Gold and USDJPY reversal a green light for USD bears?

Looking ahead: US treasury yields, not so busy week ahead.
US treasury yields remain pivotal here and the persistently high yields (until yesterdays drop) this week threatened to put a damper on the resurgent equity market had they broken significantly above 4.50%. But note that there could be other tectonic drivers afoot for the US treasury market, including foreign concerns that the US will alter the landscape on how foreign holders of US treasuries are taxed on their interest income. Michael McNair is a good follow on X on this. And it isn’t just interest income that could be in play, but also equity dividend income – see more in this post. European yields are tumbling this morning, offering a fillip to the EURJPY bears.

Interesting to note on the trade deal front that the FT this morning leads with a story discussing Japanese PM Ishiba’s reluctance to be too generous to the US side due to heavy pushback from Japan’s automakers and farmers (rural voters have more voting power than urban constituents due to Japan's voting system). Europe is likely set to make negotiations difficult as well in its bureaucratic approach to everything and its reluctance to get dragged into this new era of bilateralism. But on the military spending front that has been a key Trump concern, all signals point to increased commitments. German Chancellor Merz vowed to make the German military Europe’s most powerful yesterday and foreign minister Wadephul said they would pursue NATO secretary-general Mark Rutte’s proposal of moving to 3.5% of GDP on hard military spending and an additional 1.5% on “related spending” on infrastructure and cybersecurity.

Next week’s event risk calendar fairly quiet, with an RBA Cash Target meeting on Tuesday (25 bps cut fully priced, with July meeting guidance in play as market partially priced for a further cut). Elsewhere, we have UK CPI on Wednesday, the preliminary Eurozone PMI on Thursday and Japan’s CPI on Friday.

FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.

The trend intensity has dropped sharply almost across the board on the recent two way action in the major currencies. Watching here whether the JPY reversal can build anything in the sessions ahead and for the USD status as its comeback attempt has not spread any wings.

Table: NEW FX Board Trend Scoreboard for individual pairs.

Silver rejected the attempt at slipping into sell-off mode yesterday – but has offered nothing for trend traders for months. The JPY crosses are on my radar and USDJPY will be set to roll over into a new negative trend if it stays near or below current levels for another couple of sessions (the “score” is already negative, but the slower moving trend indicator is not triggered.)