Some strong flows in Asia sent the pair lower with the yen gaining across the board, but we see USD/JPY sellers moving away to firmly challenge the 135.00 mark. Overall, we have been somewhat caught in the 135.00-140.00 range since the start of the month and while the Yen’s move today is noticeable, it remains in that region.
Now, the Fed saw a subtle change in communication yesterday, but overall I don’t see it turning its back on more aggressive rate hikes, i.e. more than 25 basis points until in September at least. But as Powell noted, it will all depend on the data and so the markets will have to fill in the blanks with that and digest comments from Fed speakers.
The interesting development of the day is that Treasury yields are on the rise and this could also spill over to USD/JPY – pushing the pair higher as well. This may reduce today’s early losses somewhat, but until there is conviction to break out either side of 135.00 and 140.00, the “consolidation” at top keeps buyers in balance.