US Dollar Strength Tested as USD/JPY Remains Key Driver

The US dollar has strengthened following last Wednesday's rate hike, and is now testing above the 100.00 level on the DXY index.

However, one of the key drivers behind this strength is the USD/JPY pair, where a crowded carry trade remains in place.

While a pullback may occur due to dual intervention, a larger reversal in the USD/JPY theme will likely require a shift in fundamental dynamics.

This could lead to a de-leveraging event across macro markets, as seen in July of 2024.