USDJPY whipsaws at multi-year high despite Japan holiday, focus on FOMC, US NFP

Market sentiment remains positive as traders prepare for this week’s key data/events amid early Monday. In doing so, the market players consolidate previous moves amid Japanese holidays and a light calendar.

That said, the US Dollar Index (DXY) consolidates the previous gains amid hopes of witnessing a disappointment from the Fed, mainly due to the higher hawkish hopes from the US central bank. Also, mixed headlines about China and receding geopolitical woes exert downside pressure on the Greenback.

With this, EURUSD and GBPUSD extend the previous week’s advances while the USDJPY pair gains major attention by refreshing a multi-year high past 160.00 before posting a daily loss of more than 1.0% so far.

Further, AUDUSD and NZDUSD also cheer the US Dollar’s weakness while USDCAD hesitates in falling amid the downbeat Crude Oil prices, Canada’s key export. Further, Gold price prints the first daily loss in three after snapping a five-week uptrend.

Elsewhere, BTCUSD remains pressured after a four-week downtrend amid pessimism surrounding the US SEC moves to regulate crypto trading. However, ETHUSD pares the weekly gains with mild losses as Ethereum fees drops to a six-month low.

Following are the latest moves of the key assets:

• Brent oil extends Friday’s retreat from a one-week high toward $88.00, down 0.50% intraday near $88.30 by the press time.
• Gold prints mild losses around $2,330 to snap a two-day winning streak at the latest.
• The USD Index stays depressed around 105.80 after posting the first weekly loss in three.
• Wall Street closed in the green but the Asia-Pacific shares lacked momentum amid the holiday in Japan. Further, European and UK shares remain slightly positive during the initial trading hour.
• BTCUSD and ETHUSD post intraday losses to around $62,000 and $3,180 as we write.

US Dollar braces for Fed, NFP amid sluggish start to the key week…

The cautious mood ahead of the monetary policy announcements from the Federal Open Market Committee (FOMC) and the monthly US employment report allows the US Dollar to pare Friday’s heavy gains.

That said, Friday’s US Core PCE Price Index improved in March and allowed the US Dollar Index (DXY) to post heavy daily gain on Friday. However, the pre-Fed consolidation weighed on the Greenback’s gauge versus the six major currencies on a weekly basis. Following the upbeat US data, White House (WH) Economic Adviser Lael Brainard said that the word to bring down costs is ongoing. The same joined the market’s disappointments from the upbeat US Core PCE Price Index, due to higher hopes from the data, to challenge the Greenback buyers.

In addition to the Core PCE Price Index, the upbeat prints of the US Q2 GDP forecast by the Atlanta Fed’s GDPNow model also helped the Greenback’s gauge to pare the first weekly loss in three. That said, the Atlanta Fed’s GDPNow model now predicts the US Q2 GDP growth at 3.9%. It’s worth observing, however, that the formulation anticipated Q1 GDP growth at 2.7% but witnessed a 1.6% actual outcome, which in turn challenges the optimism about the US growth conditions and the US Dollar growth of late.

While the US Dollar cheered firmer prints of the US Core PCE Price Index data, the US stocks rallied as the Fed inflation matched market forecasts versus hopes of witnessing a strong inflation number, especially after upbeat US GDP and Personal Consumption Expenditure (PCE) data. With this, the Wall Street benchmarks posted solid weekly gains led by Nasdaq while the US Treasury bond yields edge higher.

USDJPY briefly crossed the 160.00 psychological magnet to refresh the 34-year high before posting more than 1.5% intraday fall to return to the sub-156.00 region. The rapid pullback in the pair could be linked to Japan’s market intervention to defend the Yen, as well as the US Dollar’s retreat ahead of this week’s top-tier data/events. It’s worth noting that a holiday in Japan fails to restrict the Asian market moves despite a light calendar. That said, the divergence between the hawkish mood at the US Federal Reserve (Fed) and the Bank of Japan (BoJ) officials’ defense of easy-money policy joined news that Japan’s PM Fumio Kishida lost 3 key by-election seats to drown the Japanese Yen (JPY). On Friday, BoJ Governor Kazuo Ueda cited chances of witnessing a prolonged weakness in the Yen.

During the weekend, China’s Industrial Profits marked a surprise fall in March, from 10.5% YoY for January-February to -3.5% YoY. The same joined downbeat prints of China’s Industrial Production and Retail Sales figures for the said month to challenge the latest recovery in commodities and Antipodeans, as well as test the risk-on mood. However, the US Dollar’s weakness ahead of FOMC and NFP seems to allow the Dollars of Australia, New Zealand and Canada to remain firmer.

The US Dollar pullback and firmer sentiment allowed the Euro and the British Pound (GBP) to remain firmer but the Gold price retreats from the 10-day EMA hurdle while preparing for this week’s key catalysts. Meanwhile, crude oil fails to cheer a pullback in the US Dollar amid hawkish bias about the US Federal Reserve (Fed), especially after Friday’s strong prints of the US Core PCE Price Index, as well as due to receding geopolitical woes. Reuters came out with the news suggesting improvement in the Israel-Hamas peace talks. The news cited the arrival of the Hamas leader to Cairo on Monday while the Israeli foreign minister said on Saturday a planned incursion into Rafah could be put off in the event of a deal that involves the release of Israeli hostages.

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

A likely dull Monday ahead…

A lack of major data/events, Japan’s holiday and positioning for this week’s key catalysts might restrict the market moves on Monday. However, upbeat sentiment and the latest weakness in the US Dollar are expected to continue. That said, the preliminary readings of German Inflation for April and the US Dallas Fed Manufacturing Index for the said month will entertain the momentum traders.

On a weekly basis, a lack of liquidity is expected ahead of Wednesday’s FOMC and Friday’s US Nonfarm Payrolls (NFP). That said, the Gold price is likely to resume its upward trajectory and the US Dollar may witness further downside as market players have too hawkish hopes from the Fed in recent days and hence the odds of witnessing a disappointment from the FOMC announcements are high. It should be observed, however, that the Fed’s rejection of rate cuts, backed by upbeat US data, won’t hesitate to trigger the much-awaited US Dollar rally.

May the trading luck be with you!