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Yen Rebounds Against Dollar as US Yields Rise, Inflation Concerns Loom
Developing
In Short: OCBC's Christopher Wong highlights a rebound in USD/JPY, citing higher US Treasury yields and stronger US Dollar, despite expectations for further BOJ normalisation.
OCBC's Christopher Wong highlights a rebound in USD/JPY, driven by higher US Treasury yields, a stronger US Dollar, and elevated oil prices, according to reports from FXStreet. Higher US PPI and a broader USD recovery provided support, while higher oil prices added to inflation concerns and were less favourable for Japan’s terms of trade.
Wong notes that focus now shifts to US CPI, with an upside surprise, particularly in core inflation, potentially pushing US Treasury yields higher and extending the USD/JPY rebound. However, the bearish momentum remains intact, with tentative signs of it fading, as indicated by a rise in RSI from oversold conditions.
The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar, which weighed heavily on the pair, according to reports. However, hawkish Reserve Bank of Australia (RBA) expectations limited losses for the Australian Dollar, as USD bulls await the US consumer inflation figures before placing fresh bets.
Meanwhile, the US Dollar remains under pressure as a rallying Japanese Yen outweighs support from hawkish Fed bets and geopolitical tensions, despite upbeat wage growth data and a Q2 GDP revision cementing bets on a BoJ rate hike next week, which continues to boost the Japanese Yen. US Dollar selling remains unabated, despite hawkish Fed expectations and rising geopolitical tensions, lending additional support to the pair.
What's still developing
- Bearish momentum intact though there are tentative signs of it fading while RSI rose from oversold conditions." "We now flag the potential risks of bullish divergence on MACD and RSI tentatively forming though it is still early to confirm.
Sources
- Fxstreetlink