The US dollar is extending its bullish trend, strengthening in virtually every conceivable currency pair. Against the yen, the USDJPY has reached levels where Japan intervened earlier this year.
Given the considerable risk of Donald Trump fueling inflation next year and the risk of excessive debt, bond yields remain elevated, which is good for the US dollar at least for now.
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Create account Try a demo Download mobile app Download mobile appAnother factor driving the USDJPY higher is monetary policy in Japan. For now, analysts expect the BOJ to remain idle and continue to assess conditions at its next meeting in December. The BOJ is currently expected to raise its target rate by 25 basis points to 0.50% at its January meeting, followed by two further 25bp hikes in April and July, taking it to 1.0%.
Let's remember that in the medium term, Donald Trump's election victory will provide an additional inflationary impulse for the Japanese economy by raising the cost of imports. In the case of the Bank of Japan, this will raise concerns about the risk of inflation exceeding the 2% target, which will encourage the increase in the cost of money in Japan.
The USDJPY pair is breaking through the psychological barrier of 156 yen to the dollar for the first time since July this year. A sustained breakout of this zone could open the way for further upward movements towards the 157/158 zone, where in the past they were an important control zone for the demand and supply sides. The most important support currently remains the recently broken, local top in the zone of 154,600 and the local bottom near 151,300.
Source: xStation
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