Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

FX Update: USD triangulating. Fresh pressure on JPY. FX Update: USD triangulating. Fresh pressure on JPY. FX Update: USD triangulating. Fresh pressure on JPY.

FX Update: USD triangulating. Fresh pressure on JPY.

Forex 5 minutes to read
John Hardy

Head of FX Strategy, Saxo Bank Group

Summary:  The US dollar has been triangulating since the FOMC meeting last week and will likely have to choose a direction this week, one that is determined by whether we transition to a summer doldrums scenario or to fresh angst triggered by new upward pressure on global yields, led by US treasuries. Certainly, the JPY is already under fresh pressure as yields pushed higher in core Europe yesterday.

FX Trading focus: Fresh pressure on JPY as BoJ losing control. USD triangulating.

USDJPY is already back pressing on the cycle highs even as US treasury yields have merely bounced from pivotal levels (the US 10-year Treasury yield benchmark zone around 3.15-3.20% looks critical for the tactical outlook). The recent EURJPY dip was far deeper than the dip in USDJPY, and the rebound there has been sharper as EU core yields hardly consolidated and are pressed back higher yesterday after the ECB talked up the intentions with its new tool to compress peripheral yield spreads, an operation that could allow core yields to rise more than they otherwise would as this would mean that shifting balance sheet priorities would proportionally increase the supply of core bonds into the market – especially with the new expansive fiscal programs that lie ahead to address military and energy security concerns driven by the war in Ukraine. If US yields push higher again as well and take the 10-year Treasury yield beyond 3.50%, the pressure on the JPY will mount to eventually unbearable levels – but this last BoJ meeting shows that Kuroda and company will put up a considerable fight before folding. Last week, the Bank of Japan’s operations to defend yield-curve-control saw it accumulate $81 billion worth of JGB’s, a record for a single week. The BoJ has entirely lost control of its balance sheet and the JGB market is dysfunctional.

The EURJPY correction cut deep, but the rebound has come roaring back since the Bank of Japan meeting last Friday made it clear that the BoJ is refusing to budge, while core EU yields remain pinned near the highs of the cycle. The German 10-year yield is a remarkable 175 basis points this morning after trading below the BoJ’s yield cap of 25 basis points as recently as early March. The pressure on JPY crosses could become supercharged again if the key sovereign bond yields continue to rise to new highs for the cycle. And as we note above, core EU yields might find additional upward pressure from the ECB prioritizing a crushing of peripheral spreads.

Source: Saxo Group

Bank of England Chief Economist Pill was out this morning touting inflation risks and the importance of avoiding second round effects, while also noting that monetary policy is a “blunt tool” for moving against inflation, while admitting that the BoE is willing allow growth to weaken if that is what it takes to move inflation back to the target. The market hasn’t been particularly volatile during a series of comments this morning as short UK yields trade at cycle highs, but it was interesting to see Pill bring up the exchange rate in his comments, as something that needs to be taken into account. With global commodities priced in US dollars and the GBPUSD rate having fallen some 10% from its January highs, it is an important point.

A speech from RBA governor Philip Lowe overnight took Australia’s short yields a notch lower as that the July hike from the RBA would be 50 basis points at most, moving the market to cut anticipation of a larger rate hike – and in a Q&A, Lowe said that the board would only consider a rate hike o 25- to 50 basis points. The RBA sees Australian inflation rising toward 7% in Q4 of this year. Given that the RBA is the only central bank that still meets on a monthly basis, this doesn’t have to look so dovish, as the bank can simply hike 50 basis points at every meeting if conditions dictate. More than from the RBA, the risk for further AUD weakening stems from any return of weak global market sentiment, and more specifically, to Chinese demand concerns as key commodity prices are struggling. Copper, for example, a bellwether metal is trading near the range lows stretching back and Australian mining giant BHP Billiton’s share price is hovering near its 200-day moving average.

Noted hawk James Bullard, president of the St. Louis Fed, was out with fresh hawkish comments yesterday, but the market has not reacted to these. He emphasized that it is important for the market to move as quickly as the market is currently pricing and to prevent inflation expectations from coming “unmoored”. He highlighted the interesting divergence in actual inflation readings and falling inflation predicted by TIPS (inflation protected US treasuries), which “will have to be resolve, possibly resulting in higher inflation expectations”. US Fed Chair Powell is set for two days of testimony before Senate and House panels tomorrow and Thursday, respectively. For USD direction, I have eyes firmly pinned on whether the US 10-year treasury yield remains tamed. On Friday, we get the final June University of Michigan sentiment survey, which includes a longer-term inflation expectations survey that garnered huge attention when it suddenly jumped to 3.3% from 3.0% in the initial June release.

Table: FX Board of G10 and CNH trend evolution and strength.
As noted, the US dollar has been triangulating since last week’s FOMC and will need to choose a tactical direction soon. NOK is in for a test on Thursday on the Norges Bank and whether it is set to change its cautious pace of rate tightening. Elsewhere, CHF impulsive strength on the back of last week’s SNB has yet to blossom.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
The individual pairs are short on tactical developments but watching whether the USD comes under pressure or renews its bull trend in coming sessions. Note AUDCAD at a tipping point supposedly, but actually trading in a volatile range – likely to copy the direction of AUDUSD from here. And speaking of AUD charts – watching EURAUD for upside break potential if 1.5200 breaks.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1000 – UK Jun. CBI Trends in Total Orders and Selling Prices
  • 1230 – US Chicago Fed National Activity Index
  • 1230 – Canada Apr. Retail Sales
  • 1400 – US May Existing Home Sales
  • 1600 – US Fed’s Mester (Voter) to speak
  • 1930 – US Fed’s Barkin (Non-voter) to speak
  • 2350 – Japan BoJ Minutes of April Meeting


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.