Forex Today: US Dollar reels from USD/JPY sell-off, Fedspeak in focus

Here is what you need to know on Tuesday, November 28:

Another day of mixed trading was seen in Asia on Tuesday, as traders took the lead from the negative close on Wall Street and bore the brunt of renewed China concerns. Beijing's Stock Exchange suffered a 6% sell-off after major shareholders were advised to refrain from selling on Monday. China’s property market issues also continue to sap investor’s confidence.

Markets also remain cautious, as they assess the US Federal Reserve (Fed) interest rate outlook ahead of this week’s key PCE inflation data from the United States.

Heading into the European trading, however, there seems to be a slight improvement in the market mood, reflective of a modest uptick in the US S&P 500 futures. Investors find some comfort from the extended recovery in the US bond market, as the benchmark 10-year US Treasury bond yield drops back below the 4.40% key level.

This suggests that the US Dollar is likely to remain vulnerable against its main competitors. However, a bunch of Fed policymakers could provide fresh directional impetus to the Greenback in the day ahead. At the time of writing, the US Dollar Index is consolidating near a new three-month low of 103.07 reached earlier in the Asian session.

The US Dollar continues to reel from the pain of the ongoing sell-off in the USD/JPY pair. The Japanese Yen extends its bullish momentum against the US Dollar, as Japan’s inflation data suggested that the economy is making progress towards achieving sustainably its 2.0% price target, fanning speculations that the BoJ will shift gears from its ultra-dovish stance in 2024.

The Australian Dollar (AUD) and the New Zealand Dollar (NZD) keep their range close to multi-month highs against the US Dollar. AUD/USD is supported above 0.6600 while the NZD/USD is flirting with 0.6100.

The Aussie pair fails to regain upside traction due to the downbeat Australian monthly Retail Sales data, which showed a drop of 0.2% in October, as against the expectations for a 0.1% increase. Meanwhile, cautious remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock also weigh on the AUD. Bullock said that “the central bank has to be a "little bit careful" with using rates to bring down inflation without lifting unemployment.”

EUR/USD is battling 1.0950 in early European trading after facing rejection once again near 1.0965. Testifying before the European Parliament’s Committee on Economic and Monetary Affairs on Monday, European Central Bank (ECB) President Christine Lagarde warned that “headline inflation may rise again slightly in the coming months.” Lagarde is due to speak again on Tuesday, in a pre-recorded video at the European Financial Reporting Advisory Group Conference, in Brussels.

GBP/USD is holding fort above 1.2600, retesting the two-month high of 1.2644 in the Asian session. The Pound Sterling remains underpinned by Bank of England (BoE) policymakers’ efforts to maintain the narrative of ‘higher interest rate for longer.’

Gold price is challenging six-month highs of $2,018 early Europe while WTI is fluctuating around $75.00, with the downside capped by expectations of further oil output cuts by OPEC and its allies (OPEC+). OPEC+ is set to meet on November 30 to decide on the continuation of output cuts next year.