The USDJPY pair shows seasonal weakness between now and August with an average fall of -1.36%.

The USD has found significant buying since the start of the year due to expectations that the Fed will rapidly hike interest rates in order to control surging inflation. Many analysts consider that the USD may be quite near peak bullishness since quite a lot of those expectations have been already priced in.

On top of this, the recent extended weakness in the JPY is getting the BoJ’s and the Japanese Gov’t attention. There is a wariness in the market that there may be some intervention into the JPY.

This means that the USDJPY pair could find itself vulnerable to a correction lower over the next few weeks in line with the seasonal outlook.

Major Trade Risks: The inflation pressure is key. If the US sees inflation pressures building even further then that will keep up expectations of even more aggressive Fed action and could keep the USD bid.

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