Bonda Asia: The Bank of Japan may hold steady, and the US dollar/yen closes slightly higher

On April 2nd, the U.S. ADP Wednesday release of the national employment report showed steady growth in private sector employment in March. The report indicated that both hiring and wage increases remained stable in March, suggesting the labor market may be stabilizing. Small businesses with fewer than 50 employees continued to be the main driver of employment growth for the second consecutive month, adding 85k jobs, offsetting the declines in medium-sized businesses (down 20k) and large companies with 500 or more employees (down 4,000). ADP Chief Economist Nela Richardson stated that this shift might be due to the industry “catching up,” as well as the impact of inflation and “people needing second or third jobs to keep up with small business price levels.”

Additionally, according to data released by the U.S. Department of Commerce on Wednesday, retail sales in February increased by 0.6% month-over-month, reversing a slight decline in January and exceeding economists’ forecast of 0.5%. Excluding autos and gasoline, sales grew by 0.4%, the highest in eight months. Out of 13 retail categories, 10 saw growth, with a strong rebound in auto sales being a major driver. This data suggests that before the outbreak of conflict in the Middle East, the U.S. consumer fundamentals remained resilient, with wage growth continuing to outpace inflation, supported by expanded tax refunds. However, the war has pushed the national average retail gasoline price above $4 per gallon. If oil prices remain high, it could squeeze consumption in other areas.

Today, the key data to watch include U.S. March Challenger layoffs, U.S. February trade balance, U.S. initial jobless claims for the week ending March 28, and Canada’s February trade balance.

Gold/USD

Gold surged significantly yesterday, reaching a nine-day high. The main reasons for the rise were the decline in the safe-haven demand for the U.S. dollar index and the rekindling of expectations for Fed rate cuts, which pushed the dollar to a one-week low. During Asian morning trading, gold was pressured downward due to profit-taking and the impact of U.S. President Trump’s cooling comments reigniting safe-haven demand for the dollar, with the spot price trading around 4650. Today, focus on resistance around 4750, with support near 4550.

AUD/USD

The Australian dollar rose and hit a four-day high yesterday, with the spot price trading around 0.6890. Besides ongoing short covering supporting the currency, the weakening of the dollar index due to dovish comments from Fed officials and the rekindling of expectations for Fed rate cuts were also important factors supporting the rebound. Additionally, signs of easing tensions in the Middle East and improved risk sentiment boosted the market, providing further support. Today, watch for resistance around 0.7000, with support near 0.6800.

USD/JPY

The USD/JPY pair consolidated and edged slightly higher yesterday, closing the day with a slight gain, with the spot price around 159.40. Besides short covering providing some support, expectations that the Bank of Japan will hold steady this month also supported the currency. However, the weakening dollar index and concerns about potential Japanese intervention in the currency market limited the rebound. Today, focus on resistance around 160.50, with support near 158.50.