Dollar Stalls Amid Treasury Buybacks as USD/JPY Remains a Crowded Trade
The US Dollar experienced a fresh lower-low this week after an announcement from the Treasury department regarding increased buybacks. The move stalled afterwards, and the breakout in EUR/USD did not accelerate as expected. Meanwhile, GBP/USD and AUD/USD saw their breakouts accelerate.
USD/JPY remains a major focus point due to its crowded long trade status. Despite this, bulls continue to bid dips, and the Japanese Yen's influence on the DXY basket is relatively small at 13.6%. However, the pair has been above the early-2021 level for over 50%, indicating a potentially precarious situation.
The Treasury department's announcement drew attention to softening US inflation, which had been a key factor in previous episodes of USD/JPY unwind. The latest headline CPI print showed 3.4% inflation, complicating bullish continuation strategies in USD/JPY and the USD as a whole.