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MTrading Team • 2024-05-23

USDJPY seesaws near three-week high as traders prepare for top-tier data

USDJPY seesaws near three-week high as traders prepare for top-tier data

The typical pre-data anxiety prevails early Thursday as market players await the first readings of May’s activity numbers for the top-tier data. Even so, geopolitical tensions and the hawkish Fed Minutes allow the US Dollar to pare the previous week’s losses, which in turn challenge the riskier assets.

With this, the US Dollar Index (DXY) stays on the front foot and exerts downside pressure on the EURUSD, despite the latest corrective bounce ahead of the data. It’s worth noting, however, that the GBPUSD remains firmer for the fifth consecutive day on higher-than-expect UK inflation numbers. At the same time, USDJPY fails to cheer Japanese policymakers’ verbal efforts to defend the domestic currency, especially when the Bank of Japan (BoJ) officials fail to sound hawkish.

AUDUSD justifies the risk-barometer status while staying pressured whereas NZDUSD sticks to the previous day’s gains. Furthermore, Crude Oil and Gold prices remain depressed on the US Dollar’s run-up, as well as the market’s paring for the previous week’s gains amid mixed headlines.

BTCUSD and ETHUSD reverse the previous day’s losses amid cautious optimism surrounding the spot ETH ETF approvals. It’s worth mentioning, however, that the US House of Representatives passed a bill targeting more regulations of the cryptocurrencies to challenge the Bitcoin and Ethereum buyers of late.

Following are the latest moves of the key assets:

  • WTI Crude oil drops for the fourth consecutive day, printing mild losses near $77.00 at the latest.
  • Gold prints a three-day losing streak even as it posts a minor downside to $2,365 by the press time.
  • The USD Index stays defensive near the weekly high surrounding 104.90 after rising in the last three consecutive days.
  • Wall Street closed with minor losses which weighed on the Asia-Pacific shares. That said, British and European shares lack clear directions during the initial trading hour.
  • BTCUSD and ETHUSD both print mild gains near $69,500 and $3,780 as we write.
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US Dollar steadies ahead of key data, braces for weekly gains…

On Wednesday, Minutes of the latest Federal Open Market Committee (FOMC) Monetary policy meeting renewed hawkish bias about the US central bank and joined the geopolitical woes to underpin the US Dollar’s biggest daily jump in three weeks.

As per the Fed Minutes, "Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate." The statement contradicted Fed Chairman Jerome Powell’s post-FOMC comments rejecting the rate hike concerns.

Meanwhile, China’s military drills surrounding Taiwan raised fears about the fresh Sino-American tension, especially when Beijing announced countermeasures against 12 US companies and their top-tier officials. Also contributing to the risk aversion are headlines from the US White House (WH) as the WH National Security Advisor Jake Sullivan criticized Israel’s aggression in Gaza that endangers civilians. Furthermore, the UK’s Secretary of Defense Grant Shapps mentioned that British intelligence now has evidence of China lying when they claim that they aren’t providing Russia with lethal weapons systems. Hence, most of the geopolitical headlines suggest grim conditions and hence allow the US Dollar to pare the previous week’s losses. It’s worth mentioning, however, that the market’s consolidation ahead of today’s key PMIs and Friday’s US Durable Goods Orders test the Greenback buyers of late. With this, the US Dollar Index (DXY) struggles to extend the three-day uptrend at the highest level in a more than week while bracing for a weekly gain.

Elsewhere, EURUSD pauses a three-day losing streak ahead of the Eurozone and German PMIs for May, especially when the European Central Bank (ECB) officials hesitate to signal rate cuts after June. Furthermore, GBPUSD prints a five-day winning streak as slower-than-expected easing in the UK inflation figures joined calls for the British elections in July.

The May month preliminary PMIs for Australia came in downbeat and those for Japan flashed mixed readings, which in turn challenged the AUDUSD and USDJPY traders amid mixed sentiment. It should be observed that the upbeat yields and concerns about the Bank of Japan’s (BoJ) inability to lift the rates further, as well as hopes of witnessing the Reserve Bank of Australia’s (RBA) rate cut, weigh on the Japanese Yen (JPY) and the Australian Dollar (AUD).

That said, NZDUSD defends the previous day’s gains even as the New Zealand (NZ) Finance Minister (FinMin) cited fears of higher government deficit. The reason could be linked to the Reserve Bank of New Zealand’s (RBNZ) hawkish halt.

Furthermore, crude oil dropped for the fourth consecutive day while refreshing the weekly low as the US weekly crude oil inventories, per the Energy Information Administration (EIA), printed a surprise build in the stockpile versus the expected draw, just like the private industry data. Additionally, the Russian Energy Minister stated that the nation’s oil production was slightly above to target, which in turn weighed on the Oil prices.

Gold price dropped for the third consecutive day amid fears emanating from China and due to the US Dollar’s defensive performance. Also weighing on the XAUUSD could be the headlines suggesting the market’s consolidation of the previous moves ahead of this week’s top-tier data/events.

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

PMIs, US Jobless Claims, and housing data will direct intraday moves…

The US Dollar regains upside momentum after the previous day’s hawkish Fed Minutes. However, cautious mood ahead of the first readings of the US/UK and Eurozone PMIs for May and the US Jobless Claims and housing data tests the Greenback’s further upside. Given the recent softening in the US data, the downbeat numbers could pare the US Dollar’s weekly gains and can renew the upside of the Gold and Crude Oil prices. Meanwhile, mixed data from the top-tier economies and the geopolitical woes can keep the US Dollar firmer and challenge the riskier assets. It should be observed that the recent upbeat performance of equities should restrict the USD’s gains.

May the trading luck be with you!