Japanese Yen Crumbles Under the Weight of a Robust US Dollar. New Peaks for USD/JPY?


Japanese Yen, USD/JPY, US Dollar, AUD, EUR, GBP, China, Crude Oil – Talking Points

  • The Japanese Yen appears vulnerable to a galloping US Dollar
  • The BoJ is holding yields down while US yields are rocketing up
  • Currencies, commodities, bonds and equities are all in flux for now

The Japanese Yen has sunk to its lowest level since 1998 against the US Dollar today. While the Fed has made it clear that rates are going higher, the Bank of Japan (BoJ) re-asserted their yield curve control (YCC) program on Wednesday to keep bonds yields down.

The 10-year Japanese government bond (JGB) traded near the central bank’s upper limit of 0.25% today. The bank then made announcements that they would add to their bond purchases within their scheduled operations.

Treasury yields continue to soar higher with the 2-year note trading at 3.75%. The US Dollar has proceeded higher across the board. The Korean Won has been hit particularly hard as the nation tallies up the cost of yesterday’s typhoon.

EUR/USD marked a 20-year low of 0.9874 overnight while GBP/USD is threatening to break below the 2020 low of 1.1414, a move that would see a new 37-year nadir.

The Australian Dollar slipped today despite2Q quarter-on-quarter GDP coming in as forecast at0.9%against the0.8% previously that has been revised down to 0.7%.

Annual GDP to the end of Julywas 3.6% instead of 3.4% anticipated and 3.3% prior. It reveals upward revisions to previous quarters in 3Q and 4Q 2021.

China’s trade data was a big miss at US$ 79.39 billion instead of US$ 92.70 billion forecast and US$ 101.26 billion previously. The onshore Yuan hit a 2-year low with USD/CNH trading as high as 6.9949.

Commodities were not immune from the carnage with gold languishing under US$ 1,700 an ounce.

The WTI crude oil futures contract fell to levels not seen since the start of the year near US$ 85 bbl. The Brent contract is around US$ 91.50 bbl.

Arab light crude prices for Asian customers were lowered yesterday by Saudi Aramco. The cut for October deliveries could be interpreted as an indication of slowing demand.

Equity markets are feeling the pinch from tightening monetary conditions with a sea of red for Asian bourses today. Futures are pointing to a soft start to the European and North American cash sessions.

After Europe wide GDP data today, the Bank of Canada will be making a decision on rates. It is anticipated that they will raise the cash rate by 75-basis points to 3.25% according to a Bloomberg survey of economists.

A number central bankers will also be making comments.

The full economic calendar can be viewed here.

USD/JPY TECHNICAL ANALYSIS

USD/JPY made a 24-year high today, hitting 144.39.

Resistance might be at 144.97, which is the 161.8%Fibonacci Extensionof the move from 139.39 down to 130.39. An ascending trendline is also near that level.

Support could be at break points of 139.39 and 138.88.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter





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