- USD / JPY sees higher levels ahead on Fed sentiment.
- The Fed is becoming more hawkish as inflation fears intensify.
USD / JPY holds 115 area around 115.35 and sits in Thanksgiving range of 115.24 / 45 as it consolidates recent Federal Reserve sentiment as hawks hover around 2051 Constitution Ave.
A reduction in the yen seemed justified by some support for US 10-year yields so far and since mid-November, given how overloaded the yen’s net short positioning was. However, the pair could be here to stay. Nonetheless, the US dollar weakened slightly on Thursday. Traders are gone for the holidays, but the greenback remains in positive territory around the highest levels seen since July 2020 against the euro and in the DXY index. The greenback strengthened as markets anticipate that the US Federal Reserve will hike rates sooner than other major central banks.
The November 2-3 Fed meeting minutes on Wednesday supported the case for a higher US dollar, but did little that day to send it much higher. There could be a delayed reaction here, perhaps with investors taking profits on long positions overall ahead of the long weekend.
However, the minutes indicated that board members had become more concerned about rising inflation. p The December meeting will be an important meeting where the pace of scaling down their bond buying program could begin, as many members have already advocated. as such, the markets are gearing up for an earlier take-off than expected.
USD / JPY levels
The hawkish bias should keep the USD / JPY afloat. Commerzbank analysts expect more from the pair with the 115.60 61.8% Fibonacci retracement of the 2015 decline being the focus of attention. “Above that is the 117.56 level, the 1998-2021 resistance line and 119.41, the 1975 downtrend. We have a short term uptrend at 113.92.”