USD/JPY is flirting with the 135.00 stage after briefly touching beneath. The pair corresponds carefully with Treasury yields however these days a large divergence has opened up.
There isn’t any doubt that Fed climbing expectations have diminished with Fed funds down greater than 75 bps within the final three weeks.
So what’s taking place right here? My guess is that it relates again to the euro. There is a flight out of euros on recession fears and I believe that cash is chasing the momentum in {dollars} reasonably than the standard mixture of currencies, together with the yen. The sharp fall in JPY this 12 months and yield-curve management has made it a no-go zone for international buyers.
So is it time to promote USD/JPY?
I believe some additional retracement is warranted. The pair could also be slowly topping right here however except the BOJ presents a catalyst, I might be cautious of a convergence commerce. The market psychology across the yen is dampened and even Japanese buyers aren’t dashing to purchase in occasions of market turmoil.
Briefly, the yen might really be shedding its place because the chief safe-haven asset.
