The US dollar has been enjoying its peak level around the rise in Treasury yields ahead of Federal Reserve speakers this week, confirming expectations that asset purchases will begin to decline by the end of this year. The U.S. economy will soon meet the Federal Reserve’s bar for beginning to reduce its bond purchase program, with continued job growth and the September employment report is now a potential stimulus said by Chicago Fed President Charles Evans on yesterday, but it will be late 2023 before an interest rate hike is warranted.

U.S. yields have been pulled higher by a hawkish shift at the Federal Reserve, which was announced  last week’s FOMC Interest Rate Decision meeting may start tapering stimulus as soon as November and flagged interest rate increase may follow sooner than expected. Members noted that moderation in bond buying may soon be warranted.  Powell went further during his press conference by saying that he feels goals have been met to taper and that tapering could be finished by mid-2022.  This sent the US Dollar and US yields higher.

Greenback gained by rising in August new orders and shipments data of U.S.-made capital goods increased which is 0.5% among strong demand for computers and electronics products. Today, Fed Chairman Powell and Treasury Secretary Yellen will testify in front of the Senate Banking Committee.  In US politics, Democrats and Republicans will be fighting this week over the infrastructure package, raising the US debt ceiling, and the possibility of a government shutdown.  Democrats have suggested a stopgap measure to extend it until December.   This would give them more time to figure out a long-term plan.

Meanwhile the BOJ July policy meeting revealed today and in that few Bank of Japan policymakers said a full-fledged recovery in the economy might be delayed as per reuters. One member added that the BOJ should take into account the risk that China’s economic growth could move forward. “Many members said the overseas economic outlook was highly uncertain with various risks,” the minutes showed. At the July 15-16 meeting, the BOJ kept monetary policy steady, but this year’s growth forecast lowered emergency restrictions on the fight against coronary heart disease. The slow vaccinations and the increase in delta variant cases forced Japan to extend the restrictions until September, accumulating inconvenience to some businesses.

Aso made the comment when asked to evaluate the efforts of BOJ Governor Haruhiko Kuroda, who became the longest-serving governor of the Central Bank of Japan on Tuesday. “It is true that the BOJ has not yet reached its 2% inflation target,” Aso said. “We cannot expect inflation to rise without strong consumer demand. Monetary policy has its limit only.” On the other hand the government of Japan plan to completely lift its novel coronavirus state of emergency and less strict pre-emergency when they expire on Thursday and it is approved by Japanese government advisory panel on today.

This week events are completely packed week for the US Dollar.  Not only will the US be releasing important monthly economic data such as Durable Goods Orders and Core PCE, but there are other important issues for the US Dollar to watch as well. However, US interest rates have been the main driver of yen pair.

USD/JPY 4 Hour Chart:

Support: 110.65 (S1), 110.33 (S2), 110.12 (S3).

Resistance: 111.18 (R1), 111.39 (R2), 111.71 (R3).

The US dollar relishes its overlying moment with its filled economic calendar for this week and higher U.S. treasury yields and weaker yen. We expect a bullish trend for USD/JPY.