Today has certainly been a volatile day in the foreign exchange market but when you zoom out, not much has changed. The dollar is basically flat on the day with one single exception:
The yen is the only real mover today, perhaps with some GBP weakness as well.
I made the case for yen selling this week and today's price action certainly adds to it. US CPI was a touch low and the pair dropped initially but quickly reversed afterwards and is now testing 1.4500 and the June high of 145.07.
That rip comes despite a poor run in equities and it's getting help from higher bond yields. But note that USD/JPY rallied this week even when Treasury yields were falling, so it's proving to work in divergent conditions, which is something I saw as a tell earlier in the week.
With some major resistance now just 25 pips above, the bulls will want to take some profits here but I see an even stronger case for buying above 145.07 now. At some point, economic weakness will pull forward Fed rate cuts, but until that happens, I expect this pair to continue to run. I don't believe the threat of Japanese intervention is real until at least 150.00 and probably not 155.00.
