Japanese Yen, USDJPY, AUDJPY, EURJPY, GBPJPY - Talking Points
- Yen[1] continues to outperform on recession, peak yields themes
- July FOMC[2] meeting seen as “dovish,” taking USD[3] lower
- RBA, BoE meet this week – Key levels in play for AUDJPY[4] & GBPJPY[5]
The Japanese Yen appears to have made a serious pivot as a myriad of factors have allowed for the US Dollar[6] to cool its recent advance. Global recession fears and the market’s attempt(s) to price a Fed pivot have pushed the Greenback lower of late, allowing for a bid into risk assets. Despite the Bank of Japan’s continued dovish stance, yield compression globally has made the Yen more attractive. If yields truly have topped, those who have milked the carry trade for much of the last two years may look to make an “Irish exit” if they haven’t done so already. A rush to close Yen shorts could result in a true squeeze lower in many Yen crosses, with many already significantly off of YTD highs.
Last week, the Bank of Japan (BoJ) released its Summary of Opinions which reiterated the bank’s easy stance on monetary policy. The report revealed that the BoJ would “not hesitate to take additional easing measures as necessary.” Policymakers also stated that it is natural to continue easing as inflation is yet to exceed 2% “in a stable manner.” Despite the dovish stance from the BoJ, the Yen may outperform as trends shift into H2 2022.
USDJPY Daily Chart
Chart created with TradingView
USDJPY[7] has continued to flush lower following last week’s FOMC meeting. Markets have effectively perceived the July meeting as dovish, given that Chair Powell indicated the Fed was now at neutral, and
