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MTrading Team • 2023-03-20

USDJPY renews monthly low as yields reverse early-day rebound

USDJPY renews monthly low as yields reverse early-day rebound

The all-important week comprising multiple central bank meetings and flash PMIs for March begins with a dicey action. That said, weekend headlines triggered a risk-on mood during early Monday before the sentiment soured on a reassessment of the key catalysts, as well as due to the cautious mode ahead of important scheduled data/events.

USDJPY appears the weakest as the US Dollar fades the day-start gains while yields drop back to the monthly low marked on Friday. Following that, is the GBPUSD as the UK-linked optimism joins the USD pullback. The AUDUSD and NZDUSD, however, marked mild losses amid downbeat sentiment.

Elsewhere, prices of Gold refreshed the 2023 high after an initial pullback while Brent Oil price drops to a fresh low since December 2021 amid demand fears.

Cryptocurrencies remain directionless, printing mild losses of late, as BTCUSD and ETHUSD seesaw around the multi-day tops marked in the last week.

Following are the latest moves of the key assets:

  • Brent oil drops to a fresh low since December 2021, down 3.0% intraday near $71.00 at the latest.
  • Gold remains firmer for the fourth consecutive day as it renews yearly high near $2,010, up 0.65% intraday at the latest.
  • USD Index struggles to defend the week-start gains below 104.00.
  • Wall Street closed with notable losses but equities in the Asia-Pacific region, as well as shares in Europe and the UK, trade mixed afterward.
  • BTCUSD and ETHUSD print mild losses near the highest levels in nine and seven months respectively, near $28,200 and $1,790 as we write.
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Failed attempt to revive optimism

The UBS-Credit Suisse deal joined the major central bankers’ push for US Dollar liquidity to propel the market sentiment during early Monday. However, the details of the news suggest no permanent respite from the Déjà vu surrounding the 2008 crisis. Adding strength to the risk aversion were headlines suggesting more rate hikes from the key central banks and looming monetary policy meetings, as well as the key PMI data.

The risk-off mood previously allowed the US Treasury bond yields to pare the heavy weekly loss before renewing the downside. The same joins indecision surrounding the US banking sector strength to weigh on the US Dollar afterward. Furthermore, news that some more EU banks are in the pipeline to shake the global banking sector by announcing their liquidity crunch also favored the sour sentiment and backed the bond buyers.

With this, the traders rush towards traditional risk-safety, namely the Gold and JPY, while avoiding the riskier commodities and Antipodeans.

Hence, the USDJPY drops the most among the major currency pairs even as the BoJ Summary of Opinions defends the easy money policy of the Japanese central bank. Further, the Gold rises nearly 1.0% to refresh the 2023 peak around the $2,000 round figure.

It’s worth noting that the downside in Crude allowed the USDCAD to remain at a less-advantaged position compared to the greenback despite broad less likeliness for the US Dollar.

BTCUSD and ETHUSD bulls take a breather amid fears from the US banks as they request the Fed to insure deposits while the options market catalysts suggest the exhaustion of bullish bias.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Yields are the key

Although multiple central banks, including the Fed, are likely to rock this week’s momentum, traders should pay attention to headlines surrounding the health of the banking gamut and the performance of the Treasury bond yields from the US, Europe and Japan. In a case where the bond buying continues, the US Dollar may not cheer the Fed’s likely 0.25% rate hikes, which in turn can allow the Gold price to poke the 2022 peak.

May the trading luck be with you!