
USD/JPY Outlook: Bulls get a lifeline from the bond bloodbath
A rare surge in US-Japan yield spreads has failed to lift USD/JPY, but with bond yields still rising and the pair printing a bullish engulfing candle, reversal risk is rising.
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A rare surge in US-Japan yield spreads has failed to lift USD/JPY, but with bond yields still rising and the pair printing a bullish engulfing candle, reversal risk is rising.

Assuming the Fed delivers the expected hike, traders will want to know WHAT could prompt another hike, WHY they hiked this time, and HOW to interpret the dot plot.

It has not been an easy week for the Japanese yen. Over the last four trading sessions, USD/JPY has posted a move of only around 0.3%, reflecting a market that continues to lack clear direction and remains trapped in a phase of neutrality.

PCE may still matter to policymakers at the Fed, but for traders looking for a genuine volatility event, CPI has been the far more reliable release.

The last Core PCE before the Fed's September meeting will mark 65 straight months above the central bank's 2% target - will it be enough to push the FOMC toward a rate hike?

Speculative yen shorts are far less stretched, but the focus now shifts to US inflation. Another hot print could quickly revive Fed hike expectations and support USD/JPY.

A week after a similarly below-expectation report from the US, Canadian inflation cooled more sharply than expected in June, easing concerns that the recent energy-driven increase was spreading across the broader economy. USD/CAD is in focus.
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