After the dovish comments of Fed policymakers and the approval of the debt ceiling bill, the US dollar faced a sell-off. The yield of US government bonds also decreased yesterday. So, 10-year Treasury notes dropped to two-week lows.

Nevertheless, early Friday, the greenback managed to slightly recover. In the Asian session, it consolidated in a narrow range of 103.4–103.6. It was trading at 103.5.

Although domestic economic reports exert pressure on the US dollar, there could be unexpected reversals. The US ISM Manufacturing Index has been declining for the 7th month in a row.

Initial jobless claims data and the ADP report still signal a tight labor market. These contradictory factors increase market uncertainty. Hence, the yields of all Treasuries, excluding 20- and 30-year ones, advanced early Friday.

For example, the yield of 6-month US bills jumped to 5.57% in the Asian session. Usually, growing Treasury notes stimulate a rise in the US currency. Now, investors are waiting for the NonFarm Payrolls report for May to get more clues.

The yen was rather volatile due to the fears on Wall Street. It is trying to decline amid the weaker US dollar. However, it is also climbing because of the growing Treasury yields.

In addition, Kazuo Ueda said yesterday that the regulator would patiently maintain its ultra-loose monetary stance. It means that its rate decision will mainly depend on external factors. Ueda pointed out that there's still a distance to achieving a stable 2% inflation target.

For the yen, money injections into the economy mean further growth of the money supply. As a result, it will be unable to climb against the US dollar. Thanks to the weak yen, the operating profits of Japanese companies are also growing. At the end of May, Japan's benchmark indices rose again to their 33-year highs, outperforming major global benchmarks.

The dollar/yen pair reached 139 due to the BoJ’s dovish stance and rising yields of US government bonds. It was moving in the wide range of 138.6–139.1.

It is quite logical that the yen is volatile now. It is the end of the week and traders are trying to determine its further trajectory. Besides, the US dollar is also at a crossroads. If we look at the larger time frame, we will see that the yen has climbed versus the greenback by several pips over the past seven days since May 26. The pair grew to 139 from 141.

For this reason, the main trend is still bearish. The support level of 139.2 could impact the movements of the pair. After this level, the pair could hit the resistance level of 139.7 and the psychologically important level of 140.

However, a clear breakout of 138.4 will boost the bearish bias. Apart from technical indicators, the yen/dollar pair will also react to the US employment report today.

While the yen is trying to gain momentum versus the US dollar, commodity currencies have resumed growth. The Australian dollar reached its weekly high of 0.6600. At the end of the Asian session, it approached 0.6630.

The aussie is growing amid optimism about the US debt ceiling bill, the Fed's dovish rhetoric, and a weakening US dollar. At the same time, it ignores strong manufacturing figures in the country.

Upbeat macro stats may lead to a policy reversal by the RBA. Its meeting will be held next week on June 6. After the previous decisions – a pause and then a quarter-point rate increase - it is very difficult to predict the next move of the regulator.

It seems that the bulls are not concerned about the likelihood of a policy reversal. In the Asian trade, the AUD/USD pair was moving in the price corridor of 0.6565–0.6634. Its further trajectory will largely depend on the NonFarm Payrolls for May.

The New Zealand dollar was also trading in the bullish channel of 0.6026–0.6112. It rose to 0.6105 at the end of the Asian session. It managed to maintain the bullish momentum.


00:00 Intro
00:31 Janet Yellen
01:05 Joe Biden
01:20 US Fed
01:57 USDX
02:43 6-MONTH TREASURY YIELD
03:19 Kazuo Ueda
03:53 USD/JPY
04:36 USD/JPY (30M chart)
05:45 AUD/USD
06:56 NZD/USD

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