The yen is on fire today!
Will it continue to gain pips even against its fellow safe haven U.S. dollar?
Before moving on, ICYMI, yesterday’s watchlist checked out USD/CAD’s uptrend ahead of lower-tier data releases from the U.S. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
S&P Global Canada Manufacturing PMI for July: 49.6 vs. 48.8 June
U.S. ISM manufacturing PMI clocked in at 46.4 in July (vs. 46.0 in June), reflecting slower rates of contraction
U.S. JOLTS job openings declined by 34,000 to its lowest levels since April 2021, with layoffs and resignations pointing to less confidence in the labor market
Credit rating agency Fitch downgraded U.S. long-term credit grade from AAA to AA+, citing “Expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades.”
Chicago Fed Pres. Goolsbee: “When you’re around the transition point, every meeting is a live meeting”
Atlanta Fed Gov. Bostic: “We are in a phase where there is some risk of overtightening”
API report showed U.S. crude oil inventories dropping by 15.4M barrels, much higher than 900K draw expected
New Zealand’s unemployment rate ticked up from 3.4% to 3.6% in Q2 2023- a two year high – as strong labour demand was met with more people looking for work
BOJ June meeting minutes showed that members did not see an imminent need to tweak YCC policies despite doing so in July
Swiss SECO consumer sentiment only up from -30 to -27 in July (vs. long-term avg of -6) as high prices continued to squeeze household budgets
Spain loses a net of 11K jobs in July (vs. -38.2K expected, -50.2K previous)
Switzerland’s Procure manufacturing PMI contracts further, down from 44.9 to 38.5 in July
Price Action News
There were not a lot of market-moving updates during the Asian session, so traders had time to process Fitch downgrading the U.S. sovereign credit grade from AAA to AA+.
The U.S. dollar found some support but it was the safe-haven yen that gained the most pips against its “riskier,” higher-yielding counterparts.
JPY was trading around its U.S. session levels when risk aversion pushed it up to just under its weekly open prices across the board.
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.S. ADP report at 12:15 pm GMT
EIA crude oil inventories at 2:30 pm GMT
Australia’s trade balance at 1:30 am GMT (Aug 3)
China’s Caixin services PMI at 2:00 am GMT (Aug 3)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
USD/JPY: 15-min
Thanks to a risk-averse trading environment, traders flocked to safe-havens. And, because Fitch downgrading the U.S. sovereign credit grade made up most of the headlines, the yen gained pips over the U.S. dollar.
After all, the downgrade would put some U.S. assets out of the reach of firms that only buy AAA-rated assets. What’s more, the downgraded spooked investors who were holding U.S.-related (and likely USD-denominated) assets.
This is probably why USD/JPY not only broke below the 142.60 area of interest but also the 200 SMA on the 15-minute time frame.
The pair is currently trading just under the S1 (142.51) Pivot Point level and could see a pullback to the 100 and 200 SMAs between the 38.2% – 61.8% Fibonacci levels.
USD bears and JPY bulls can consider shorting at the previous inflection zone if we don’t see market-changing themes show up in the next trading sessions. USD/JPY could revisit its 142.00 weekly lows or even make new weekly lows if there’s enough bearish momentum.
Keep close tabs on the 142.60 broken support zone, which could serve as resistance if the anti-USD, pro-JPY themes extend to the U.S. session!
