The US dollar rose following a mixed NFP report last Friday. However, as seen on the chart, it grew rather moderately and consolidated in a fairly narrow range of 104.0-104.2.

After the volatility triggered by default fears and the comments of Fed policymakers, many currencies started the new week with small changes. Nevertheless, demand for the US dollar kept rising. In the Asian session, the greenback hit an intraday high of 104.3.

The yield of US Treasury notes also climbed in the morning. For example, the 1-year government bonds went up sharply this morning, trading near a 23-year high of 5.3%.

The dollar/yen pair jumped as well. Growing US government bonds as well as upbeat NonFarm Payrolls report increased the likelihood of a new rate increase. It facilitated the upside potential of the US currency.

All these factors triggered a sell-off of the pair. It slid into the range of 139.9–140.5. In the Asian session, the dollar/yen pair broke above the resistance level of 140, touching 140.4.

A breakout of 140.4 could push the pair to the resistance level of 140.9, which is the high of May 30. It may even climb to the semi-annual high of 141.6. Given the economic reports on Japan’s economy published today, the yen will hardly recover in the near future.

The JIBUN Bank Services PMI Index for May came out slightly below the forecasts. The reading amounted to 55.9% versus the consensus estimate of 56.3%. However, the Composite PMI Index, which measures the output in the manufacturing and services sectors, rose in May at the fastest pace since October 2013. The indicator stood at 54.3%. Strong economic data enable the Bank of Japan to stick to an ultra-loose stance. So, the yen is likely to remain weak against the US dollar.
Commodity currencies declined at the start of the week. The Australian dollar kicked off Monday with a fall in the price corridor of 0.6587–0.6618. Compared to the moderate consolidation of the US dollar, the aussie is very volatile today. Strong bullish sentiment on the greenback exerts pressure on the aussie.

However, growing optimism in stock markets and rising oil prices are pushing it up as a risk asset and a commodity currency. In addition, the RBA will announce its rate decision tomorrow. This is the main reason why the Australian dollar is so volatile today.

Consumer prices in Australia have been rising for the ninth month in a row and remain at a 30-year high. At the same time, the annual inflation totaled 7 % in the first quarter of 2023. The monthly figure amounted to 6 %. So, inflation is still far from the 2-3% target.

RBA governor Philip Lowe said that the regulator still has work to do. Perhaps he hinted at a hawkish move at the upcoming meeting. In March, the regulator raised the key rate by a quarter point and in April it took a pause.

If the aussie still has a chance to advance depending on the RBA’s decision, the New Zealand dollar is not so lucky in this regard. The central bank has hiked the interest rate 12 times in a row since October 2021 and seems ready to take a pause at its meeting a week later – on June 12.

Therefore, the kiwi started the week with a drop due to external factors. It was trading at 0.6053. In the Asian session, the kiwi/dollar pair was moving in the range of 0.6043–0.6083.

00:00 Intro
00:22 CME FEDWATCH TOOL
00:57 US
01:30 Jerome Powell
01:53 USDX
02:33 52-WEEK BILL YIELD
02:53 USD/JPY
03:49 COMPOSITE PMI INDEX
04:31 AUD/USD
05:18 Philip Lowe
06:00 NZD/USD

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