Japanese Yen Talking Points
USD/JPY[1] trades at its highest level since 2018 as it rallies to a fresh yearly high (113.41), and recent developments in the Relative Strength Index (RSI) indicate a further appreciation in the exchange rate as it pushes into overbought territory for the first time since the first quarter of 2021.
USD/JPY Rate Rally Pushes RSI Into Overbought Territory
USD[2]/JPY[3] extends the series of higher highs and lows from last week even though the US bond market is offline in observance of Columbus Day, and current market conditions may keep the exchange rate afloat as speculation for an imminent shift in Federal Reserve policy lifts US yields.
During an interview with CBS, San Francisco President Mary Daly, who votes on the Federal Open Market Committee[4] (FOMC) this year, discussed the disruptions caused by the Delta variant, with the official going onto say that the labor market “is going to have these ups and downs” as long as COVID-19 persists.
The comments suggest the weaker-than-expected US Non-Farm Payrolls report (NFP)[5] will do little to hold back the Fed from scaling back monetary support as Daly acknowledged that the stickiness in inflation continues to be drive by the supply-side disruptions, and key developments coming out later this week may fuel a larger advance in USD/JPY as the update to the Consumer Price Index (CPI) is expected to hold steady in September.
At the same time, the FOMC Minutes may generate a bullish reaction in the US Dollar[6] as the central bank reveals a tentative exit strategy in tapering its purchases of Treasury securities and mortgage-backed securities (MBS), and the deviating paths for monetary policy may keep USD/JPY afloat throughout the remainder of
