Could USD/JPY break lower?
|Earlier, I wrote that benchmark US government bond prices have been inching higher and yields lower again, suggesting the recent improvement in US data has not made a big impact on interest rate expectations. If the moves can be sustained, this could potentially derail the US dollar’s rally against some of her major rivals. One of those “rivals” is the Japanese yen, which has actually outperformed the dollar over the past several days despite the Dollar Index breaking above last year’s high yesterday. The divergence between the DXY and USD/JPY suggests that the USD/JPY could actually break lower if US bond yields continue to fall at a faster clip than Japan’s. The Bank of Japan is unlikely to make a significants impact on the direction of yields at its meeting over night.
Figure 1:
Source: TradingView and FOREX.com.
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