From a technical perspective, the pair is keeping with the rejection of the 150.00 mark with the 100-week moving average once again also holding. The latter was holding closer to around 149.66 in the past week and helped to keep a lid on price action as it did during the run up in July as well.
As such, that is now seeing USD/JPY fall further this week as the pair is now down another 0.6% today to 147.06. The drop today is also largely due to traders reacting to the US government shutdown news. This seems to be more of a kneejerk reaction, as what we’re seeing with stocks, as the bond market remains rather sanguine still.
USD/JPY daily chart
In any case, the greenback is lower across the board today and that’s contributing to the added decline in USD/JPY.
The pair now falls back into the previous consolidation zone in between both its 100-day (red line) and 200-day (blue line) moving averages. We’ve officially hit the reset button to that potentially late breakout in September.
Going back to today’s price action, I’d be inclined to fade the whole narrative that the dollar should be much weaker on a government shutdown. That especially since the bond market also isn’t reacting whatsoever.
Fed funds futures still show ~95% odds of a 25 bps rate cut by the Fed this month and unless there’s a change to that outlook, this whole ordeal will continue to stay on as more of an operational hiccup than an economic risk for the US.