- USD/JPY is teetering in a 100 pip range on Tuesday, capped by a strong US dollar and falling US Treasury yields.
- Risk aversion increased the appetite for haven assets, with the greenback taking the lead.
- US Treasury yields fall more than 13 basis points and are back below 2.80%.
The USD/JPY remains almost unchanged in a session dominated by risk aversion, triggering flows into safe-haven assets, and in the currency space, USD, JPY and CHF are the winners. However, due to its risk-averse nature, USD/JPY is up just 0.07%, trading around the 135.70 area.
USD/JPY range bound by factors driving both currencies to hold steady
Recession and concerns about high inflation are the headlines of the session. The dollar index, which compares the greenback to six currencies, gained 1.50% to 106,716. Meanwhile, the USD/JPY pair oscillated in the 135.50-136.40 zone during the day, within known ranges.
To the downside, USD/JPY was capped by greenback strength, but to the upside, falling US Treasury yields, mainly 10-year US Treasury yields , are falling thirteen basis points to 2.794%, well below the high of 3.50% so far this year.
Meanwhile, the upbeat mood of Tuesday’s Asia-Pacific session, fueled by talks between US and Chinese officials, was short-lived. Even though the news indicates that US President Biden is expected to reduce tariffs on Chinese imports shortly, this could not overshadow the looming scenario of stagflation in the world economy.
Meanwhile, in the Japanese economic calendar, the services and composite PMIs of the Jibun Bank were published, corresponding to the month of June, which showed the resistance of the economy, with better than expected figures. On the other hand, the US calendar was positive as Durable Goods Orders and Factory Orders beat forecasts.
Later in the week, an absent Japanese economic docket will leave USD/JPY traders adrift on US data. The ISM Non-Manufacturing PMIs, JOLTs Job Offers and FOMC Minutes will be released on the US macroeconomic calendar. In addition, Fed officials will give remarks, led by New York Fed President John Williams on Wednesday, while Christopher Waller and St. Louis Fed President Bullard on Thursday.
Key USD/JPY Technical Levels
Source: Fx Street
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