The dollar fell in trading yesterday but there’s no extension to that so far today. Besides USD/JPY, other dollar pairs remain relatively muted after some light extension to the ranges earlier. Here’s a snapshot of things currently:
GBP/USD did nudge up to a high of 1.3340 after the upbeat UK retail sales data but has pared that advance back to 1.3285 currently.
Meanwhile, the other dollar pairs are keeping in narrower ranges and still lacking appetite overall. EUR/USD remains confined with large option expiries here also in play, at least for now.
USD/JPY is the main mover as it looks to clip the 144.00 level next. In the big picture though, the pair is still caught in a series of lower highs in recent times.
USD/JPY daily chart
The move higher today comes as the BOJ kept monetary policy change unchanged. And Ueda also offered no real suggestions of tightening policy in October next. As things stand, he still claims that markets are “unstable”. And BOJ policymakers have said that as long as markets stay that way, they would be uncomfortable in hiking rates again.
In the bond market, 2-year Treasury yields are seeing a bit of a push and pull on the day. It was down to around 3.57% earlier but is now back up closer to 3.60%. 10-year yields were also marked down to 3.70% at the lows but are now up to just above 3.72%.
As much as the USD/JPY bounce is looking to play out, there’s still limited scope for a major rebound unless dollar sentiment switches up.
Traders are looking to try and see how far they can push the Fed in terms of pricing for November. So, there’s that to consider. And then there’s the 23.6 Fib retracement level of the swing lower from July to the low earlier this month, seen at 144.85. That before larger offers are lined up at the figure level itself at 145.00.
Those will be the bigger levels to watch as we gauge the extent of this latest rebound in the pair.
But again, I would argue it needs to be vindicated by movement in rates as well. So, we’ll see about that.