USDJPY ignores upbeat Japan PPI, IMF statements to refresh two-week high

Global financial markets remain mostly dicey early Tuesday, after witnessing a sluggish start to the key week comprising the US inflation and Fed Chair Powell’s speech. Also restricting the trading sentiment could be a light calendar ahead of the top-tier data/events and the mixed risk headlines concerning China and the Middle East.

Against this backdrop, the US Dollar remains sidelined following a downbeat close on Monday, especially amid inactive yields and a cautious mood ahead of today’s US Producer Price Index (PPI) and Fed Chair Jerome Powell’s speech.

The Greenback’s inaction allows EURUSD and GBPUSD to edge higher despite lacking upside momentum of late, whereas USDJPY bucks the trend while ignoring data/events suggesting fresh strength of the Japanese Yen (JPY).

AUDUSD and NZDUSD lack clear directions on mixed catalysts whereas USDCAD extends the week-start recovery while ignoring firmer crude oil prices. That said, USDCHF also grinds higher amid unclear catalysts at home.

Elsewhere, Gold picks up bids to reverse the previous day’s losses while Crude Oil stays defensive after rising the most in three weeks on Monday.

In the case of cryptocurrencies, BTCUSD and ETHUSD both snap a three-day recovery as the institutional whales dump holdings while ignoring the US Senators’ dislike for the Department of Justice’s (DoJ) harsh policies toward asset providers.

Following are the latest moves of the key assets:

• WTI Crude oil fades the previous day’s recovery momentum while retreating to $79.00 by the press time.
• Gold struggles to defend buyers around $2,337, especially after a downbeat start of the week.
• The USD Index picks up bids to reverse the week-start losses near 105.30 at the latest.
• Wall Street closed mixed and the Asia-Pacific shares drifted lower. Further, British and European shares lack clear directions during the initial trading hour.
• BTCUSD and ETHUSD both remain pressured for the day near $62,000 and $2,920 as we write.

Consolidation ahead of key data/events…

Traders prepare for this week’s key data/events while reversing the week-start moves early Tuesday. In doing so, the US Dollar Index (DXY) edges higher following a downbeat start to the week, especially after posting the weekly gains. The greenback’s recent gains could also be linked to the hawkish Fed concerns, upbeat inflation clues and mixed geopolitical news.

That said, the New York Federal Reserve’s (Fed) inflation expectations for a one-year and five-year rise to 3.3% and 2.8% versus 3.0% and 2.6% respective priors while the three-year inflation precursor eased to 2.8% from 2.9% marked the last week.

Elsewhere, US Treasure Secretary Janet Yellen again crossed wires while showing discomfort from higher rates. The policymaker said that US President Joe Biden’s priority is bringing down inflation. Alternatively, Fed Vice Chair Philip N. Jefferson also mentioned that keeping the policy rate restrictive is appropriate until inflation is added.

It should be noted that US Treasury Secretary Yellen’s comments citing the Sino-American tension underpin the US Dollar’s strength ahead of today’s key data/events. “We value our trade and investment relationship with China, but have areas where we have disagreements with China,” said the former Fed leader Yellen.

On a different page, Japan reports improvements in the PPI data for April and calls for further rate hikes from the Bank of Japan (BoJ). On the same line, the International Monetary Fund (IMF) said, “Further hikes in Japan's short-term policy rate should proceed at a gradual pace and be data-dependent.” It’s worth noting that Japanese Finance Minister Sunichi Suzuki advocated for stable currency moves and put a floor under the USDJPY pair. With this, the Yen pair rises the most among the G10 currency pairs.

The mixed prints of New Zealand Retail Card Sales and cautious mood ahead of Australian jobs report restrict the moves of the NZDUSD and the AUDUSD while USDCAD bears the burden of the dovish bias about the Bank of Canada (BoC), despite firmer crude oil prices and Friday’s upbeat Canada jobs report. Further, USDCHF edges higher despite an improvement in the Swiss SECO Consumer Confidence for the second quarter (Q2) of 2024. The reason could be linked to the SNB Chairman Thomas Jordan’s statements suggesting more rate cuts from the Swiss National Bank (SNB).

EURUSD remains lackluster amid no change in the final readings of German inflation for April while GBPUSD reverses the day-start losses despite a mixed UK employment report, comprising a higher Unemployment Rate, upbeat wage growth, and an increase in the Claimant Count Change.

Gold price fades the early-day strength as traders rushed toward the US Dollar amid hopes of witnessing hawkish statements from Fed Chair Jerome Powell and upbeat US PPI. The same challenges Crude buyers after allowing them to cheer the heavy daily gains the previous day, backed by softer US Dollar and geopolitical tensions in the Middle East, not to forget hopes of witnessing more stimulus from China.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

Australia budget, US PPI and Fed Chair Powell’s speech eyed…

Looking forward, a speech from Fed Chair Powell at the Netherlands' Foreign Bankers' Association, in Amsterdam, will gain major attention and could renew the US Dollar's strength if the US central banker defends hawkish monetary policy and pushes back the rate cut odds. However, the markets have witnessed a discomfort among the US Dollar bulls even with Powell’s hawkish tone, unless he pushes back the September rate cut odds. The same highlights the need for a strong US PPI figure and the risk-off mood to defend the USD buyers.

Elsewhere, Australia’s Annual Budget is likely to impress the AUD buyers but the doubts about the Reserve Bank of Australia’s (RBA) hawkish capacity, as well as China woes, could weigh on the Aussie pair.

May the trading luck be with you!