- The US dollar, stable above 113.85, returns near multi-year highs.
- The yen is still affected thanks to the yield spreads on the Treasury bonds.
- USD / JPY: Weakness seen as corrective above 112.40 – Credit Suisse.
The U.S. dollar has made up lost ground, following a weak opening against the Japanese yen on Tuesday. The pair USD/JPY it fell from a three-year high at 114.45 reached on Monday to session lows at 113.85 before rebounding and returning to the 114.30 area.
Risk appetite and lateralized US yields have weighed on the USD
The JPY it tried to rebound, having depreciated almost 5% in the last four weeks. A heightened appetite for risk supported by upbeat quarterly earnings results from Johnson and Johnson and Travelers had rekindled risk appetite, while consolidation in US Treasury yields curbed demand for the USD, offering respite. its main rivals.
However, the yen’s recovery has been short-lived. The Japanese currency, particularly sensitive to monetary policy spreads, continues to be affected as the market positions itself for an imminent announcement that the Federal Reserve begins to reduce its massive stimulus program. These expectations have been widening the Treasury yield gap between the US and Japan, whose central bank keeps the 10-year yield near zero through a yield control curve, crushing investor appeal. for the yen.
USD / JPY: weakness seen as corrective while above 112.40 – Credit Suisse
From a technical standpoint, Credit Suisse’s currency analysis team considers the pair to be biased to the upside while support at 112.40 remains intact: “With a significant base above the 2019 high of 112.40, we maintain our opinion that the weakness will be corrective and temporary only. A clear break out of 113.99 should mark a short-term top to add weight to our view for a pullback to 113.81 / 61 initially, with new buyers expected here for now. A breakout may mean a deeper pullback towards 113.08 / 04, but this will ideally demonstrate the edge of the recession. “