Coming into the European session, the USD/JPY duo lacked a clear directional bias, oscillating between modest gains and slight losses, and was trading below the mid-111.00s. When several factors came together, the USD/JPY pair gained some positive impetus during the beginning of the trading day on Thursday, though the momentum was not strong enough to be considered definitively bullish. The risk-on sentiment in the markets weighed on the relatively secure Japanese Yen, which came under additional pressure when the Bank of Japan (BoJ) lowered its forecasts for five of Japan’s nine local economies.
The risk perception around the world took a dramatic shift on Wednesday after Russian authorities assured Europe that gas supplies would not be disrupted. Additionally, the leading Republican in the US Senate, Mitch McConnell, has stated that his party would support an increase in the federal debt limit until December to avoid a federal debt collapse shortly. This increased investors’ interest in presumed high-risk investments such as shares, which were already high.
Bullish traders got fresh signals from a minor increase in the rates on US Treasury bonds, but a softening of sentiment toward the US dollar hindered the USD/JPY pair from extending its gains to significant levels. With the anticipation of a faster than expected rate hike by the Federal Reserve and the current expansion of the yield disparity between the US and Japanese government bonds, the downside risk is still mitigated.
Bond Yields and Reserve Rate Hike
Since the Federal Reserve announced in late September that it would begin to decrease its monthly bond holdings by the end of 2021, the rates on US government bonds have been rising. In addition, the markets appear to have begun pricing in the prospect of a Federal Reserve rate hike in 2022, owing to concerns that rising oil prices may exacerbate inflation. This should serve as a positive catalyst for the Greenback and the USD/JPY exchange.
The underlying environment appears to be biased in favor of optimistic traders, and the outlook for a continuation of the latest rising trend experienced over the previous three weeks or so appears to be encouraging. Investors, on the other hand, appeared hesitant to make large wagers, preferring instead to remain on the sides before Friday’s release of the heavily watched US monthly employment report (NFP).
Trading may be influenced in the meantime by the release of the typical Weekly Initial Unemployment Claims data from the United States, which is expected later during the morning North American session on Thursday. Aside from that, the rates on US Treasury bonds, as well as the overall risk attitude in the market, will have an impact on the USD/JPY duo and provide traders with some significant changes.
Outline of the Technical Details
USD/JPY CHART. Source: Tradingview.com
Today’s last price was 11.37, Today Daily Change was -0.04%, and Today’s daily open is 111.41. Daily SMA20: 110.42, Daily SMA50: 110.08, Daily SMA100: 110.07, and Daily SMA200: 108.57. Previous Daily High: 111.79, Previous Daily Low: 111.2, Previous Weekly High: 112.08, Previous Weekly Low: 110.54, Previous Monthly High: 112.08, and Previous Monthly Low: 109.11.