Japanese Yen, USD/JPY, US Dollar, Federal Reserve, Bank of Japan, China PMI, Crude Oil, Gold – Talking Points
- the Japanese Yen Still under pressure yet U.S. dollar Reinforcement resumed
- The Fed reminded the markets of their intention and pushed back yields, backed up by the data
- If Treasury yields continue north, will they rally? US dollar / Japanese yen higher than prompted the Bank of Japan to take action?
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The Japanese yen fell to its weakest level since November last year in the wake of Federal Reserve and Bank of Japan leaders affirming their monetary policy divergence earlier in the week.
Federal Reserve Chairman Jerome Powell has been constantly crossing wires in the past few days to present his hawkish wares. Conversely, Bank of Japan Governor Kazuo Ueda has made it clear that his bank will maintain its ultra-loose settings for the foreseeable future.
Jaws were raised by the Japanese authorities until the end of the week. Today it was Finance Minister Shunichi Suzuki’s turn to warn that the government will respond to excessive moves in the currency markets. USD/JPY fell back below 145 after the comments.
Elsewhere, Treasury yields sustained the massive gains seen in the US session after the strong jobs data. The two-year policy-sensitive note is up 4.89% and almost back to the levels seen before the SVB crash, as it is at the back end of the curve.
Global government bonds in developed markets followed suit to varying degrees.
Equity markets in the Asia-Pacific region were relatively quiet although China’s CSI 300 saw some gains after NBS PMI data hit expectations at 49.
The People’s Bank of China (PBOC) put the yuan stronger than expected as it appears that Beijing may be looking more closely at the exchange rate.
Crude oil is flat in Friday’s session, with WTI futures nearing $70 a barrel, while Brent hovering around $74.50 a barrel.
After touching $1900 overnight, gold has recovered to trade near $1915 at press time.
Looking ahead, after UK GDP and European CPI data, Canada will also see GDP numbers. In the US, measures of inflation in personal consumption expenditures will come into focus as the calendar enters a new month, quarter and half year.
The full economic calendar can be viewed here.
Recommended by Daniel McCarthy
How to trade the US dollar/Japanese yen
Technical analysis of the USD/JPY pair
USD/JPY peaked just below the breakout point at 145.10 today and this level may continue to offer resistance. Moreover, the previous peaks at 148.85 & 151.95 might offer resistance as well.
On the downside, support could be at breakpoints 142.25 & 140.90. Moreover, there is a bunch of previous breakouts and lows in the area of 137.75 – 138.85 and this could be a support area.
– By Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @tweet on Twitter