For the second day in a row, the US dollar is losing ground against the Japanese yen. Economic analysts at OCBC anticipate a period of stabilization in the area of 113.80-114.80 for the pair shortly. The upper side is hampered by widespread USD sourness.
With the price of 114.00, losses have been minimal and well-cushioned. The topside is hampered by widespread USD sogginess. Hold on to the current position in anticipation of stabilization between 113.80 and 114.80 in future trading sessions. The key driver of the upward trend remains the expansion of both front and rear UST yields.
A Technological and Intuitive Overview
USD/JPY CHART Source: Tradingview.com
Financially constrained Chinese company Evergrande Group announced Wednesday that a $2.6 billion plan to sell its real estate management arm had collapsed. Concerns grew that the ailing property behemoth could default after a 30-day time limit to pay a dollar bond payment expired over the weekend.
According to rumors, Evergrande has been granted a three-month reprieve on a $260 million bond. Furthermore, Chinese authorities said the sector’s problems will not be permitted to spiral out of control. This, together with a slight US dollar recovery, may help limit USD/JPY losses.
The USD was supported by rising US Treasury bond yields but lacked certainty due to easing Fed rate hike forecasts. Investors have reduced their bets on an early US monetary policy hike as a result of this week’s disappointing US macro data – industrial output and housing market data. Earlier, Fed Governor Randal Quarles said it would be inappropriate to increase interest rates despite strong inflation that is expected to fall next year. Quarles emphasized, though, that the Fed should begin reducing its enormous pandemic-era bond-purchasing program.
Considering the current robust rally, the uncertain fundamental backdrop caused traders to reduce their optimistic wagers. To be sure, the USD/JPY pair has peaked out, but it is advisable to wait for serious negative wagers to be placed. The market now awaits the US data calendar, which includes the Philly Fed Manufacturing Index and Weekly Initial Unemployment rate Claims.
The USD may be influenced by a remark by Fed Governor Christopher Waller and US bond yields. Based on wider market volatility, investors will look for short-term opportunities around the USD/JPY pair. During the first half of the activity on Thursday, a little increase in prices for the relatively secure JPY pulled the USD/JPY exchange closer to weekly lows.
The second day of declines continued overnight with a pullback from the 114.70 area, or near four-year peaks. Investors are wary of a loan crisis in China’s real estate industry. This pushed significant haven flows to the Japanese yen, putting pressure on the USD/JPY.