- USD/JPY continues to trade to the south of the 116.00 level on Thursday, having failed to rally post-hawkish Fed minutes.
- Long-term US yields will need to continue pushing higher if USD/JPY is to test late-2016 highs above 118.00.
- US 10-year yields are up sharply on the week, but are yet to break above 2021 highs around 1.77%.
After briefly moving back above the 116.00 level on Wednesday, but failing to test Tuesday’s multi-year high at 116.40, USD/JPY has gradually slipped lower on Thursday and has spent the last few hours going sideways in the 115.70s area. The pair, which has thus far failed to garner any impetus in wake of a more hawkish than expected Fed minutes release on Wednesday despite it sending US yields sharply higher across the curve, has found support in the form of Wednesday’s low close to 115.60. Below that, technicians note further support in the form of the November 2021 and February 2017 highs at 115.50.
Some FX strategists are surprised at the dollar’s failure to pick up in wake of the Fed minutes that clearly showed a strong appetite at the Fed for a fairly swift rate hiking cycle coupled with prompt balance sheet reduction. US data has been mixed this week in the run-up to Friday’s official December labour market report and not influenced FX markets too much. The labour market data already out this week continues to endorse the idea that the US labour market is very tight and businesses are continuing to struggle with personnel/skills shortages, something Friday’s data is expected to confirm. Tokyo Consumer Price Inflation figures out during Friday’s Asia Pacific session are unlikely to move the pair given that inflationary pressure in Japan remains highly subdued and unlikely to force the BoJ into deviating from its ultra-dovish policy stance any time soon.
Some have suggested that USD bulls might be keeping their powder dry ahead of the jobs report, which if as expected, might give them the green light to chase the dollar higher. However, with the yen the most sensitive G10 currency to rate differentials, long-term US yields will likely need to resume their march higher if USD/JPY is to surpass recent highs and test late-2016 highs above 118.00. Speaking of, the US 10-year poked above 1.70% on Thursday and is up over 20bps on the week, but the key level being watched by bond market participants is the 2021 high at 1.77%.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.