The increase in U.S. yields is somewhat concerning to the Federal Research, which is purchasing $85 billion a month of bonds in an effort to keep rates low and spur on lending. The Fed has used rhetoric to attempt at keeping long term rates low, but growth in the economy will be difficult to counteract.
One of the headwinds that have been capping the rise in USD/JPY, which would benefit Japanese exporters, is the record amount of selling of foreign bonds and repatriation of Japanese wealth. Japanese investors sold a record amount of foreign notes and bonds in June. The most recent Ministry of Finance report shows a net sale of ¥2.957 trillion worth of notes and bonds. Japanese investors also sold ¥377.7 billion of foreign stocks. When Japanese investors sell U.S. stocks they need to sell dollars and buy yen, which is seen as a headwind for the USD/JPY. Currency exchange between the pair is expected to attract much interest over the coming months.
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Yen futures have been a short term down trend over the past month, and are poised to test support near 0.9700. A break of this level could lead to a test of weekly support at 0.9500. Momentum continues to point to lower futures prices with the MACD printing in negative territory. The RSI (relative strength index) is printing near 36, which is on the low end of the neutral range.