- USD/JPY dropped from 108.00 to 107.21 for a one-month low overnight.
- Federal Reserve James Williams was advocating for significant easing.
USD/JPY dropped from 108.00 to 107.21 for a one-month low overnight. In Tokyo, the price has been stabilising between 107.33/43. The slide in the pair came despite a strong end to Wall Street that took stocks off their lows. The Dollar was the culprit in the main after Federal Reserve speakers played up the rate cut ante.
The indexes subsequently rallied later in the day. The S&P 500 index added 0.4% to end at 2,995, and the Nasdaq Composite Index ended 0.3% higher at 8,207. The Dow Jones Industrial Average, DJIA, however, was the laggard due to the declines in UnitedHealth Group Inc. -2.27% and Boeing Co. BA, +1.85%, ending the day flat at 27,222.
Firstly, Federal Reserve James Williams advocating for significant easing which was followed up by Clarida underscoring the need for “swift” and “preemptive” action by the Fed. The Dollar tanked as markets are pricing in a higher chance of a 50bp cut by the Fed in July.
Subsequently, we had the US 2-year treasury yields falling from 1.84% to 1.76% and the 10-years dropping from 2.08% to 2.03%. The markets have now priced 38bp of easing at the 31 July meeting, up from yesterday’s pricing in of 33bp. We also had some risk-off on the reports of confrontations between the US and Iran which helped to lift the price of oil. In early Asia, we had the Japanese CPI for June 2019 with a headline of 0.7% y/y, in line with expectations.
As for US data, analysts at Westpac explained that Manufacturing sentiment in the Philly region rebounded strongly in July:
“The Philadelphia Fed general activity survey surging to a one-year high of 21.5 from 0.3, exceeding even the most bullish forecasts; orders, shipments and employment all saw solid increases. The Conference Board’s US economic leading index fell 0.3%, weaker than expected. US jobless claims hovered down near general lows for yet another week; +216k from 208k the prior week.”
Valeria Bednarik, the Chief analyst at FXStreet explained that the USD/JPY pair was heading into the Asian session technically bearish according to the 4 hours chart, as the pair continued developing below all of its moving averages, and with the 20 SMA gaining bearish traction below the larger ones:
“The Momentum indicator in the mentioned chart has extended its decline within negative territory, while the RSI turned sharply lower, all of which maintains favors further slides ahead. Trading now around the previous monthly low, the pair has room to extend its decline to 106.77, June’s low, during the upcoming sessions.”