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MTrading Team • 2025-05-19

USDJPY cheers softer US Dollar, mixed Japan data/updates amid cautious mood

USDJPY cheers softer US Dollar, mixed Japan data/updates amid cautious mood

Uncertain markets continue as mixed signals emerge from key catalysts

Global markets remain uncertain and mostly negative as trade optimism fades, partly due to Trump's reduced media presence during his Middle East trip. This week's EU-UK summit, deadlock in the US-Japan trade deal, and the EU's concerns over US trade policies add to the cautious mood. The recent Moody’s downgrade of the US credit rating and disappointing data (aside from inflation signs) join speculation that the Fed may cut 10% of its staff to pressure the US Dollar.

In other news, Japan openly criticized US trade demands and insisted it won't back down unless the US removes auto tariffs. Japan’s Prime Minister also raised concerns about challenges to Tokyo’s financial markets and potential rate hikes. Meanwhile, China's Retail Sales growth slowed, but Industrial Production exceeded expectations, and Trump showed interest in meeting with China’s President Xi Jinping. Despite a quiet economic calendar, the US House's approval of Trump's tax cut bill and positive statements from Chinese officials helped ease market concerns.

Against this backdrop, the US Dollar Index (DXY) remains under pressure after a three-week uptrend, with recent bullish momentum fading. This allowed Gold to recover some losses, while Crude Oil stays lower due to hopes of a US-Iran deal and more energy supplies from OPEC+. The EURUSD is struggling after a four-week decline, while GBPUSD edges up. Meanwhile, USDJPY drops to a one-week low as investors seek safe havens in volatile markets, with hawkish expectations from the Bank of Japan. AUDUSD, NZDUSD, and USDCAD struggle to gain from a weaker US Dollar, hindered by trade concerns and mixed data from Australia, New Zealand, and Canada. Cryptocurrencies pulled back after strong Sunday gains, equities drifted lower, and bond yields bounced back.

EURUSD, GBPUSD pare weekly loss ahead of trade talks, PMIs

A pullback in the US Dollar, following Monday’s credit rating downgrade and a lack of positive trade talk, helped EURUSD and GBPUSD recover from weekly losses. This rebound gained momentum ahead of the EU-UK trade summit and today’s expected announcements from UK PM Starmer about a "Brexit reset" deal, which aims to bring the UK closer to the EU and create more job opportunities for youth.

ECB President Christine Lagarde pointed to EURUSD’s rebound as a sign of market doubt about the US, while other ECB officials raised concerns about further rate cuts, giving the Euro extra strength against the USD. However, challenges remain for EURUSD bulls due to concerns over Europe’s economic transition, despite potential trade deals with the UK and Australia.

Meanwhile, GBPUSD appears stronger, as the UK secures favorable trade deals with the US and India, and looks set to regain confidence in Europe and other major economies. Still, mixed UK data and uncertainty about the BoE’s economic outlook are testing Pound buyers.

USDJPY leads G10 movers with sustained fall

USDJPY drops for the fifth straight day, as the market’s move toward safety, combined with a weaker US Dollar and hawkish expectations for the BoJ, weighs on the pair. Japan’s Prime Minister Ishiba noted that the country’s financial situation is worse than Greece's, while Finance Minister Kato reassured that Japan can still secure funds through debt issuance. BoJ Governor Uchida also stated that interest rates will keep rising if the economy and prices improve as expected. Additionally, Japan’s Tertiary Industry Index showed improvement, giving further strength to the JPY.

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Antipodeans remain lackluster

The US Dollar’s weakness fails to boost AUDUSD, NZDUSD, or lead to selling in USDCAD, as concerns over the US-China trade deal and global economic transition weigh on commodity-linked currencies like the Australian, New Zealand, and Canadian Dollars. However, optimism around an Australia-EU trade deal, following the Aussie-UK agreement, supports AUDUSD prices. Meanwhile, NZDUSD stalls due to mixed data from New Zealand's PPI and services PMI.

Additionally, a pullback in crude oil prices, a key export for Canada, along with a dovish outlook for the Bank of Canada (BoC), helps keep USDCAD stronger, despite optimism about Canada’s new government and China-linked positive sentiment, supported by comments from a National Bureau of Statistics (NBS) spokesperson.

Crude Oil retreats, Gold edges higher

Market uncertainty allows Gold to recover some of its previous weekly losses, showing an uptick. However, Crude Oil struggles to stay firm, as expectations of increased oil supplies from Iran and OPEC+ weigh on prices. The US Dollar's weakness also supports Gold buyers, countering the previous dovish outlook, while putting pressure on Crude Oil sellers.

Latest moves of key assets

  • WTI crude oil takes offers to reverse Friday’s corrective bounce, down 0.70% to $61.40 by the press time.
  • Gold remains mildly bid near $3,223 after a heavy weekly loss.
  • The USD Index prints slight intraday losses around 100.70 after a four-week uptrend.
  • The Wall Street closed positively, but the Asia-Pacific stocks drifted lower. That said, European and British equities are slightly downbeat during the initial trading hours.
  • BTCUSD and ETHUSD both drop more than 3.0% while reversing Sunday’s heavy jump, falling back to $102,400 and $2,370 at the latest, respectively.

UK updates, EU inflation and Fed talks eyes for intraday directions…

Looking ahead, UK PM Starmer’s speech on 'Brexit', the final EU inflation data, and comments from mid-tier Fed officials will keep traders active after a mixed start. However, the spotlight will be on Trump’s potential China visit, the EU-UK summit, G7 updates, the RBA rate cut, and Canada’s inflation data, alongside the preliminary May PMI readings for major economies.

The US Dollar may remain under pressure due to a light economic calendar and limited news, which could allow key assets to recover losses against the Greenback. This may also help USDJPY extend its downtrend toward the crucial support around 140.00.

Predictions for top-tier assets

  • Bullish Move Expected: USDCAD
  • Further Downside Likely: USDJPY, USDCHF
  • Sideways Movement Anticipated: Nasdaq, DJI30, USDCNH, AUDUSD, NZDUSD, GBPUSD, US Dollar, BTCUSD, ETHUSD
  • Slow & Gradual Fall Eyed: DAX, FTSE 100, Crude Oil, Gold, EURUSD

May the trading luck be with you!