen pair to occupy the second place together. That said, Gold price prints a corrective bounce while Crude Oil eases from the highest level since April.

It should be noted that the BTCUSD and ETHUSD fail to cheer the US Dollar’s retreat as both of them fade the previous day’s rebound from six-week lows amid US SEC’s investigation into the latest crypto ETFs.

Following are the latest moves of the key assets:

  • Brent oil retreats from 3.5-month high, down 0.50% intraday near $85.50 at the latest.
  • Gold price recovers from a three-week low to $1,950 by the press time.
  • USD Index grinds near 102.10 by the press time after rising to the three-week high, mildly offered of late.
  • Wall Street benchmarks closed mixed but the stocks in the Asia-Pacific zone dropped afterward. On the same line, equities in Europe and UK print more than 1.0% intraday losses of late.
  • BTCUSD and ETHUSD reverse the previous day’s rebound from a six-week low by posting mild losses near $29,500 and $1,850 of late.
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US lost the throne

With the latest rate cut US lost its status as the most credible nation in the world, at least on a credit rating basis, which in turn amplifies concerns of higher costs for the US debt and more economic hardships in the future. The same prods the US Dollar bulls at a three-week high.

Apart from the US Dollar’s retreat due to the risk-off mood, BoJ officials and the latest monetary policy meeting minutes allow the USDJPY to reverse from a three-week high and print the first daily loss in four, by declining the most among the key trading pairs just after the NZDUSD.

Elsewhere, the increased participation of the crypto players contrasts with the US SEC’s latest steps to tame the risky transactions in the BTCUSD and ETHUSD to challenge the previous day’s rebound from the 1.5-month low.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

US ADP Employment Change, risk catalysts in focus

While the US credit rating status and the US-China headlines are likely to entertain the market players ahead of the US ADP Employment Change, talks about the US ISM Services PMI and the US NFP, as well as the Fed, will infuse market moves.

May the trading luck be with you!