European Open Yields are on the rise again
US treasury yields closed in on their multi-month highs overnight, dragging USD/JPY to a 1-year high along the way.
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US Dollar Outlook: USD/JPY
USD/JPY approaches the weekly low (149.32) as the US Personal Consumption Expenditure (PCE) Price Index narrows in September, and the opening range for November is in focus as market participants turn their attention to the Bank of Japan (BoJ) and Federal Reserve interest rate decisions.
US Dollar Forecast: USD/JPY Faces BoJ and Fed Rate Decisions
USD/JPY registered a fresh yearly high (150.78) earlier this week even as long-term Treasury yields held steady, and the exchange rate may track the positive slope in the 50-Day SMA (148.19) should the BoJ continue to carry out Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC).
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Japan Economic Calendar
More of the same from the BoJ may produce headwinds for the Japanese Yen as the central bank seems to be in no rush to switch gears, but an adjustment to the non-standard measures may shake up the near-term outlook for USD/JPY if Governor Kazuo Ueda and Co. scale back on monetary easing.
US Economic Calendar
At the same time, developments coming out of the Federal Open Market Committee (FOMC) may sway foreign exchange markets as the central bank appears to be at or nearing the end of its hiking-cycle, and a change in the forward guidance for monetary policy may drag on the Greenback if Chairman Jerome Powell and Co. show a greater willingness to keep US interest rates on hold over the remainder of the year.
However, the FOMC may keep the door open to implement higher interest rates as inflation remains above the 2% target, and hints of another Fed rate hike may prop up USD/JPY amid the different approach in managing monetary policy.
With that said, the opening range for November is on focus for USD/JPY as monetary policy in the US and Japan are expected to stay unchanged, but the pullback from the fresh yearly high (150.78) may end up being short-lived should the exchange rate track the positive slope in the 50-Day SMA (148.19).
USD/JPY Price Chart – Daily
Chart Prepared by David Song, Strategist; USD/JPY on TradingView
- USD/JPY may attempt to test the 2022 high (151.95) as it registers a fresh yearly high (150.78), and the exchange rate may track the positive slope in the 50-Day SMA (148.19) as it clears the opening range for October.
- Next area of interest comes in around the July 1990 high (152.25) followed by the June 1990 high (155.80), but lack of momentum to hold above the 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension) region may push USD/JPY towards the moving average.
- Failure to hold above the moving average may lead to a test of the monthly low (147.29), with the next area of interest coming in around 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement).
Additional Market Outlooks:
US Dollar Forecast: EUR/USD Post-ECB Drop Brings Test of Monthly Low
Canadian Dollar Forecast: USD/CAD Eyes Yearly High with BoC on Hold
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
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