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MTrading Team • 2024-04-03

USDJPY stays defensive as risk sours before top-tier catalysts

USDJPY stays defensive as risk sours before top-tier catalysts

The market sentiment remains dull early Wednesday as a cautious mood ahead of top-tier data/events joins geopolitical woes emanating from Asia and the Middle East. Even so, the US Dollar Index (DXY) remains pressured, after reversing from a five-month high the previous day, as traders seem making peace with the clues suggesting the Federal Reserve’s (Fed) start of rate cuts from June. Also, a pullback in the short-term yields allows the Greenback gauge to pare recent gains.

As a result, the EURUSD and GBPUSD defend Tuesday’s rebound from a multi-day low but the USDJPY lacks clear directions amid mixed Japan data and traders’ anxiety. Further, AUDUSD and NZDUSD also print mild gains while USDCAD reverses the previous day’s losses as crude oil retreats from a five-month high. Elsewhere, Gold price eases after refreshing the record top for the fourth consecutive day.

On a different page, BTCUSD and ETHUSD print the first daily gains in three while consolidating the biggest fall in a fortnight as traders prepare for Bitcoin halving and the frontline US data.

Following are the latest moves of the key assets:

  • Brent oil snaps a four-day uptrend to retreat from the highest level since October 30, mildly offered near $89.60 as we write.
  • Gold price prints half a percent intraday loss after refreshing the all-time high to $2,288, close to $2,270 at the latest.
  • USD Index remains lackluster around 104.80 after reversing from the highest level since mid-November the previous day.
  • Wall Street closed in the red while the Asia-Pacific stocks edged lower. Further, traders in Europe and the UK print minor losses during the initial trading hour.
  • BTCUSD and ETHUSD both consolidate the previous day’s losses by rising near 1.0% each to around $66,100 and $3,310 at the latest.
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US Dollar eases ahead of key data/events…

A major earthquake in Taiwan and its ripple effect in surrounding nations like the Philippines and Japan roiled the risk appetite early Wednesday. Also challenging the sentiment are the US-China tensions and war fears surrounding Iran, Iraq, Russia, Ukraine, and the Red Sea.

On Tuesday, the US Factory Orders and the JOLTS Job Openings both registered upbeat outcomes for February and allowed the US 10-year, as well as the 30-year, yields to remain firmer. However, the two-year bond coupons eased from the weekly top and dragged the US Dollar Index (DXY) from a five-month high despite hawkish comments from Federal Reserve (Fed) officials.

Elsewhere, updates about a phone call between US President Joe Biden and his Chinese counterpart Xi Jinping also contribute toward the risk-off mood as China’s Xi said, “Taiwan is the first red line that cannot be crossed in China-US relations.” Furthermore, anxiety ahead of today’s NATO meeting to provide military support to Ukraine and US Treasury Secretary Janet Yellen’s China visit, scheduled for later this week, also challenged the sentiment and put a floor under the US Dollar.

Even so, the market’s peace with the Fed’s June rate cut and preparations for this week’s top-tier data/events exert downside pressure on the Greenback.

As the US Dollar weakened, the EURUSD managed to cheer not-so-soft German inflation data while GBPUSD also recovered from a multi-day low. However, the downbeat prints of Japan’s Jibun/S&P Global Services PMI and talks about no more immediate rate hikes from the Bank of Japan (BoJ) lured the USDJPY buyers.

AUDUSD and NZDUSD struggle between the US Dollar’s retreat and pessimism surrounding their biggest customer China, not to forget unimpressive data at home. However, USDCAD rebounds as Canada’s main export, namely crude oil, eases from the highest level since October 2023.

It should be noted that Crude oil rose the most in two weeks the previous day after private inventory data suggested a higher-than-expected draw. Also favoring the energy prices were supply fears emanating from the Middle East and a cautious mood ahead of today’s OPEC+ meeting.

Gold price retreats after renewing an all-time high amid mixed clues about the major central bank and the traders’ anxiety before the key catalysts, not to forget sluggish yields and fresh challenges for China.

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

US ISM Services PMI, ADP Employment Change, EU inflation, and Fed’s Powell eyed…

Looking forward, a slew of top-tier data/events will entertain momentum traders. Among them, the first readings of Eurozone inflation data for March will be the first and can negatively affect the EURUSD prices should the outcome ease, especially when the ECB officials favor early rate cuts.

Following that, the US ISM Services PMI and ADP Employment Change for March, as well as a speech from Fed Chair Jerome Powell will be crucial as traders seek more clues to confirm a delay in the Fed’s rate cuts, which if confirmed could allow the US Dollar to reverse the previous day’s losses.

May the trading luck be with you!