USD/JPY to follow US interest rates higher

The USD/JPY is up 3.8% since February 22 and consolidated those gains last week. The pair is set to follow the yield curve, as FXStreet’s Analyst Joseph Trevisani reports.

Key quotes

“With another vast stimulus package now law, and the pandemic ending, the economic growth potential for the US economy is very strong. The Atlanta Fed GDPNow track for the first quarter is 8.4% annualized. Unless there is a change in circumstances the 10-year yield could be 2% in relatively short order. The USD/JPY will accompany rising US interest rates.”

“The Federal Reserve meeting on March 16 and 17 is the main event in the coming week. There will be no policy developments but the first Projection Materials for the year will be issued. Any improvement in the GDP and the unemployment estimates, which is likely, will confirm the positive US economic outlook and a higher USD/JPY. Likewise, Retail Sales is a harbinger for economic growth.”

“Technically the very steep ascent in the past three weeks leaves the USD/JPY vulnerable to profit-taking sales on any statistical disappointment. But with US interest rates in a sustained rise, any USD/JPY decline will swiftly become a buying opportunity.”