USD/JPY reverses sharply and jumps to tests weekly highs above 106.50
- Yen tumbles as Wall Street posts gains and US yields jump.
- Fed adopts average inflation target: dollar reverses and turns positive across the board.
The USD/JPY made a U-turn during the American session and climbed to 106.57, matching the recent top. Previously it bottomed at 105.59, the lowest in almost a week. A big reversal in US yield boosted the pair to the upside as volatility spiked following Fed’s Chair presentation of the updates of the its monetary policy strategy.
The Fed updated its statement on goals and monetary policy strategy. It will adopt an average inflation target, allowing inflation to run higher at good times. Powell said that any inflation overshoots are expected to be moderate.
Initially the dollar dropped sharply but it then rebounded, not only erasing loses but turning positive. The DXY tumbled to 92.42 and then jumped to 93.30. US yield also bounced sharply: the 10-year rose form 0.67% to 0.73%, level not seen since mid-June.
The rise in US yields and also the rally in Wall Street weakened the yen that dropped across the board. Later the stronger dollar, boosted further USD/JPY. The pair is back above the 20-day moving average but again is having difficulties breaking the 106.60 area, a key short-term resistance that if broken should lead to further gains, exposing 107.00 and the August high (107.04).
Technical levels