- USD/JPY remains on track for weekly gains on Friday.
- Higher US Treasury yields compensat for a steep fall in US dollar.
- Fed’s optimistic view, downbeat US PMI data, improved risk appetite remain vocal points.
USD/JPY took a breather on Friday after jumping more than 80-pips in the overnight session. The rise in the pair was contributed by the Fed’s cautious optimism on the timeline of tapering and subsequent rate hike. Additionally, a further move was corroborated by the ebbed contagion of China’s Everngrande default risk. At the time of writing, USD/JPY is trading at 110.30 down 0.02% for the day.
Higher US benchmark 10-year Treasury yields drives the market
The US benchmark 10-year Treasury yields posted the biggest single-day gains since March on Thursday following the FOMC policy update. The benchmark yields gained 7.6 basis points to 1.43%. In the latest policy meeting, the US Federal Reserve set the stage for an announcement of tapering in the November policy meeting, which could mean reductions of the monthly purchases of $80 billion in Treasury and $40 billion in mortgage-backed securities.
The gains in the pair came to halt as the greenback cooled down from a one-month high and traded near 93.10 with more than 0.30% losses. Traders digested China’s property giant Evergrande’s fallout and the US central bank’s plans for reining in US stimulus.
In addition to that, disappointing US economic data washed all the earlier gains for the US dollar. The Initial Jobless Claims increases for the second straight week to the highest in four-week to 351K in the week ending September 18th whereas the IHS Markit Manufacturing Purchasing Managers Index (PMI) dropped 60.5 in September from the previous 61.1 in August and below the market consensus of 61.5. US Service PMI too fell to 54.4 in September below the market expectations of 54.0.
It is worth noting that S&P 500 Futures is trading at 4,439.00, up 1.25%. The reading suggests improved risk sentiment which exerts pressure on safer assets like the Japanese yen. As for now, traders are waiting for Japan's Inflation Rate, US Fed’s official speeches, and New Home Sales data.
USD/JPY additional levels
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.