USDJPY jumps more than 2.0% on BoJ talks, cautious optimism

The risk complex started to recover after a rough beginning to the week. Concerns about global growth and central banks’ decisions eased, and this, combined with a quiet economic calendar and the falling Japanese Yen (JPY), helped the US Dollar bounce back from recent losses.

The US Dollar Index (DXY) managed to recover from a seven-month low, thanks to positive US growth predictions and uncertainty about the Federal Reserve’s interest rate cuts in 2024. The rebound was also supported by strong performance in tech stocks and a rise in Treasury bond yields.

The EURUSD fell further from a one-year high as the US Dollar strengthened and Eurozone data was weak. GBPUSD also dropped to a five-week low before posting a corrective bounce.

USDJPY gained significant attention, rising over 2.0% intraday after a Bank of Japan (BoJ) official challenged concerns about potential interest rate hikes.

AUDUSD, a key risk indicator, climbed to a weekly high despite mixed data from China and concerns about the Reserve Bank of Australia.

NZDUSD rose to its highest level in two weeks, supported by strong employment data from New Zealand. USDCAD also saw movement, influenced by a rebound in Crude Oil prices, which are important for Canada’s economy.

USDCHF gained for the first time in seven days as cautious market optimism reduced the demand for the Swiss Franc, usually considered a haven.

BTCUSD and ETHUSD both recovered from their lowest levels since earlier this year. These moves in cryptocurrencies might be short-term recoveries, as no major new factors are driving them.

Following are the latest moves of the key assets:

• WTI Crude oil snaps a four-day losing streak while posting mild gains around $73.30 by the press time.
• Gold struggles to defend the first daily gains in five around $2,395 at the latest.
• The USD Index extends the previous day’s recovery from a seven-month low to 103.30 as we write.
• Wall Street closed in the green and allowed the Asia-Pacific shares to print minor gains. Further, equities in Britain and Europe also remain slightly positive during the initial trading hour.
• BTCUSD and ETHUSD both rise more than 1.5% intraday to around $56,900 and $2,510 at the latest.

US Dollar recovers without much ammunition…

Turnaround Tuesday" saw the market improve, thanks to strong technology shares and a quiet economic calendar, which boosted the US Dollar and helped it recover some previous losses. The Atlanta Fed's positive GDPNow forecast for Q3 also supported the US Dollar.

The US Dollar's rebound was also helped by a decline in the Japanese Yen (JPY) on Wednesday. The USDJPY pair jumped over 2.0% as Bank of Japan Deputy Governor Shinichi Uchida downplayed concerns about interest rate hikes, saying they wouldn’t raise rates during market instability. Weak Japanese economic data also pushed the USDJPY higher.

However, the US Dollar faces challenges due to a widening US trade deficit and concerns about the Federal Reserve possibly cutting rates three times in 2024 instead of two. China’s poor trade data and ongoing issues in the Middle East and with hurricanes also play a role in the US Dollar's performance.

The EURUSD’s recent decline is linked to weaker Eurozone retail sales for June. GBPUSD’s bounce is tied to the strength of the US Dollar, even though there are no negative UK data points.

AUDUSD rose despite weak China trade numbers and concerns about Reserve Bank of Australia rate cuts. Positive comments from Australian officials about the economy also supported the Aussie. NZDUSD benefited from strong New Zealand employment data and the overall positive market mood. USDCAD fell as Oil prices recovered, which is significant since Oil is a major export for Canada. USDCHF rebounded from a low as market optimism reduced the demand for the Swiss Franc, traditionally seen as a haven.

Crude Oil prices rose despite a surprise increase in US oil inventories, partly due to news that the US government might buy oil for the Strategic Petroleum Reserve.

Gold prices remained uncertain after four days of losses, as the US Dollar’s recovery and mixed sentiment from China affected gold’s movement.

• 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

A light calendar ahead…

The economic calendar is mostly empty except for Canada’s Ivey PMI, the Bank of Canada’s summary of discussions, and weekly US crude oil inventory updates. This means that news about risk from the US, the Middle East, and US technology companies will likely drive market movements in the near term. The US Dollar seems to have fewer obstacles in recovering from previous losses, which could affect EURUSD and GBPUSD negatively and boost USDJPY. Meanwhile, commodities, stocks, and currencies from Australia and New Zealand might benefit from a positive market sentiment.

May the trading luck be with you!