US Dollar Gains on Yields

The US dollar has gained against the Japanese yen to recapture the ¥115 level again during the trading session on Friday as the jobs report in America surprised. While some pundits expected a negative print, the reality is that the United States came out with an addition of 425,000 jobs. This of course ended up having traders worrying about the Federal Reserve becoming even more aggressive with its tightening policy, something that sent yields skyrocketing. Higher yields help a currency, and therefore it is not a huge surprise to see what happened here.

USD/JPY Video 07.02.22

Keep in mind that the Japanese continue to be very dovish with their monetary policy, so it is a bit much to think that the yen would suddenly tighten against one of the currencies of major banks out there that looked to tighten. Because of this, we did break the ¥115 level and it certainly looks as if it we are more than willing to attempt to break through the upside. Whether or not we can is probably a completely different question, but at this point time I think it certainly makes a decent amount of sense to think about this through the prism of interest rate differential. With the 10 year spiking the way it has in America, I think the US dollar will continue to strengthen against a lot of currencies, perhaps with the notable exceptions of the Euro and the British pound.

All this being said, there is obviously a significant amount of resistance just above so that should be taken into account. If we can break above the shooting stars from last week, then it is possible that we could go looking towards the highs again.

For a look at all of today’s economic events, check out our economic calendar.