The USDJPY pair extends its recent steep retracement decline from the YTD top and is still losing ground on Wednesday. It is now barely over the 145.00 psychological threshold. During the Asian session, spot prices fell to a level that was about one month low. They are presently trading just over the 139.50 mark, down around 0.50% for the day.
The USDJPY continues to gain strength due to rumors that the BoJ would alter its policy position in July.
Speculations that the Bank of Japan (BOJ) may modify its ultra-loose policy settings soon continue to bolster the Japanese Yen (JPY). the Japanese Government Bond (JGB) yields have been rising this month. In fact, earlier this week, the benchmark 10-year JGB yield soared to its highest level since April. The US-Japan rate disparity is reduced as a result, which further encourages flows toward the JPY. This is in addition to the recent decline in US Treasury bond rates. In addition, the current US Dollar (USD) selling bias is seen to be another element pushing the USDJPY pair downward.
The continuous decline to a bottom about one month ago is a result of the current USD selling bias.
In fact, the USD Index (DXY). Which measures the value of the US dollar against a basket of six other currencies. Drops to a new two-month low as predictions grow. That the Federal Reserve (Fed) has little capacity to continue raising interest rates.
On Monday, a number of Fed insiders suggested. The US central Even if the bank’s current cycle of rate hikes was about to come to an end. It would probably continue to tighten its monetary policy in order to reduce inflation. The monthly poll from the New York Fed, which was issued. On Monday, confirmed the predictions when it revealed that consumer inflation expectations for the next 12 months fell to 3.8% in June, the lowest level since April 2021.
Meanwhile, the aforementioned fundamental background implies that the fall remains the direction of least resistance for the USDJPY pair. However, traders could hesitate from making aggressive trades and instead choose to remain passive until the latest US consumer inflation numbers are released, which is scheduled to happen later during the early North American session.
More probable than not, a further halt in price increase will lead to new USD selling, paving the way for the bank’s current cycle of rate hikes was about to come to an end, it would probably continue to tighten its monetary policy in order to reduce inflation. The New York Fed’s monthly poll, which was issued on Monday and revealed that consumer inflation expectations for the following year decreased to 3.8% in June, the lowest level ever, confirmed the bets. On the other hand, a positive surprise might trigger a quick short-covering rally around the dollar and the major.
