Yen to snap record losing streak on intervention worries; euro jumps

The Japanese yen briefly fell to a fresh two-decade low on Wednesday after the Bank of Japan stepped into the market again to defend its ultra-low interest-rate policy, drawing a sharp contrast with the United States where bond yields hit new highs.

But the Japanese unit bounced in London trading as increased nervousness around verbal intervention and growing speculation around an impending bilateral meeting between U.S. Treasury Secretary Yellen and her Japanese counterpart prompted traders to trim some short bets.

Still, positioning in the derivatives and currency futures suggest the yen weakness has more room to run.

The BOJ again offered to buy unlimited amounts of Japanese government bonds to check the rise in Japanese 10-year yields, which were butting against its 0.25% tolerance ceiling.

In contrast, Treasury yields marched to three-year highs while inflation-adjusted bond yields hit positive territory for the first time since March 2020 as hawkish comments by policymakers reinforced expectations of aggressive U.S. interest rate hikes.

The U.S. dollar reached 129.43 yen for the first time since April 2002 in Asian trading before easing to last trade 0.9% lower at 127.82.

"The 130 is a psychological level; if we break it (likely) then momentum will likely drive USDJPY even higher," said Vasileios Gkionakis, EMEA head of FX G10 Strategy at Citibank.

"This is a play on monetary policy divergence with the Fed in tightening mode and the BoJ still easing."

The dollar's rally against the yen has come as U.S. Treasury yields pushed higher, with 10-year yields touching 2.981% for the first time since December 2018 in Tokyo trading. Inflation-adjusted U.S. 10-year yields hit 0% overnight.

"The yen remains the loser of the monetary policy normalisation," Commerzbank (ETR:CBKG) strategists said.

Elsewhere, the euro was the other big gainer in London after media reports that some ECB policymakers were forecasting a first rate hike as early as July. The single currency was up as much as 0.6% at $1.0853.

The dollar index, which measures the currency against six major peers including the yen, early in the day matched Tuesday's high at 101.03 - a level not seen since March 2020 - before easing to 100.38, down 0.6% in the day.

An index of currency market volatility firmed above 8% but still well below 2022 highs of 10% hit in March.

The offshore Chinese currency was the other big loser with the unit declining 0.4% to 6.44 yuan per dollar.

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Gold Price Forecast: XAU/USD remains on the defensive amid faster Fed hike views

A combination of diverging forces failed to provide any impetus to gold on Tuesday.

The Fed’s hawkish outlook, sustained USD buying continued acting as a headwind.

The Ukraine crisis, growth/inflation concerns helped limit the downside for the metal.

Gold witnessed subdued/range-bound price action on Tuesday and remained confined in a narrow trading band, below the $1,980 level through the first half of the European session. Growing market acceptance that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation acted as a headwind for the non-yielding yellow metal. Apart from this, the unstoppable rally in the USD/JPY pair is bolstering the US dollar bid at the expense of the dollar-denominated commodity.

All eyes on the Fed and US dollar

More hawkish comments from Federal Reserve officials have reinforced expectations for faster US policy tightening. They started to flow in from New York Fed President John Williams who said last week that a half-point rate rise next month was "a very reasonable option," in a further sign that even more cautious policymakers are on board with faster monetary tightening.

Meanwhile, Fed member James Bullard spoke on Monday and offered further insight on the outlook for Fed policy. Bullard is one of the bank's most hawkish and has called for interest rates to reach 3.0% this year.

US inflation is "far too high," he said on Monday, repeating his case for increasing interest rates to 3.5% by the end of the year to rein in inflation expectations and slow what are now 40-year-high inflation readings.

"What we need to do right now is get expeditiously to neutral and then go from there," Bullard said at a virtual event held by the Council on Foreign Relations, adding that he doesn't expect to need to raise rates by more than half a percentage point at any meeting.

He said that the Unemployment Rate can continue to fall even with aggressive rate hikes, repeating his view that unemployment, now at 3.6%, will go below 3% this year.

This all comes ahead of the Fed Chair Jerome Powell later this week, where he is expected to solidify expectations for a 50 bps rate hike at the coming Fed policy meeting.

As a consequence of such sentiment, the US rate futures market has priced in a 96% chance of a 50 basis-point tightening at next month's Fed policy meeting, and about 215 basis points in cumulative rate increases in 2022, providing ample support for the dollar.

As for positioning, speculators' net long bets on the US dollar fell for a second straight week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $13.22 billion for the week ended April 12.

The downside, however, remains cushioned amid the retreat in the US Treasury yields from the multi-year highs. Apart from this, a generally weaker tone around the equity markets was seen as another factor that extended some support to the safe-haven gold. The COVID-19 lockdowns in China, a protracted Russia-Ukraine war, along with a potential European Union (EU) embargo on Russian gas have intensified inflation and growth concerns. This was seen as another factor that benefitted the metal's appeal as a hedge against rising costs. That said,  the sentiment will be driven by the Fed’s expectations amid absent relevant market moving economic releases from the US.

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 Saudi Feb crude exports hit near two-year high

Saudi Arabia's crude exports in February rose to 7.307 million barrels per day (bpd), the highest level since April 2020, official data showed on Monday.

Crude oil exports in February rose 4.4% from about 7 million bpd reported for January.

The world's largest oil exporter's February crude production also rose to its highest level in nearly two years at 10.225 million bpd from 10.145 million bpd in the previous month.

Saudi Arabia's domestic crude refinery throughput fell 0.271 million bpd to 2.506 million bpd in February while direct crude burn fell 111,000 bpd to 291,000 bpd.

Monthly export figures are provided by Riyadh and other members of the Organization of the Petroleum Exporting Countries (OPEC) to the Joint Organizations Data Initiative (JODI), which published them on its website.

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Gold Price Forecast: XAUUSD aims $2,000 amid a solid rebound to near $1,960, yields surge

Gold Price may face various headwinds as the expectations of the Fed's tightening bets elevated.

The 10-year US Treasury yield trims Wednesday’s losses and approaches the 2.80% threshold.

Gold Price could be on the way to a test of the 38.2% and 61.8% ratios near $1,950 and $1,930.

Gold (XAU/USD) witnessed a strong rebound in the late New York session from around $1,961.00 following a minor correction in the US dollar Index (DXY). Investors preferred the precious metal for parking their funds amid a long weekend due to the Easter holiday. It says that the Tough gets going but the journey of recapturing the crucial figure of $2,000 will be filled with difficulties.

The US Treasury yields have recovered from their losses recorded in the last two trading sessions on the optimism of an aggressive tight policy by the Federal Reserve (Fed) in May. The 10-year US Treasury yields have reclaimed their three-year high at 2.83% after the Bank of Canada (BOC) and Reserve Bank of New Zealand (RBNZ) hiked their critical policy rates by 50 basis points (bps). Elevation in policy rates by worldwide central banks raised hopes of mean reversion to neutral rates sooner rather than later. It is worth saying that the campaigning for higher interest rates will also be followed by the Fed in its May monetary policy, and in anticipation of that yields may remain underpinned while the gold prices will face headwinds.

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EUR/USD Price Analysis: Extra pullbacks seen below 1.080

EUR/USD fades the pre-ECB uptick to the 1.0920 zone on Thursday.

Recent lows around 1.0800 emerge as the next contention area.

In light of the ongoing price action, extra losses in the pair remain in the pipeline in the short-term horizon. Against that, a break below the so far monthly low at 1.0808 (April 14 should pave the way for a quick visit to the 2022 low at 1.0805 (March 7) before the May 2020 low at 1.0766 (May 7).

While below the 200-day SMA, today at 1.1440, the outlook for the pair is expected to remain negative. 

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GBP/JPY sticks to strong gains near two-and-half-week high, around 164.00 mark

GBP/JPY regained traction on Wednesday and was supported by a combination of factors.

Dovish remarks by BoJ’s Kuroda and the risk-on impulse weighed on the safe-haven JPY.

Hot UK consumer inflation figures underpinned sterling and provided an additional boost.

The GBP/JPY cross maintained its strong bid tone through the first half of the European session and was last seen trading near a two-and-half-week high, around the 164.00 mark.

Following the previous day's modest pullback, the GBP/JPY cross caught fresh bids on Wednesday and was supported by a combination of factors. The Japanese yen weakened across the board after the Bank of Japan Governor Haruhiko Kuroda reiterated to sustain the current powerful monetary easing to support economic recovery. Apart from this, the risk-on impulse - as depicted by a positive tone around the equity markets - undermined traditional safe-haven assets, including the JPY.

On the other hand, the British pound drew some support from hotter-than-expected UK consumer inflation figures. In fact, the UK Office for National Statistics reported that headline CPI jumped from 6.2% YoY in the previous month to 7% in March - the highest level since 1992. Adding to this, the Core CPI, which excludes volatile food and energy prices, rose to 5.7% YoY from the 5.2% reported in February. This was seen as another factor that provided an additional lift to the GBP/JPY cross.

With the latest leg up, spot prices have rallied nearly 150 pips from the weekly low, around the 161.60 region touched on Monday. Expectations that the BoJ will stick to its accommodative monetary policy stance should continue to act as a headwind for the JPY and supports prospects for a further near-term appreciating move for the GBP/JPY cross. Hence, a subsequent move back towards challenging the multi-year high, around the 164.65 region touched in March, remains a distinct possibility.

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 Gold Price Forecast: $1,960 could cap XAU/USD ahead of US CPI

Gold struggled to capitalize on its early uptick and attracted some selling around the $1,960 region on Tuesday. The pullback extended through the first half of the European session and dragged spot gold further away from the four-week high touched the previous day. The prospects for a faster policy tightening by the Fed pushed the US Treasury bond yields to a fresh multi-year peak and acted as a headwind for the non-yielding yellow metal. That said, concerns that the war in Ukraine and tough new COVID-19 restrictions in China could hit global growth could limit losses for the safe-haven XAU/USD. Apart from this, worries that the recent surge in commodity prices would put upward pressure on already high consumer prices could further benefit the metal's appeal as a hedge against inflation. Hence, the market focus will remain on the US CPI report, scheduled for release later during the early North American session.

Gold: Key levels to watch

The Technical Confluences Detector shows that any subsequent slide is likely to attract some buying near the $1,952-51 region - the Fibonacci 61.8% one day. The next relevant support is pegged near the $1,941 area - the Fibonacci 23.6% one week - ahead of the $1,937 zone, marking the 5-day SMA. A convincing break below could negate prospects for any further near-term appreciating move and drag spot gold to the $1,921-$1,919 intermediate support en-route the $1,900 round-figure mark.

On the flip side, the $1,960 region now seems to have emerged as an immediate strong barrier. The said resistance is the convergence of the Fibonacci 38.2% one day, Pivot Point one week R1, Bollinger Band one-day Upper and the Fibonacci 61.8% one month. Sustained strength beyond would be seen as a fresh trigger for bullish traders and pave the way for a move back towards the $2,000 psychological mark.

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