With US rates moving higher (2 year up 7.3 basis points and 10 year up 9.1 basis point), the USDJPY is reacting to the upside. The pair just reached a new session high of 135.493. That is getting closer to the swing high from August 8 at 135.575.
A move above 135.575 what but the price in a swing area between that level and the 61.8% retracement 135.945 (see red numbered circles).
The low to high trading range today for the USDJPY is up to 159 pips. The average of the last 22 trading days is a whopping 166 pips. So there may be some stall from the range standpoint especially as the pair moves closer to the August high at 135.575. Nevertheless, the buyers remain more in control.
Close support for buyers is now the 50% retracement 134.882. On the North American session dip, the price stalled ahead of that midpoint level before restarting the move to the upside.
Of note, is the 10 year yield has moved back up toward its 100 day moving average at 2.893%. The high yield reached above that level at 2.911% in the current yield is trading above at 2.900%. There has been moves above that moving average over the last week or so, but momentum has not been sustained. A more sustained move above that 100 day moving average should give the USDJPY a shove to the upside.
The Bank of Japan continues to key policy unchanged while the Federal Reserve is expected to continue to tighten credit conditions. Later today the Federal Reserve will release the minutes from the last meeting when the central bank raised rates by 75 basis points. The expectations are for continued hawkish nests as the Fed focuses on bring inflation down.
Also of note is that in September, the Federal Reserve will start to sell treasury securities from their balance sheet has quantitative tightening kicks in. There is risk from that selling to the upside in yields.
