USDJPY bears keep the reins with eyes on FOMC, BoJ and US NFP

Traders are mostly conscious early Monday as last week’s economics and geopolitics, as well as the earnings reports, challenged the market’s early optimism about global growth. However, increasing odds of witnessing lower rates from the top-tier central banks including the US Federal Reserve (Fed) join China stimulus hopes to keep the mood slightly positive.

With this, the US Dollar Index (DXY) remains pressured but the EURUSD and GBPUSD fail to recover. On the same line, AUDUSD, NZDUSD and USDCAD bear the burden of mixed sentiment and fears in the commodity markets, especially amid dovish bias about the respective central banks.

Meanwhile, USDJPY gains major attention as it defends the previous losses amid hawkish bias about the Bank of Japan (BoJ). Also exerting downside pressure on the Yen pair could be the softer yields, the Japanese currency’s haven appeal and chatters about Japan’s market intervention.

BTCUSD rises to a six-week high after an unimpressive weekly close while ETHUSD pares the first weekly loss in three as crypto market optimism increased during the weekend. That said, comments from Donald Trump allowed crypto traders to begin the week on a positive side as he promised not to sell the US government BTC. The US Presidential Election candidate Trump also said that he would fire the US Securities and Exchange Commission (SEC) Chairman Gary Gensler, who advocates heavy restrictions on the crypto market, on the first day of taking office.

Following are the latest moves of the key assets:

• WTI Crude oil prints more than 1.0% intraday gains around $77.20 by the press time, after declining in the last three consecutive weeks.
• Gold challenges a two-week losing streak by rising for the second consecutive day, up 0.20% intraday near $2,390 at the latest.
• The USD Index lacks clear directions while making rounds to 104.30 as we write.
• Wall Street closed in the green but the Asia-Pacific shares edged lower. That said, equities in Britain and Europe posted mild gains during the initial trading hour.
• BTCUSD and ETHUSD both rise more than 1.5% each to $69,500 and $3,365 respectively at the latest.

A slower start to the key week…

Having witnessed a volatile week and the US Dollar’s indecisive close, traders remain cautious ahead of this week’s top-tier catalysts comprising monetary policy meetings from the US Federal Reserve, Bank of Japan (BoJ) and Bank of England (BoE), as well as inflation data from Australia and the US employment clues.

On Friday, the Federal Reserve’s (Fed) favorite inflation gauge, namely the US Core PCE Price Index for June, marked unimpressive outcomes despite beating the downbeat forecasts. The same joined upbeat prints of the University of Michigan (UoM) Consumer Sentiment Index and UoM Consumer Inflation Expectations to keep the market’s odds of witnessing the Fed rate cut in September intact and pushed the US Dollar Index (I.USDX) toward posting the weekly loss.

It’s worth mentioning that the market expects around 67 basis points of rate cuts in 2024 with a clear indication of witnessing a 0.25% rate reduction in September.

Even if the Fed bias remains mostly intact, the Wall Street Journal’s (WSJ) Nick Timiraos expects hints of a September rate cut and directions for the future move on Tuesday’s Fed meeting, which in turn exerts downside pressure on the US Dollar.

Meanwhile, Chinese efforts to defend the economy and geopolitical tensions in the Middle East challenge the market’s optimism and put a floor under the US Dollar ahead of this week’s top-tier central bank announcements and the key data. That said, China braces for a 10x increase in exchange fees for the High-Frequency Traders (HFTs).

On the other hand, Israel blames Iran-backed Hezbollah militants for an arm-strike that killed nearly 12 including children in Golan Heights. Apart from the Israel-Iran tensions, the cautious mood ahead of the Presidential elections’ result in Venezuela and US political woes also challenged the sentiment and helped the Crude Oil prices to post a week-start gap-up despite falling in the last three consecutive weeks.

It should be noted that the US Dollar’s weakness and fresh geopolitical woes helped Gold to extend the previous day’s rebound from the key support comprising 50-SMA and an upward-sloping support line from early February.

Elsewhere, EURUSD snaps a two-day winning streak even as European Central Bank (ECB) Governing Council member Isabelle Schnabel said that the services inflation is showing the last mile in the inflation fight especially difficult. It should be noted that the first readings of Eurozone and German inflation will be out during the week.

Like EURUSD, the GBPUSD pair also remains pressured, especially after a two-week downtrend, as the UK economics appear less promising for the Bank of England (BoE) hawks. Also, a slight shift in the political optimism in Britain weighed on the Cable price.

Elsewhere, AUDUSD and NZDUSD marked the biggest weekly loss of 2024 amid China's woes and fears that the respective central banks won’t be able to defend their hawkish bias. USDCAD was also on the same line as it rose to the yearly high, up by the press time, amid softer prices of Canada’s key export item, Crude Oil, and the Bank of Canada’s (BoC) readiness for further rate cuts, not to forget the pessimism at the Antipodeans’ market.

Alternatively, USDJPY holds lower grounds at the three-month low after falling in the last four consecutive weeks. In doing so, the Yen pair benefited from softer yields and the recent hawkish bias about the Bank of Japan (BoJ) ahead of this week’s monetary policy announcements. Further, the JPY’s traditional haven status and the US Dollar’s weakness also allow the pair sellers to keep the reins.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

Light calendar to restrict market moves on Monday…

The UK CBI Realized Sales will join the US Dallas Fed Manufacturing Business Index to entertain intraday traders. However, the cautious mood ahead of top-tier catalysts will restrict the market moves on Monday. The same could allow the US Dollar, Gold and JPY to print daily gains amid the geopolitical woes.

May the trading luck be with you!