On Monday, April 29th, during the Asian midday market, the USD/JPY pair reversed its early morning surge, falling rapidly to 155.70 and reaching a low of 155.04 amid volatile trading. Reports indicated that Japanese authorities might intervene. As Middle Eastern risk sentiment cooled, gold tried to rebound after falling to $2,322, with the price temporarily reporting at $2,333. Chinese state media disclosed that the first issuance of the Hong Kong Bitcoin spot ETF is expected to be listed for trading tomorrow, yet Bitcoin still fell to nearly $62,000.
During the Asian session on Monday, the yen rebounded steadily from its lowest level since October 1986, bouncing about 500 points from below the 160.00 psychological barrier. The significant rebound could be attributed to some interventions by Japanese authorities to boost their currency, but no official announcements have been made so far. Alongside a slight decline in the dollar, this caused the USD/JPY rate to fall sharply in the past hour.
However, given the Bank of Japan's cautious stance on tightening policy further and uncertain interest rate prospects, any meaningful appreciation of the yen seems hard to achieve. In contrast, supported by the US Personal Consumption Expenditures (PCE) Price Index released on Friday, as inflation remains sticky, the Federal Reserve is expected to delay interest rate cuts. This suggests that the significant interest rate gap between the US and Japan will persist for some time, coupled with a generally positive risk tone, which should limit the yen's movements.
As widely expected, the Bank of Japan kept short-term interest rates unchanged on Friday and stated that inflation is expected to reach the 2% target in the coming years, indicating that the bank is prepared to raise borrowing costs later this year.
At the post-meeting press conference, Bank of Japan Governor Kazuo Ueda provided almost no clues about when the next rate hike might occur and ruled out the possibility of a full-scale reduction in bond purchases, keeping yen bulls cautious.
Moreover, the Tokyo Consumer Price Index released on Friday showed that Japan's inflation is cooling, coupled with a generally positive tone in the stock market, which should limit any significant rise in the risk-averse yen.
The ruling Liberal Democratic Party in Japan lost three key by-election seats, which is not seen as a vote of confidence for Prime Minister Fumio Kishida and opposes his re-election in September when his term ends.
A report by the US Bureau of Economic Analysis indicated that the PCE Price Index rose 0.3% in March, climbing to an annual rate of 2.7% from 2.5% in February, exceeding the expected 2.6%. Additionally, the core PCE Price Index, excluding volatile food and energy prices, remained stable at 2.8% year-over-year, against expectations of 2.6%, reaffirming the Federal Reserve's bet on maintaining higher interest rates for an extended period.
According to the CME Group's FedWatch tool, investors currently expect a 58% probability that the Federal Reserve will begin a cycle of interest rate cuts in September, down from 68% a week ago, with a more than 80% chance of easing policies by December.
This indicates that the significant interest rate gap between Japan and the US will persist for some time, coupled with a positive risk tone, which should limit any significant rise in the risk-averse yen and provide support for the USD/JPY currency pair. Investors are now looking forward to this week's key central bank event risks, starting with the two-day Federal Open Market Committee (FOMC) monetary policy meeting on Tuesday and the highly anticipated US non-farm payroll (NFP) report, seeking new directional momentum.
In terms of gold, the price initially touched a low of $2,322 at the start of the week, with a drop of up to $15. The prospect of Israel delaying a full-scale escalation of war, temporarily suspending attacks on Rafah in exchange for hostages, cooled risk sentiment. However, the US banking sector explosion, with the takeover of 32 branches of Republic First Bank, provided some support for bullish traders.
JPMorgan released signals for positioning on dips, stating that the structural bull market conditions for gold remain intact.
The heavy signal from the China-US Bitcoin spot ETF
The China Fund Journal noted that the Hong Kong Securities Regulatory Commission approved the first issuance of six virtual asset spot currency ETFs by Huaxia Hong Kong, Bosera International, and Harvest International, which debuted on April 29th and officially listed on the Hong Kong Stock Exchange on April 30th. These six ETFs show certain differences in product fees, trading, issuance, and virtual asset platforms.
In terms of issue price, the products under Harvest International and Huaxia (Hong Kong) were issued at $1 per share, while Bosera's Bitcoin ETF and Ethereum ETF's initial issue price matched the index tracked on April 26th, 2024, at 1/10,000 and 1/1,000 respectively, meaning the net asset value per fund share corresponds to approximately 0.0001 Bitcoin and 0.001 Ethereum, implying that holding 10,000 shares is equivalent to one Bitcoin, and 1,000 shares to one Ethereum.
Eric Balchunas, Senior ETF Analyst at Bloomberg Intelligence, shared his views on the Hong Kong cryptocurrency spot ETF market, stating, "The Hong Kong Bitcoin/Ethereum spot ETFs officially permitted to trade starting April 30th have fees of 30 basis points, 60 basis points, and 99 basis points, respectively, averaging lower than our expectations, which is a good sign."
However, bearish news came from the Wall Street Bitcoin spot ETF, according to Farside Investors, as of the week of April 26th, the net outflow from the Bitcoin spot ETF market totaled $328 million.
With two trading days left in April, as of Monday's trading session, the net outflow from the Bitcoin spot ETF market for April amounted to $130.8 million. If the demand situation does not improve, the Bitcoin spot ETF market could see its first monthly net outflow since its launch on January 11th.
The sensitivity of investors to the flow trends of the Bitcoin spot ETF market may intensify this week, with the US labor market data and the Federal Reserve being the focus. The FOMC press conference on Wednesday will allow the market to adjust its expectations for multiple rate cuts by the Fed in 2024.
USD/JPY Technical Analysis
Haresh Menghani, an analyst at FXStreet, noted that from a technical perspective, the breakout from the upward-sloping trend channel extending from the year's lows, witnessed on Friday, was seen as a new trigger for bullish traders. However, the relative strength index (RSI) on the daily chart is now showing extreme overbought conditions, prompting aggressive long unwinding trades on the first day of the new week.
Any subsequent slide might find decent support around the 157.00 level, representing the breakout point of the ascending channel's resistance. This latter should serve as a pivotal support point, and if decisively breached, might change the near-term bias in favor of bearish traders and pave the way for some meaningful corrective declines.
Bitcoin Technical Analysis
Bob Mason, an analyst at FXEmpire, stated that Bitcoin remains below the 50-day moving average while maintaining above the 200-day moving average.
EMA confirms a recent bearish but long-term bullish price trend.
A breakout above the $64,000 resistance level would activate the 50-day moving average. A breach of the 50-day moving average could signal a rise to the $69,000 resistance level.
On Monday, consideration of the US economic calendar and Bitcoin spot ETF market flow data is necessary.
Conversely, if Bitcoin falls below the $60,365 support level, the $58,000 threshold will come into play.
With a 14-day RSI reading of 42.94, Bitcoin could potentially fall to the $58,000 level before entering the oversold region.
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Weatherly
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Weiliang