US Dollar, Debt Ceiling, USD, Fed, Japan Machine Orders, USD/JPY – Talking Points
- The US Dollar lost traction today as Joe Biden returns from the G-7
- The Fed might be signalling a pause at its next FOMC in mid-June
- If USD can’t gain ground elsewhere, does that mean USD/JPY has peaked for now?
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The US Dollar dipped again against the Suisse, Euro, Sterling and Yen to start the week with the US debt ceiling creating doubt in traders’ minds.
Talks are due to resume later today between US President Joe Biden and House Speaker Kevin McCarthy. The latter said that a phone call between the two on Sunday had been ‘productive’.
Treasury yields are a few basis points lower across the curve so far today and might be contributing to the weakening US Dollar.
US Federal Reserve Chair Jerome Powell made remarks on Friday that were seen as potentially less hawkish than previous commentary. In regard to future policy decisions, he said, “the risks of doing too much versus doing too little, have become more balanced.”
Minneapolis Federal Reserve President Neel Kashkari also stated that he would be open to skipping a hike at the next Federal Open Market Committee (FOMC) meeting in mid-June.
Interest rate markets are pencilling in a 25-basis point cut to the Fed funds target rate by November.
The Japanese Yen is firming even though core machine orders there for March came in much lower than forecasts today.
New orders fell -3.9% month-on-month in March rather than increasing by 0.4% as anticipated. Year-on-year, core machine orders dropped by -3.5% to the end of March, well below the estimates of a 1.3% increase.
USD/JPY is over a big figure lower from the 6-month peak 0f 138.75 seen last Thursday.
The People’s Bank of China (PBOC) left the 1- and 5-year loan prime rates unchanged at 3.65% and 4.30% respectively.
Hong Kong’s Hang Seng Index (HSI) is the best of the APAC equity indices, it was up over 1.5% at one stage. The rest of the major Asian bourses are mostly in the green although Australia’s ASX 200 is slightly in the red.
The buy now pay later (BNPL) sector is facing further scrutiny after the Australian government today announced measures to bring those debt providers under existing universal credit laws. The companies will now need to secure a credit license to operate.
Gold has held onto Friday’s gains but is little moved going into the European session, trading near US$ 1,980 at the time of going to print.
Crude oil is struggling today after making after spiking on Friday but remains in a broad range. The WTI futures contract is near US$ 71 bbl while the Brent contract is close to US$ 75 bbl.
It is a relatively quiet day ahead in terms of data releases, but several speakers from the ECB and the Fed will be making speeches.
The full economic calendar can be viewed here.
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USD/JPY TECHNICAL ANALYSIS
USD/JPY tried to run higher last week after breaking above a prior peak and making a high of 138.75.
It appears that the market has rejected the move for now with the price moving back below those previous resistance levels. This might be suggestive of a false break and a new high will need to be made to allay these concerns.
Resistance might be at previous highs of 138.17, 138.75 and 139.90. On the downside, support may lie at the 200- and 260-day Simple Moving Averages (SMA) currently at 137.12 and 136.46 respectively.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCarthyFX on Twitter