Japanese Yen soars, outperforms, Dollar dips

Bond yields fall, US pending home sales slump

Summary

The Japanese Yen soared against the Greenback as risk aversion hit asset markets. The USD/JPY pair settled at 156.85, down from 157.40 yesterday. Japan’s 10-year treasury yield settled at 1.05% after reaching 1.1% this week for the first time since July 2011.

Bank of Japan Board Member Seiji Adachi said that the central bank may raise rates if the Yen falls sharply and leads to further inflation. The Yen also advanced against other FX rivals.

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies, dipped to 104.70 from 105.00 yesterday.

A fall in April US Pending Home Sales to the slowest since April 2020 weighed on the Greenback. Pending Home Sales dropped 7.7% in April compared to March.

The Euro (EUR/USD) rebounded to close at 1.0830 from 1.0798 yesterday. The Eurozone April Unemployment Rate dipped to 6.4%, beating expectations of 6.5%.

The Aussie (AUD/USD) rallied to 0.6633 (0.6613). Australia’s Private Capital Expenditure climbed to 1% in Q1, up from 0.9%. Against the Yen, the Aussie eased to 104.03 (104.06).

Sterling (GBP/USD) closed at 1.2732 (1.2697). UK annual inflation rose to 2.3%, up from forecasts at 2.1%. Markets now favor the BOE’s first rate cut in September instead of June.

Against the Asian-EMFX currencies, the Dollar eased modestly. USD/CNH (Dollar-Offshore Chinese Yuan) dipped to 7.2530 (7.2700). The USD/THB pair (Dollar-Thai Baht) slid to 36.70 from 36.90. USD/SGD settled at 1.3500 (1.3525).

Other economic data released yesterday saw the US Initial Unemployment Claims climb to 219K from 216K previously, higher than estimates at 218K.

USD/JPY – The Greenback tumbled against the Japanese Yen to 156.85 from yesterday’s opening at 157.40. The USD/JPY pair traded to an overnight high at 157.62 before plummeting. The overnight low recorded was 157.37.

AUD/USD – The Aussie Battler rallied to 0.6633 against the Greenback, up from yesterday’s 0.6613. The overnight high traded for the AUD/USD pair was at 0.6648, while the overnight low recorded was at 0.6591.

EUR/USD – The Euro rebounded to 1.0830 from 1.0798 boosted by broad-based US Dollar weakness. Overnight, the shared currency rallied to a high of 1.0845. The overnight low recorded was at 1.0788. The EUR/JPY cross dipped to 169.85 (170).

GBP/USD – The British Pound settled at 1.2732, up from yesterday’s 1.2697. Overnight, the GBP/USD pair climbed to a high at 1.2747 before easing. The overnight low recorded for Sterling was 1.2681.

On the lookout

 Today’s economic calendar is a busy one and kicks off with Tokyo’s May CPI (y/y f/c 2.0% from 1.8% - ACY Finlogix), Tokyo May Core CPI (y/y f/c 1.9% from 1.6% - ACY Finlogix).

Next up is Japan’s April Unemployment Rate (f/c 2.6% from 2.6% - ACY Finlogix), Japanese April Retail Sales (m/m f/c 0.6% from -1.2%; y/y f/c 1.9% from 1.2% - ACY Finlogix). Japan also releases its Industrial Production for April (m/m f/c 0.9% from 4.4%; y/y f/c -4.3% from -6.2% - ACY Finlogix), and Japanese April Housing Starts (y/y f/c -0.2% from -12.8% - ACY Finlogix). Next up is Australia’s Private Sector Credit (m/m f/c 0.4% from 0.3%; y/y f/c 4.8% from 5.1%).

China follows with its NBS (National Bureau of Statistics) May Manufacturing PMI (f/c 50.5 from 50.4 – ACY Finlogix), Chinese NBS Non-Manufacturing PMI (f/c 51.5 from 51.2 – ACY Finlogix). Germany starts off European data with its German April Retail Sales (m/m f/c -0.1% from 1.8%; y/y f/c -1% from 0.3% - ACY Finlogix). The UK follows with its UK May Nationwide Housing Prices (m/m f/c 0.1% from -0.4%; y/y f/c 1.3% from 0.6% - ACY Finlogix).

France releases its May Preliminary Inflation Rate (m/m f/c 0.2% from 0.5%; y/y f/c 2.4% from 2.2% - ACY Finlogix), and France Q/Q GDP Final Growth Rate (f/c 0.2% from 0.1% - ACY Finlogix). Italy follows with its GDP Final Growth Rate (q/q f/c 0.3% from 0.1%; y/y f/c 0.6% from.7% - ACY Finlogix). The UK releases its April Mortgage Approvals (f/c 61.5K from 61.33K – ACY Finlogix), UK April BOE Consumer Credit (f/c GBP 1.5 billion from GBP 1.577 billion – ACY Finlogix).

The Eurozone follows next with its Eurozone Flash May Inflation Rate (y/y f/c 2.5% from 2.4% - ACY Finlogix), Eurozone May Flash Core Inflation Rate (y/y f/c 2.8% from 2.7% - ACY Finlogix). Italy follows with its May Inflation Rate (y/y f/c 0.8% from 0.8%; m/m f/c 0.2% from 0.1% - ACY Finlogix).

Canada starts off North America with its GDP Growth Rate (q/q f/c 0.6% from 0.2%; annualized GDP f/c 2.2% from 1% - ACY Finlogix). The US rounds up today’s busy economic calendar with its US April Core PCE Price Index (m/m f/c 0.3% from 0.3%; y/y f/c 2.7% from 2.7% - ACY Finlogix), US April Personal Spending (m/m f/c 0.3% from 0.8% - ACY Finlogix), US April Personal Income (m/m f/c 0.3% from 0.5% - ACY Finlogix) and finally US Chicago May PMI (f/c 41 from 37.9 – ACY Finlogix).

Trading perspective

Welcome to Friday. Expect risk-off to dominate Asian trade today with the Dollar under moderate selling pressure. Caution will prevail with risk-off dominating. The Japanese Yen will continue to outperform while risk associated FX led by the Aussie will trade heavy. The fall in US bond yields will also weigh on the Greenback. Other global rates were lower, but to a lesser degree than their US counterpart. It’s also Friday today and month end so technical factors will come into play, boosting volatility. Get those tin helmets on and get ready to rumble!

USD/JPY – Expect more choppy trading today in this currency pair. Immediate resistance lies at 157.10, followed by 157.40 and 157.80. On the downside, immediate support can be found at 156.50, 156.20 and 155.90. Look for further choppy trade, likely between 156.00 to 158.00. Watch those US yields, they will determine where USD/JPY goes next.

AUD/USD – The Aussie Battler rallied against the overall weaker Greenback to 0.6633 (0.6613). Look for immediate resistance at 0.6650 (overnight high traded was 0.6648). The next resistance level lies at 0.6680 and 0.6710. On the downside, immediate support is found at 0.6600 followed by 0.6570 and 0.6540. Look for consolidation in a likely range today of 0.6580-0.6680. Trade the range, nice and wide. And it’s Friday.

EUR/USD – The shared currency rallied against the US Dollar to 1.0830, up from 1.0798. On the day, look for immediate resistance at 1.0860 followed by 1.0900. Immediate support can be found at 1.0800 followed by 1.0770 and 1.0740. Look for the Euro to consolidate, likely between 1.0785 and 1.0885. Prefer to sell Euro rallies today.

GBP/USD – Sterling rallied against the US Dollar to finish at 1.2730, up from 1.2697. On the day, look for immediate resistance at 1.2750 (overnight high traded was 1.2747). The next resistance level lies at 1.2780. Sterling has immediate support at 1.2700 followed by 1.2670 and 1.2640. Look for the British Pound to trade a likely range of 1.2675-1.2775. Trade the range with the preference to sell Sterling on strength.

Happy trading and Friday all. Have a top weekend.