USD/JPYhas drifted lower as a result of the USD’s decline. The decline began after the Bank of Canada’s 100 bps rate hike last Thursday. This morning the dollar has continued the move lower and will mark a third successive day of decline. Sentiments hint at a continued low of the US dollar despite the significant short positioning and the fact that it has been doing well in the markets.
The market has taken advantage of the FOMC media blackout period by clawing back prior losses.
Looking ahead, the economic calendar produces minimum US data as we await the FOMC meeting and decision next Wednesday. In the past, statements from hawkish members of the FOMC gravitate towards accelerating rate hike odds and dollar valuations. However, because the rate-setting committee is in its usual media blackout period, markets have seemingly taken the opportunity to gain grounds against the US dollar. Markets will look out for the Bank of Japan’s (BoJ) quarterly report as there is no expectation for a move on the interest rate front.