- USD/JPY declines from yearly highs near 115.00 as USD bulls take a breather.
- Money market futures have fully discounted a 25 basis point Fed rate hike by July 2022.
- 10-year US Treasury yields and the US dollar remain sideways on the session, strengthening the Japanese yen.
USD/JPY struggles with the 115.00 level, losing 0.24%, trading at 114.55 during the U.S. session at the time of writing. Sentiment-wise, the market is mixed as European stocks fluctuate between gains and losses.
USD/JPY made an attempt to break through 115.00. It lacked the strength to overcome severe resistance, so it retreated to Wednesday’s daily pivot point of 114.57. Where it encountered some buying pressure and jumped to the 114.70 level.
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The US dollar index, stable around 95.90, USD bulls prepare an attack towards 96.00.
Meanwhile, money market futures have entirely discounted a rate hike by the US central bank of 25 basis points by July 2022. A month after the Fed finishes buying assets.
Following a 30-year high in the US CPI, investors believe the Fed will need to intervene fast to slow the bond market’s price surge, which is reflecting the CPI rise. Furthermore, the 10-year US Treasury yield has risen one basis point to 1.64 percent, serving as a headwind for the USD/JPY.
Supported by US 10-year yields, the US dollar index. Which gauges the greenback’s performance against a basket of rivals, is trading flat at 95.90 for the day.
Japanese economic docket showed export growth slows to an 8-month low
Leaving that aside, the Japanese economic calendar revealed that export growth had slowed to an 8-month low as auto demand slowed due to global supply restrictions affecting Japanese manufacturers.
“While automakers plan’revenge production’ in November and December, clouds still hang overhead: the semiconductor shortage will last at least until the end of the year, and no one knows whether automakers’ plans to avoid the impact of chip shortages by adjusting their supply chains would be successful,” according to sources quoted by Reuters.
Housing reports were mixed on the economic front in the United States, but investors appear to be ignoring them. Building permits increased to 1.65 million in October, exceeding experts’ expectations of 1.638 million. Housing starts, on the other hand, dropped to 1.52 million in the same period, falling short of the 1.576 million forecast.
As a result, the dynamics of US bond yields, which serve as a tailwind for the pair, strengthen USD/JPY. If the 10-year yield remains stable, bulls in the Japanese yen may be able to push the pair lower. USD bulls, on the other hand, appear to be taking a breather before beginning an assault on 115.00.