Yields in the US have moved higher with the 10-year yield now up 2.8 basis points and the 2-year yield up 3.2 basis points. In addition, the chance of no change in policy in November reached close to 25% today before rotating back down to 20%. It wasn't long ago that the market was pricing in a 50 basis point cut. There still is an 80% chance of a 25 basis point cut in November.
The move higher in rates has helped to push the USDJPY higher as well and the price has now reached the August 16 high near 149.36. The high price just reach 149.355. Move above that ceiling and traders would start to look toward the 50% midpoint of the move down from the July high at 150.757.
Yesterday the price moved down to test an old ceiling going back to August 20 (see green numbered circles). On Friday, the price broke above that ceiling after the US jobs report. The low price yesterday extended to that old ceiling and found support buyers (the low reached 147.338). That gave the buyers the go-ahead to push back to the upside today
Getting and staying above the 38.2% retracement at 148.116 was another positive/bullish development for the pair today.
Fundamentally, the key CPI data will be released tomorrow at 8:30 AM. The number is expected to be fairly tame at 0.1% for the headline and 0.2% for the core. The YoY is expected at 2.3% down from 2.5% for the headline but up at 3.2% for the core. With the job market remaining strong in the last report, seeing the court come down to a 2% handle would give Fed officials more comfort. Nevertheless, the recalibration idea for the Fed is still in play.
