The Fed’s statement that it will gradually discontinue its urgent bond scheme was the year’s most expected market move. To the Fed’s benefit, there were none, proving its long-running campaign to ease markets. After the Fed meeting, Treasury rates jumped temporarily before falling. A week ago, the 10-year yield was 1.561 percent, but by Friday morning, it had fallen below that level.
The growing US Treasury-Japanese Government Bond (JGB) expansion was the biggest rationale for buying the USD/JPY before the US yields fell. On September 22nd, before the FOMC conference, the disparity between the US 10-year Treasury yield and the 10-year JGB was 1.283 percent. On October 21, the spread had grown to 1.587%. The USD/JPY traded at 114.70 on October 20 and closed at 114.38 on October 19.
Since then, the yield spread between the US and Japan has shrunk to 1.423 percent. The USD/JPY has been trading between 113.25 and 114.40 for 3 weeks. The pair opened Monday at 113.96 and closed Wednesday at 114.00. The USD/JPY and US yields both fell on Thursday, with the USD/JPY falling to 113.76 at the end of the day.
Overall household expenditure decreased by 1.9 % in September, much less than the 3.9 % predicted and August’s 3 % drop. Despite the labor deficit, supply chain hiccups, and pandemic disruptions, the US economy remains solid. The Institute for Supply Management’s Purchasing Managers’ Indexes grew in October. Despite a decline in services and a rise in manufacturing, the Job Indices stayed above 50. New orders were strong, as where prices are given.
As of the last week of October, the number of initial unemployment claims was 269,000, a figure not far from that of last March. Nonfarm payrolls climbed 531,000 in October, adding to the 249,000 gains in August and September.
The Fed’s pull-out of credit market help will eventually raise US interest rates, but bond traders are not in a hurry. The USD/JPY closed at 113.41 on Friday, at the low end of its latest range and the underside of the pennant. 113.25 is the instant indicator. The Japanese authorities have pledged intervention to resurrect the economy. There’s very little cause to suppose that the upcoming expenditure program or financial backing from the Bank of Japan (BOJ) will have any effect.
The BOJ’s Yen vulnerability is currently aligned by the US interest rate lassitude. The September Coincident Score and the October Eco Watchers Survey will not affect the USD/JPY. The US consumer and producer wage growth data for October may provide minimal benefits for the USD/JPY.
USD/JPY CHART Source: Tradingview.com
The MACD forecast is mildly pessimistic due to the recent range failures at 114.50 and 114.00. the increased tendency if the pair approaches 113.25 support. The Relative Strength Index (RSI) has dipped toward indifferent this week as the USD/JPY falls. The USD/JPY has stayed range-bound, reducing True Range velocity. These markers do not account for the likely USD/JPY acceleration if the 113.25 assistance is broken.
The 21-day MA at 113.77 held the USD/JPY steady on Thursday. Friday’s preliminary rise was turned down at 114.00, and the retreat continued unabated. The level’s ease of intersection makes it improbable to offer much opposition if the USD/JPY rises. The 50-day MA at 111.78 and the 100-day MA at 110.96 should sustain the support line at 112.00. The USD/JPY was 109.66 well before the late September upsurge.
The very first support edge at 113.25 is appealing because it is empty. Trading on October 11 defines the near gap. On an active day, the organic pressure of such an infrequently traded scope will be difficult to resist.