Japanese yen broadly lower, USD, risk bounces amid Trump-tariff relief

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The US dollar rose alongside Wall Street indices and oil prices while the Japanese yes was broadly lower amid a risk-on start to the week, on a mixture of stronger US data and the growing likelihood that Trump’s tariffs will be less severe than feared.

The Australian and Canadian dollar were the strongest FX majors. The Canadian dollar led the gains against the Japanese yen, with CAD/JPY rising 1.1% to a 4-week high and closing the day above 105. Trump-tariff relief and higher oil prices were the ideal drivers for the cross to take the lead with AUD/JPY a close second place at 1.1%. GBP/JPY and USD/JPY were also up around 0.9%, though all FX majors gained against the Japanese yen on Monday.

The 150.9 low to 151.3 high is the next area of resistance for USD/JPY bulls to conquer, having seen a daily close above trend resistance, which would bring the 152 and 153 handles into focus (also note the 50 and 200-day SMA nearby that could cap the rally over the near term)
GBP/JPY is considering a break above the January high, with bullish momentum gaining traction from rally from the February low, having turned the 200-day SMA resistance into support
EUR/JPY has posted a solid bounce from its March low, and Monday’s bullish range expansion suggests a swing low has formed after a 3-day retracement of a strong bullish trend
AUD/JPY appears to be the laggard of the yen pairs, though a move to 96 could be on the cards over the near term
CAD/JPY has formed a potential inverted head and shoulders after finding support around the August low, and its daily close above the neckline and 105 handle favours a break above the 50-day SMA
CHF/JPY bulls now eyeing a break above the 200-day SMA following a 3-day retracement followed by bullish range expansion

Nasdaq 100 leads the bounce on Wall Street

Wall Street indices enjoyed their best day in just over a week, with Nasdaq 100 futures leading the pack with a 2% gain and closing in on the November low alongside S&P 500 futures. Dow Jones futures are just a touch below 43k, and while the anticipated bounce is a refreshing break from the recent norm, the current bias is for at least one more cycle low as part of the correction from their all-time highs. This also dragged ASX 200 futures (SPI 200) higher and points towards a positive open for the ASX cash market today.

While I suspect the bounce on Wall Street has further to go, note the declining volumes which suggest short-covering over bullish initiation. The September and January low is also nearby for the S&P 50 futures market while the November low hovers overhead of Nasdaq prices.

USD index (DX) futures technical analysis

The anticipated bounce on the US dollar index is finally underway, although it is hardly setting the world alight with losses against the strong euro muted. But we did see a sizeable fall in Q1 which stalled around the -6% mark, similar to the prior two drops. Support was also found around a 61.8% Fibonacci level and the current cycle printed a doji and small bullish outside week above the November low.

Still, volumes are lower and upside volatility is limited, so the bias remains for another leg lower once the current counter trend bounce has completed.

The 200-day MA capped as resistance and we’ve already seen it rise for four days. But I do see the potential for a move to the 200-day EMA (104.6) or the December low AND May high, just below 105, before the anticipated next leg lower.

Economic events in focus (AEDT)

The Australian government will present the Federal budget on Tuesday night. It tends not to be a market mover for traders, but it could shed further light on expected inflationary pressures, so is likely to be monitored by the RBA.

10:10 – RBA Assistant Governor Kent speaks
10:50 – BOJ Monetary Policy Minutes
16:00 – Japanese core CPI (BOJ)
20:00 – German Ifo Business Climate
23:00 – US Building Permits
23:40 – FOMC Member Kugler Speaks
00:05 – FOMC Member Williams Speaks
01:00 – US Consumer Confidence (Consumer Board), Richmond Manufacturing Index

ASX 200 at a glance

The ASX 200 cash index closed higher for a third day on Monday, even if only by a mere 0.07%
Yet the positive lead from Wall Street saw ASX 200 futures (SPI 200) rise 0.45% overnight, which will prompt a positive start for the cash index today and take it to with a theoretical day’s trading range away from the 8,000 milestone
And that should also see the ASX break above last week’s high, to suggest the counter trend move against its 4-week decline has more to give
Energy and technology stocks could perform well thanks to the positive lead from oil prices and the Nasdaq 100

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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