USD softens ahead of CPI data and Japanese YEN also weakens.

US Dollar, USD, US CPI, Japanese Yen, USD/JPY, Hang Seng Index – Discussion Points

  • The US dollar slipped slightly today as all eyes were on the US consumer goods index
  • Several Fed spokespersons expressed different views
  • If US CPI misses estimates, will USD/JPY break out to the upside?

The US dollar weakened in Asian trading ahead of the US consumption tax data due later today. Most currency pairs seem to be in a holding pattern, with the exception of USD/JPY. It rose to a new high for the month above 134.00,

Most APAC equity indices posted modest gains on Wednesday, although Hong Kong’s Hang Seng Index (HSI) slipped into negative territory.

Tencent weighed on the index after news that major tech investor Prosus was preparing to sell part of its stake, which would account for about 1% of its market capitalisation.

US Treasury Secretary Janet Yellen believes the world’s largest economy is performing exceptionally well, while some Fed speakers seem divided on the possibility of further rate hikes by the bank.

New York Fed President John Williams saw scope for another rate hike to contain inflation, and Minneapolis Fed President Neel Kashkari reiterated his restrictive stance in comments overnight.

In contrast, Chicago Fed President Austan Goolsbee, referring to the recent banking crisis and the latest IMF report, hinted at a dovish stance to keep monetary policy prudent. He was joined by Philadelphia Federal Reserve Bank President Patrick Harker, who could also be considered less aggressive.

Nonetheless, the US consumer price index will be closely watched throughout the day for more accurate clues on the Fed’s interest rate path. Interest rate markets believe that the odds of a rate hike at the next Federal Open Market Committee (FOMC) meeting in early May are more than even.

The WTI futures contract is at USD 81.50 per barrel, while the Brent contract is slightly above USD 85.50 per barrel.

Silver hit a 12-month high of over USD 25.40 per troy ounce today. Gold is also approaching last week’s high of USD 2,032 per ounce.

Following the release of the US key interest rate data, the Bank of Canada will make its interest rate decision. According to a Bloomberg survey of economists, the bank is expected to leave interest rates at 4.50%.

TECHNICAL ANALYSIS USD/JPY

USD/JPY is still above an uptrend, although it tried to undershoot it last week.

Resistance could be at the 135.12 level or further up at the previous highs of 137.91 and 138.18.

On the downside, support could be at the previous lows of 130.63, 129.81 and 129.64.

Chart created in TradingView

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