USD/JPY rises as U.S. Treasury yields rise above 5%. DAX slumps as bond rout continues and oil prices surge.
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The Japanese yen has held up surprisingly well against the US dollar lately. The USD/JPY exchange rate has fallen by more than 3%, while the broader DXY index, which tracks the dollar against other major currencies, has only dropped about 0.3%.
USD/JPY is caught in a genuine crossfire this week, and Thursday's move said it all: the yen surged nearly 2% in a single session, touching a one-month high near 155.28, as traders simultaneously priced in higher odds of a Bank of Japan hike and stayed alert to fresh intervention risk following July's joint US-Japan operation. BOJ board member Hajime Takata has even floated the possibility of outsized or back-to-back hikes to contain inflation, while Governor Ueda's comments this week reinforced expectations of a move as early as this month.
The USD/JPY and DXY charts are approaching defining support levels, creating a conflict between short-term weakness, long-term bullish continuation risks, and the risk of a broader structural bearish shift.
The USD/JPY forex pair has decisively broken below 160.00 and there are signs that the yen could get stronger in the coming days.
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USD/JPY has been sliding in recent sessions, raising the prospects of registering a second successive monthly loss despite rising oil prices.
Ballooning government deficits haven't been much of a problem over the past 15 years but they're suddenly threatening to unsettle several markets. With long-term US yields already at 19-year highs and Japanese, French and German yields already at highs, this is more of a global issue.
If you were to solely look at the US Dollar weekly chart you might think that nothing really happened this week, as the currency is working on a gravestone doji-like formation highlighting continued indecision, with sellers seemingly disinterested in pushing a downside break of last week's low. But, really, there were several drivers on the matter from the Wednesday release of CPI and the Thursday release of PPI to go along with the Friday drop of Retail Sales and U of M Consumer Sentiment.