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The Japanese Yen is the standout major currency in the Forex market today. USD/JPY fell to as low as 157.63, its strongest level for the Yen since 10 August, after the pair had traded close to 160 earlier in the week. The Yen has gained around 1.5% over the past two sessions, making it by far the strongest major currency since yesterday’s Tokyo open. The weakest major currency over this period has been the Australian Dollar, putting the AUD/JPY cross in some focus.
Falling Japanese yields are helping the Yen. Japan’s 10-year government bond yield has pulled back to about 2.96% after reaching a three-decade high above 3% earlier this week. The 30-year JGB yield also fell sharply following a government-bond auction, easing some of the immediate pressure which had been weighing on the Yen.
The move in USD/JPY is technically important. The pair was trading near 160.50 only yesterday, with the bullish trend looking strong. However, the sudden move below 158.00 means that traders should now watch whether the price can establish itself below 158.00. If it can, the next obvious support area will be near 157.00; a recovery back above 160.00 would suggest that the longer-term Dollar bullish trend is reasserting itself.
The US Dollar has softened a little, but the broader picture remains uncertain. The Dollar Index has fallen to around 99.39 as Treasury yields ease, while the US 10-year yield is near 4.78%. Markets still see roughly a two-thirds probability of a 0.25% Fed rate hike this month, so tomorrow’s US jobs report will be especially important for the Dollar, Gold, and risk sentiment.
Several agricultural commodities are breaking to new highs. Wheat has reached its highest level in about two and a half years, Soybeans are at a 26-month high, Sugar is at a 16-month high, and Corn has reached record fresh highs. Trend traders will want to be involved on the long side here, as being long of commodities making significant breakouts has historically been a very profitable strategy. If futures are too expensive for you, there are ETFs which are much more affordable. The Bloomberg Agriculture Spot Index rose 13% during August, its strongest monthly advance since 2012.
Gold has continued to advance, rebounding to trade above $4,400. Gold may have made a bullish reversal. The decline to the $4,280 area was followed by two strong bullish days, suggesting that the selloff may have been exhausted. The geopolitical backdrop remains supportive, while lower yields reduce the opportunity cost of holding Gold. However, the metal remains vulnerable if US yields resume their advance or if the Federal Reserve signals a more hawkish policy outlook.
Crude oil is pausing after its powerful surge. Brent Crude has eased to about $95.07, and WTI is near $90.62 after both posted large gains over recent sessions. The decline follows comments suggesting that the latest US-Iran escalation could be short-lived, but prices remain elevated and the Strait of Hormuz situation will remain critical.