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MTrading Team • 2023-09-19

USDJPY traces firmer yields as markets prepare for Fed, BoJ

USDJPY traces firmer yields as markets prepare for Fed, BoJ

Markets slipped into the pre-Fed consolidation mode on early Tuesday, especially with Japan’s return from a long weekend.

The cautious mood ahead of the FOMC joins firmer yields and fears surrounding the US-China ties to renew the US Dollar buying, which in turn propels the USDJPY prices. On the same line, EURUSD, USDCHF and GBPUSD also portray the Greenback’s strength. However, the NZDUSD remains firmer while the AUDUSD struggles for clear directions. Additionally, USDCAD bears the burden of the firmer Oil price but the Gold price snaps a three-day winning streak.

Elsewhere, the Wall Street benchmarks barely managed to close in positive territory but the Asia-Pacific stocks edged lower by the press time.

Further, BTCUSD and ETHUSD remain firmer after printing the first daily gains in three the previous day.

Following are the latest moves of the key assets:

  • Brent oil keeps refreshing the yearly high, despite retreating to $95.00 by the press time.
  • Gold price struggles to defend three-day uptrend near $1,930, picking up bids of late.
  • USD Index stays defensive around 105.00 after retreating from a six-month high the previous day.
  • Wall Street closed with no noticeable moves but the Asia-Pacific stocks edged lower. That said, equities in Europe and the UK trade mixed at the latest.
  • BTCUSD and ETHUSD print mild gains around $26,900 and $1,640 as we write.
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Optimism fades ahead of key events

After an upbeat start to the key week, the risk-on mood fades on early Tuesday as traders justify the recent increase in the hawkish bets surrounding the Fed and the BoJ. Also challenging the sentiment could be the fears of fresh US-China tussles about trade and Taiwan. Furthermore, concerns that the US soft-landing is on the cards join the recovery in the US Treasury bond yields to challenge the upbeat mood, as well as renew the US Dollar buying.

Elsewhere, the RBA Minutes appear hawkish and China tries to defend the economic recovery from COVID-19 with a slew of measures to infuse liquidity into the world’s second-largest economy.

It should be noted that a piece from Bloomberg flagged a disparity between BoJ Governor Kazuo Ueda’s hawkish comments, shared last week, and the other policymakers’ defense of the easy-money policy. The same joins upbeat US Treasury bond yields to propel the USDJPY buyers. That said, the US 10-year Treasury bond yields initially refreshed the highest level since October 2007 before ending Monday on the negative side, mildly bid near 4.32% by the press time. On the same line, the two-year counterpart rose to the 23-year high before retreating to 5.05%, near 5.06% at the latest.

Talking about the cryptos, reports of an increase in Bitcoin’s crypto market dominance and looming spot ETF approvals, as well as the Bitcoin halving, keep the BTCUSD and ETHUSD buyers hopeful.

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

A few second-tier data to watch

While the pre-Fed consolidation may allow the US Dollar to remain firmer, a likely weakness in the US housing market statistics and hopes of witnessing no rate hike on Wednesday keeps the greenback sellers hopeful ahead of the key Fed announcements. On a different page, inflation numbers from Canada and the Eurozone will also entertain the traders on Tuesday.

May the trading luck be with you!