The USDJPY breakout was followed by two days of yen strength to test support, but further highs are now possible.
USDJPY – Daily Chart
The USDJPY trades at 146.34 after the Monday rally, and further highs are possible from here.
Upcoming Economic Conerns
The economic calendar is quiet early in the week, with Wednesday starting the annual three-day US Jackson Hole symposium meeting of central bankers. That will lead to a speech from Federal Reserve chair Jerome Powell on Friday. Thursday will bring US durable goods orders with a Michigan consumer sentiment release on Friday.
Wharton professor Jeremy Siegel said he didn’t see inflation rebounding, despite signs of a resilient economy in the face of Fed tightening over the past year.
According to the Atlanta Fed, GDP is expected to grow by 5.8% over the third quarter. Jobs growth and wages have also been strong, with the US adding 187,000 payrolls and hourly earnings up 4.4% year over year in July.
“It was the worst productivity performance in over 70 years. This year we are hiring at less than half the pace and we have two to three times the level of GDP growth. Why is that? One of the biggest bounce-backs in productivity I have ever seen,” he told CNBC. “And that’s saving Jay Powell. That’s why we can have this tremendous GDP growth and still have the disinflationary trend.”
The dollar may also be rising over fears that China’s property woes could spill over into Asia. Struggling developer China Evergrande Group has filed for US bankruptcy protection as part of one of the world’s biggest debt restructurings, with anxiety growing over China’s worsening property crisis.
The issue continues to affect the outlook for the Chinese growth machine, and investors are turning to US assets.
“To be sure, the economic downturn is putting a great deal of strain on financial sector balance sheets, and it does increase the risk of a messy policy mistake if officials don’t handle the situation with care. But we still think a full-blown financial crisis is a tail risk rather than a probable outcome,” Capital Economics said in a report.
