Headlines

* Investors contemplate fallout from US rates reaching 6%

* BoC sets bar high for further hikes as it leaves door ajar

* US jobs data (ADP and JOLTS) pointed to ongoing strength

* Asian stocks fluctuate as traders await BoJ Kuroda’s final meeting

FX: USD printed a doji candle and traded in a narrow range. The buck had made a fresh three-month high yesterday at 105.88. US Treasury 2-year yield extended gains on Wednesday after topping the 5% level after Powell’s comments. The 10-year yield is back at 4% and is consolidating just below the recent top at 4.089%.

EUR traded in a narrow range before closing largely unchanged at 1.0544.  We had some soft data while the ECB’s Visco pushed back on statements regarding prolonged increases in interest rates. GBP also traded in a subdued manner closing slightly higher at 1.1844. The year-to-date low acts as support at 1.1841 with the 200-day SMA above at 1.1899. USD/JPY climbed to 137.91 before printing a doji candle. The eagerly awaited BoJ decision is overnight. AUD dipped to 0.6567 and is trying to steady above here this morning. USD/CAD advanced north again up to a fresh cycle high at 1.3814. That level was last seen in October last year. The major is overbought on the daily RSI.

Stocks: US equities closed mixed after choppy price action. The benchmark S&P 500 settled in the green after a small bounce into the close, up 0.14%. The index had dropped 1.5% on Tuesday, its biggest daily loss in a fortnight. The tech-heavy Nasdaq 100 gained 0.52%. The Dow finished a touch lower at 0.18%.

Asian stocks traded mostly rangebound after the lacklustre Wall Street close. The Nikkei 225 rose to its highest since August. Downward revisions to Q4 GDP added to the case for a slower exit from the BoJ’s current ultra-easy policy.

US equity futures are marginally in the red. European equity futures are pointing to a soft open. The Euro Stoxx 50 cash market finished up 0.2%.

Gold was stuck near a weekly low with the dollar holding close to recent highs. The 100-day SMA sits below at $1804 along with the cycle, February low.

Day Ahead – More jobs data ahead of NFP

The dollar held onto most of the gains from Powell’s testimony on Tuesday. He followed up yesterday by clarifying that the Fed has not made any decision about the March meeting and is data dependent. But he reiterated his hawkish bias and that the terminal rate will likely be higher than previously expected.

Markets digested data releases in which the February ADP came in on the firmer side of expectations. However, it was not enough to extend recent hawkish Fed pricing. In fact, it spurred a wave of short covering in stocks. Job openings were reported in excess of 10.8 million. This means there are still around 1.9 openings for every unemployed worker. Focus today turns to the initial jobless claims data. A figure below 200k implies little evidence of a cooling labour market.

Chart of the Day – USD/JPY bumps into the 200-day SMA

It’s a historic moment in the BoJ’s history as Governor Kuroda started his final meeting today. The decision comes early tomorrow morning and markets expect no change in policy. Some are speculating that he could pull one final surprise. But that is unlikely to happen as policymakers stick to their dovish policies. Inflation is elevated but other recent data are subdued. Of course, tomorrow’s NFP looms large.

USD/JPY has been driven by the ramp up in US Treasury yields over the last few weeks. The major hit the 200-day SMA at 137.44 but pulled back. A Fib level (38.2% of the 2022 rally) at 137.24 also resides near here. A break below the 100-day SMA at 136.10 is needed to turn the uptrend.