USD/JPY bears in the market and eye break of support structure
|- USD/JPY is in the hands of the bears that eye a break of trendline support.
- Below trendline support, the 138.20s and then the 137.70s will be exposed.
USD/JPY touched a six-month high of 139 in the Asian session on Tuesday whereby talks over a debt-ceiling deal in the US risk running into a brick wall while investors get set for key economic events this week. At the time of writing, USD/JPY is flat at 0% with the price traveling between 138.23 and a high of 138.91.
Global equities slid on Tuesday as talks over the US debt ceiling continued without resolution. We also have yields on one-month US Treasury bills running into a record high. Rising yields and a stronger US Dollar pressured the Yen that has been pressured by the Bank of Japan's ongoing reluctance to tighten monetary policy further.
Meanwhile, President Joe Biden and House Speaker Kevin McCarthy could not reach an agreement on Monday over the debt ceiling with just 10 days before a possible default. President Biden prefers a clean raise of the debt limit, one without cuts. Republicans want to cut spending now.
On the preferred approach to raising the debt ceiling, three-quarters of Democrats want the limit raised first without cuts. On the other hand, two-thirds of Republicans said they want cuts tied to it. Independents were split, but a slight plurality – 48% to 45% – said they want to see cuts. Nevertheless, both sides stressed the need to avoid default with a bipartisan deal and said they would continue to talk.
As for the Federal Reserve, on Wednesday, the Federal Reserve Open Market Committee will publish its minutes from the central bankers’ meeting three weeks ago. The market will expect that the Fed has dropped hints over the timeline of rate increases.
Just this week, Minneapolis Federal Reserve President Neel Kashkari said on Monday that it was a "close call" as to whether he would vote to hike again or pause at next month's meeting, and St. Louis Fed President James Bullard said another 50 basis points of hikes might be required. Consequently, there are fewer expectations for US rate cuts from July towards November or December, sending ten-year and two-year US yields to highs not seen since March and weighing on the Yen. Besides the minutes, the Fed’s preferred inflation measure, personal-consumption expenditure index (PCE) will also be released on Friday where markets are expècting a 4.6% year-over-year increase, while the Fed is looking to bring that figure below its target of 2%.
USDJPY H1 chart
USD/JPY is testing the trendline support that guards the 138.20s and then the 137.70s.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.