The US dollar has recovered a bit against the Japanese yen, as we are trying to turn things around with rates jumping in America.
USD/JPY
The U.S. dollar has bounced nicely against the Japanese yen as we see the 10-year yield now heading toward the 4.93% level. The ¥153 level has offered a bit of support, and now we are challenging the ¥154.50 level.
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With the PPI number coming out as anticipated during the trading session, it is possible that we are likely to continue to pay close attention to CPI and whether or not it puts more pressure on the Federal Reserve to raise rates on Wednesday. We also have the Bank of Japan with its interest rate decision on Thursday.
The interest rate differential continues to power this pair in the future
By the time it is all said and done, if the Americans raise rates, and even if the Japanese do, then we are right where we were a couple of weeks ago. I think the market is trying to sniff this out right now.
I am still bullish of this, although I am the first to admit not as much as I once was, as the interest rate differential will continue to be an issue. There is some inflation in Japan, but we have heard that story before, and higher rates in Japan could just wipe out the economy from the debt load alone.
Ultimately, this is a market that, as long as it stays above ¥152, is possibly trying to consolidate. Right now, though, everybody is freaking out about the Japanese core CPI. It is anticipated to be 0.2% month over month, and if it comes out much hotter than that, we could see the U.S. dollar jump pretty significantly.
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