- The USD/JPY currency pair is still bullish and the strongest.
- The price of the currency pair settles around the 146.40 resistance level, the highest for the currency pair, during 2023 trading.
- The discrepancy between the future of the US Fed's aggressive policy and the Bank of Japan's negative interest rate will remain a major factor for the upside.
On the other hand, selling operations resumed in the US bond market on Monday, which led to a rise in bond yields for 10 years to the highest level in 16 years, as the resilient US economy prompted investors to prepare for interest rates to remain high even after the Federal Reserve ends its increases.
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Selling pressure affected standard Treasury bonds as well as those that offer additional payments to cover inflation, indicating that bondholders are bracing for the risk of monetary policy remaining tight as the US central bank warns of a return to accelerating inflation. Meanwhile, the yield on the 10-year Treasury Inflation-Protected Note rose Monday by more than 2% for the first time since 2009, extending its climb from a year-to-date low of near 1%. Not long after, the yield on 10-year Treasuries without such protection passed its peak in October, rising nearly 10 basis points to as much as 4.35%, a level last seen in late 2007. before trimming the gains a bit.
The yield on the two-year policy-sensitive note also rose briefly more than 5% in late New York trading, bringing it below 2023 peaks reached early last month and in March.
The jumps extend to the main shift that occurred in the bond market during the past two weeks, with the decline in recession prospects and the large deficit in the US federal budget increasing the supply of treasury debt. This prompted investors to sharply raise interest rates on long-term bonds, which fell sharply below those of short-term bonds on fears that the economy was about to contract.
Therefore, analysts say that the recent moves are exaggerated due to the light liquidity in late summer, with lower trading volumes on Monday. The real yield on 10-year bonds - or inflation-adjusted - has risen sharply from around 1.5% in mid-July and just over 1% earlier this year. The real yield on the 30-year note rose 2 basis points, to 2.11%.
These moves reinforced expectations that the US bond market is closing the door to a post-financial crisis period of ultra-low interest rates, anticipating that the Federal Reserve will keep US interest rates high for longer than markets expected. The move has come even as swap traders are still anticipating that the Fed is likely to finish raising interest rates and ease policy next year. Debt sales arrive ahead of the Federal Reserve's annual meeting in Jackson Hole, with the market anticipating a hawkish tone from Chairman Jerome Powell when he speaks on Friday.
Forecasts of the US dollar against the Japanese yen:
The general trend of the USD/JPY currency pair is still bullish, and despite the technical indicators reaching strong overbought levels. The bulls are still waiting for opportunities for Japanese intervention in the markets to prevent a further collapse of the Japanese yen price against the rest of the other major currencies before moving towards The highest and closest peaks are currently 146.20, 147.00, and 147.85, respectively. On the other hand, according to the performance on the daily chart below, the USD/JPY currency pair needs to move towards the support level of 142.00 to cause a change in its direction to the downside.
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