Forex Top Team

Dollar Adjustment Continues

In the Tokyo market, the USD/JPY pair shifted from the 150.50 yen level to 150.08 yen, becoming weaker for the dollar and stronger for the yen. There is a broadening adjustment movement in response to the dollar’s strength after the US CPI data. While the adjustment for the euro and pound after the CPI release is limited, for some currency pairs, such as the USD/Mexican peso, the adjustment to the dollar’s strength is more pronounced, with the entire increase being fully offset. There is also a sense of caution regarding high dollar levels in the USD/JPY pair.

The yield on the US 10-year Treasury bonds approached 4.225% from around 4.25% in the morning session in Tokyo, but then remained flat. The overall trend of selling the dollar continues. There is also observed adjustment movement ahead of tonight’s US retail sales, import and export price index releases, and other related indicators.

Whether the USD/JPY pair will break below the 150 yen mark is currently a focal point. If it maintains the 150 yen range, upward momentum may persist. If it retreats to around the mid-150 yen level, there is a possibility that the dollar’s strength will increase. Expectations for an early rate cut in the US have diminished, making the dollar more likely to be bought.

It is also noted that there is buying backlog from Japanese importers, contributing to the ongoing upward bias.

In the Tokyo market, EUR/USD is trading within an 11-point range, experiencing a stalemate. There is cautiousness in selling at the 1.06 level seen yesterday, making movements sluggish. EUR/JPY briefly dropped to 161.02 yen. Similar to the USD/JPY pair, whether it can break below the significant level is currently a focal point.

Later today, US economic indicators will be released. Particularly noteworthy are the January retail sales and import price index. Retail sales are expected to be in the negative territory due to the strong performance in the previous months. If they maintain a positive growth, it could lead to broader dollar buying. The import price index is expected to remain flat month-on-month. A stronger-than-expected figure, like the US CPI, could serve as a catalyst for dollar buying.

Today, attention is on the retail sales in the US. Given recent strong US economic indicators, it is generally assumed that there is a higher probability of them surpassing expectations. The bias remains towards buying the USD.

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