The US Dollar remains weak on poor jobs data while the Japanese Yen continues to gain following the government's landslide election victory last weekend.
- The market's main focus today is US Dollar weakness and strength in the Japanese Yen, putting the USD/JPY currency pair in focus.
- The US Dollar has been getting weaker all week and weakened further after yesterday's worse than expected US Retail Sales data, which saw no month-on-month change in retail sales while a gain of 0.4% was the consensus expectation. This has increased expectations of forthcoming Fed rate cuts, with the CME FedWatch tool now showing a consensus expectation of 2 rate cuts by July which is nearing an expectation of 3 cuts by the end of 2026. This has sent the 2 Year US Treasury Yield and the US Dollar Index falling firmly.
- The Japanese Yen has been gaining all week as Japan finally has a very strong government after the LDP won a landslide victory last weekend. This is partly a case of "sell the fact", partly a fear of intervention by the authorities on behalf of the Yen after its long-term weakening, and partly money flowing into the Japanese stock market as investors see a stock market roaring ahead to record highs under a PM committed to economic growth.
- Stock markets in Japan have risen strongly following the LDP's stunning election victory last weekend, with the Nikkei 225 Index rising to a new record high yesterday. Trend traders will be interested to be long here. In the USA, which typically leads global stock markets higher, action is more subdued, with the S&P 500 Index chopping around below 7,000 and the NASDAQ 100 well off its high, although the Dow Jones 30 Industrial Average did close strongly at a new record high last Friday. The MSCI Asia Pacific Index rose by 1% yesterday to reach a new record high.
- Gold is the strongest of all precious metals, and it is still able to trade above the key round number at $5,000 for the second day running, which means it is building a bullish case. Bulls are being helped by the market's dovish tilt on the course of Fed rate cuts.
- Bitcoin is still looking essentially bearish as it keeps failing to break above the key resistance level at $71,762. At the time of writing, the short-term price action is bearish too as it trades below $67,000.
- In the Forex market, since today's Tokyo open, the strongest major currency has been the Japanese Yen, while the weakest has been the Euro. The pair I see as most suitable for day trading today is the AUD/USD on the long side. During the Asian session, it might be better to trade the USD/JPY.
- There is still no date set for further talks between the USA and Iran after the first round of talks last Friday. The prediction market site Polymarket sees a US strike on Iran as likely to happen in April or May. However, both the USA and Iran have been publicly positive about the first round of talks which took place last week.
- There will be several high-impact data releases in the US today:
- Average Hourly Earnings
- Non-Farm Employment Change
- Unemployment Rate