• The Japanese Yen rallied on Wednesday amid speculations of another intervention by authorities. 
• The momentum, however, runs out of steam on the back of the divergent BoJ-Fed policy outlooks.
• Traders now look to the second-tier US data for some impetus ahead of the NFP report on Friday.

The Japanese Yen (JPY) surged to over a two-week high against its American counterpart on Wednesday amid speculations that Japan’s financial authorities intervened again, for a second time this week, to prop up the domestic currency. This came on the back of the post-FOMC US Dollar (USD) selling and dragged the USD/JPY pair to the 153.00 mark. The JPY, however, trimmed a part of its strong intraday gains and continued losing ground through the Asian session on Thursday, pushing the currency pair back above the 156.00 round figure. 

The Bank of Japan’s (BoJ) decision to keep interest rates near zero and indication that it will continue buying government bonds in line with the guidance made in March marks a big divergence in comparison to the Federal Reserve’s (Fed) hawkish signal. In fact, the US central bank said on Wednesday that it wants to gain greater confidence that inflation will continue to fall before cutting rates. This, along with the emergence of some USD buying, lends support to the USD/JPY pair amid a positive risk tone, which undermines the safe-haven JPY. 

Traders now look to the US economic docket, featuring the release of Challenger Job Cuts, the usual Weekly Initial Jobless Claims and Trade Balance data for some impetus later during the early North American session. The focus, however, will remain glued to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. 

Daily Digest Market Movers: Japanese Yen fails to capitalize on Wednesday’s possible intervention-led strong move up

A likely Japanese Yen buying directed by Japan’s Ministry of Finance triggered a steep USD/JPY decline to over a two-week low during the late US session on Wednesday, though the momentum falters near the 153.00 mark.
Japan’s top currency diplomat Masato Kanda declined to confirm if authorities had stepped into the FX market to support the domestic currency and said that they will disclose intervention data at the end of this month. 
Minutes of the Bank of Japan March policy meeting revealed this Thursday that the central bank must continue to support the economy from a financial standpoint to achieve sustained, domestic demand-driven recovery. 
The lack of change in forward guidance by the Federal Reserve on Wednesday, signaling that it is leaning toward reductions in borrowing costs later this year, was perceived as dovish and led to the overnight US Dollar slump. 
In the post-meeting press conference, Fed Chair Jerome Powell noted that inflation has eased substantially over the past year but it’s still too high and that further progress on inflation is not assured as the path is uncertain. 
Fed fund futures traders are now pricing in 35 basis points of easing this year, up from 29 bps before the statement, which is still less than three 25 bps cuts projected by the US central bank and helps revive the USD demand.
A positive tone around the US equity markets further contributes to driving flows away from the safe-haven JPY and provides an additional boost to the USD/JPY pair on Thursday ahead of the second-tier US economic releases.
The market attention, meanwhile, remains on the US jobs report on Friday, which will now play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the currency pair.

Technical Analysis: USD/JPY needs to break through the 50% Fibo. hurdle, around 156.50 for bulls to seize intraday control

From a technical perspective, the overnight bounce from the 200-period Simple Moving Average on the 4-hour chart and the subsequent move beyond the 38.2% Fibonacci retracement level of this week’s sharp pullback from a multi-decade high favor bullish traders. That said, mixed oscillators on hourly/daily charts warrant some caution before positioning for any further intraday appreciating move, suggesting that the USD/JPY pair might confront some resistance near the 50% Fibo. level, around the 156.55 region. Some follow-through buying, however, will suggest that the recent corrective slide from the all-time peak has run its course and pave the way for additional gains.

On the flip side, weakness back below the 155.70 area could drag the USD/JPY pair back towards the 155.00 psychological mark en route to the 154.50-154.45 support zone. Failure to defend the latter might expose the Asian session low, around the 153.00 round figure, with some intermediate support near the 154.00 mark and the 153.60 region.

SP500 – NASDAQ 100 – RUSSELL 2000 – DAX 40 – FTSE 100 – ASX 200 Elliott Wave technical analysis.

Elliott Wave analysis for indices

SP 500 and Nasdaq 100 – wave (4) is currently exhibiting bearish pressure across all indices patterns. Given this, the analysis focuses on a bearish Elliott wave pattern projecting a downturn. However, there is also a slight possibility of a bullish pattern, which might experience a minor dip before potentially recovering.

Video chapters:

00:00 SP 500 (SPX) 
04:51 NASDAQ (NDX)
08:12 Russell 2000 (RUT) IWM
09:14 DAX 40 (DAX)
11:20 FTSE 100 UKX (UK100)
15:51 S&P/ASX 200 (XJO)

Australia’s trade surplus narrowed to 5,024M MoM in April versus 7,370M expected and 7,280M in the previous reading, according to the latest Aussie foreign trade data published by the Australian Bureau of Statistics on Thursday.

 Further details reveal that Australia’s March Goods/Services Exports reprint 0.1% figures on a monthly basis versus -2.2 prior. The nation’s Goods/Services Imports grew 4.2% in April MoM versus 4.8% prior. 

Market reaction

At the press time, the AUD/USD pair is down 0.08% on the day to trade at 0.6518.

• USD/CAD loses ground near 1.3730 on the softer USD on Thursday. 
• The BoC Governor said the central bank is  “getting closer” to rate cuts.
• The Fed has not changed its key interest rates and expressed more caution than previously about possible interest rate cuts. 

The USD/CAD pair extends its downside around 1.3730 during the early Asian trading hours. The downtick of the pair is backed by the weaker US Dollar Index (DXY) to 105.75. The US Federal Reserve (Fed) kept its benchmark short-term borrowing rate in a targeted range between 5.25% and 5.50% and expressed more caution than before over future interest rate cuts. Later in the day, the usual US weekly Initial Jobless Claims and March’s Goods Trade Balance are due.

Late Wednesday, Bank of Canada (BoC) Governor Tiff Macklem reiterated that the Canadian central bank is confident that inflation will continue to decline, adding that the BoC is  “getting closer” to rate cuts. Macklem added that the BoC isn’t beholden to following the Federal Reserve’s (Fed) playbook as higher rates in Canada are having ‘more traction’ than in the US. 

Traders place more bets that the Bank of Canada (BoC) might cut interest rates in June as Canada’s economy weakened in the first quarter of this year. Canada’s GDP grew at a slower pace of 0.2% MoM in February, compared to the previous reading of  0.5%, weaker than the market expectation of 0.3% expansion. Elsewhere, the Canadian Manufacturing PM dropped to 49.4 in April and 49.8 in March, below the market consensus of 50.2, according to S&P Global on Wednesday. 

On the USD’s front, the US Fed kept rates unchanged for a sixth consecutive meeting in the 5.25%–5.50% range, as widely expected by market participants. Fed Chair Powell sounded more cautious than the previous reading, arguing for more patience on the policy front. The USD failed to capitalize following the monetary policy meeting as the bar was pretty high for an uber-hawkish pivot. However, the higher-for-longer rate narrative in the US could provide some support to the USD and cap the downside for USD/CAD. 

By Yuka Obayashi

TOKYO (Reuters) – Oil prices rose on Thursday on the prospect the U.S. may start buying crude for its petroleum reserve, after prices sank to a seven-week low on hopes for an Israel-Gaza ceasefire, doubts about U.S. interest rate cuts and swelling oil inventories.

Snapping three days of losses, futures for July gained 21 cents, or 0.3%, to $83.65 a barrel by 0026 GMT. U.S. for June climbed 22 cents, or 0.3%, to $79.22 a barrel.

Both benchmarks fell more than 3% on Wednesday to a seven-week low.

“The oil market was supported by speculation that if WTI falls below $79, the U.S. will move to build up its strategic reserves,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

The U.S. aims to replenish its Strategic Petroleum Reserve (SPR) after a historic sale from the emergency stockpile in 2022 and wants to buy back oil at $79 a barrel or less.

“If a ceasefire is agreed upon, even temporarily, in the Gaza conflict, market interest will likely shift to oil demand in the U.S. where the driving season is approaching,” Kikukawa said.

In the Middle East, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight following a renewed push led by Egypt.

Still, Israeli Prime Minister Benjamin Netanyahu has vowed to go ahead with a long-promised assault on the southern Gaza city of Rafah despite the U.S. position and a U.N. warning that it would lead to “tragedy”.

The U.S. Energy Information Administration (EIA) said crude inventories rose by 7.3 million barrels to 460.9 million barrels in the week ended April 26, compared with analysts’ expectations in a Reuters poll for a 1.1 million-barrel draw.

Crude stocks were at the highest point since June, the EIA said. [EIA/S]

Meanwhile, the U.S. Federal Reserve held interest rates steady on Wednesday and signalled it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings.

The Fed’s latest policy statement did note that “inflation has eased”. Any delay in rate cuts could slow economic growth and dampen demand for oil.

• GBP/USD trades on a stronger note around 1.2535 amid the weaker USD on Thursday. 
• The Fed maintained rates unchanged in a 5.25%–5.50% range, as widely expected. 
• Financial markets expect the Bank of England (BoE) to cut borrowing costs in the June or August meetings. 

The GBP/USD pair gains traction near 1.2535 on Thursday during the early Asian session. The uptick of the major pair is supported by the sharp decline of the US Dollar (USD) after the US Federal Reserve (Fed) left its interest rate unchanged. 

As widely anticipated, the US central bank kept its benchmark rate in a target range of 5.25%–5.50% at its May meeting on Wednesday, its highest level in more than two decades. The US Fed did not expect it would be appropriate to cut the interest rate until the central bank gain greater confidence that inflation was moving sustainably to its 2% target. 

Furthermore, Fed Chair Jerome Powell said during the press conference, “I think it’s unlikely that the next policy rate move will be a hike.” These comments spark a modest dovish reaction in the markets, which weighs on the Greenback and creates a tailwind for the GBP/USD pair. Amidst the persistence of elevated inflation and the robust economy, financial markets see only one rate cut in November, according to the CME FedWatch. The central bank has also announced that it will now reduce its bond portfolio more slowly. The Fed will reduce their monthly holdings in US Treasury securities from $60 billion to $25 billion, starting in June

On the other hand, investors expect the Bank of England (BoE) to cut borrowing costs in the June or August meetings, as BoE Governor Andrew Bailey said he is confident that headline inflation will return to 2% in April. However, BoE Chief Economist Huw Pill warned last week that there were greater risks from cutting the interest rate too quickly, rather than too late. His remarks provide some support for the Pound Sterling (GBP).

Investing.com– Oil prices rose in Asian trade on Thursday, recovering from near two-month lows as a sharp drop in the dollar following a Federal Reserve meeting offered some relief to markets.

But gains in crude were limited, as a recent spike in U.S. inventories and crude production pushed the notion that oil markets were not as tight as initially thought. This notion was also what drove steep losses in crude this week.

Focus was also on ceasefire talks between Israel and Hamas, with any progress on that front presenting a lower risk premium for oil.

expiring in July rose 0.3% to $83.71 a barrel,  while rose 0.4% to $78.73 a barrel by 20:14 ET (00:14 GMT). 

Dollar drops as Fed downplays rate hike speculation

Oil prices were buoyed chiefly by a drop in the dollar, given that crude is priced in the . A weaker dollar also benefits crude demand by making oil cheaper for international buyers. 

The dollar sank from near six-month highs on Wednesday after Federal Reserve Chair Jerome Powell said the central bank’s next rate move will likely be a cut, although the timing of such a move remained uncertain. 

Powell also noted that progress towards the Fed’s 2% inflation target had stalled, following a series of hotter-than-expected readings in recent months. This trend is expected to delay any potential rate cuts in the near term.

The prospect of rates remaining high for longer presents more headwinds for oil markets, given that it furthers the notion that economic conditions will worsen under high rates, pressuring crude demand. 

Middling purchasing managers index readings from top importer China also weighed on oil prices this week.

Oil prices battered by US inventory, production spike 

Official data on Wednesday showed U.S. grew a substantially bigger-than-expected 7.3 million barrels in the week to April 26. Gasoline stockpiles also grew, while distillates had a minimal draw. 

The inventory reading, which was preceded by data showing U.S. production surged past 13 million barrels per day in March, ramped up bets that oil markets were not as tight as initially thought.

Such a scenario bodes poorly for oil prices.

The Bank of Japan (BoJ) Board members shared their views on monetary policy outlook on Thursday, per the BoJ Minutes of the March meeting.

Key quotes

“One member said impact of rise in short-term rate to around 0.1% on economy will likely be limited.”

“Many members shared view long-term rates should basically be set by markets.”

“A few members said the BOJ should at some point in the future reduce bond buying amount, shrink its bond holdings.”

“A few members said BOJ March move is different from the monetary tightening phase experienced in US, Europe.”

“One member said BOJ should slowly but steadily move towards policy normalisation with an eye on economic, price developments.”

“A few members said while not a big risk now, there is chance of overshoot in Japan’s inflation.”

“Expects BoJ to continue aiming for achievement of 2% inflation target in stable, sustained manner.”

“Qhile wages, capex showing positive movements, consumption lacking strength, overseas risks exist.”

“The government shares the BoJ’s view that positive wage-inflation cycle is emerging.”

“BoJ must continue to support the economy for a financial standpoint to achieve sustained, domestic demenad-drive economic recovery.”

Market reaction

Following the BoJ Minutes, USD/JPY was up 0.81% on the day at 155.85.

• AUD/USD gains ground near 0.6525 in Thursday’s early Asian session. 
• The Fed kept its benchmark rate in a targeted range between 5.25%-5.50%, as widely expected.
• The recent Australia’s March retail sales dampened speculation that the RBA’s next move in interest rates might be up.

The AUD/USD pair extends recovery around 0.6525 during the early Asian session on Thursday. The Federal Reserve (Fed) held its interest rates steady at 5.25–5.50% at its meeting on Wednesday, citing a “lack of further progress” in getting inflation back down to its 2% target. The Greenback edges lower after the monetary policy meeting on the Fed’s cautious stance on its future trajectory.

The US Fed kept its benchmark short-term borrowing rate in a targeted range between 5.25%-5.50%, as widely expected. During the press conference, Fed Chair Powell emphasized the progress on inflation has stalled recently and it would take longer than previously thought before the Fed had the confidence that inflation would move toward its 2% target. Powell stated that if hiring stayed strong and “inflation is moving sideways,” that “would be a case in which it would be appropriate to hold off on rate cuts.” This, in turn, might boost the US Dollar (USD) and cap the upside of AUD/USD. 

Elsewhere, the US ISM Manufacturing PMI came in worse than estimated, falling to 49.2 in April from March’s expansionary reading of 50.3. Meanwhile, ADP Employment Change showed an increase of 192,000 jobs in April from the upwardly revised March figure of 208,000, beating the 175,000 expected. Finally, the JOLTS Job Openings dropped to 8.488 million in March from 8.813 million in the previous reading, marking the lowest level of job openings reported. 

On the Aussie front, Australia’s March retail sales were weaker than expected, dropping by 0.4% MoM in March from the previous reading of a 0.3% rise. This data dampened recent speculation that the Reserve Bank of Australia’s (RBA) next move in interest rates might be up.