Meanwhile, 10-year yields are also down 2.2 bps to 1.55% and that is weighing on the mood in yen pairs as USD/JPY is down 0.3% and trading at the lows near 113.60.

There is still some hints of pushing and pulling since the start of trading yesterday with the market continuing to count down to the FOMC meeting tomorrow. That will inevitably set the tone for the remainder of the week as highlighted in this post yesterday.

The RBA already did its part by ruling out a rate hike in 2022 – at least for now – but opened the door for one in 2023 as it drops the previous forward guidance of not foreseeing a scenario in which it will hike rates until 2024 at least.

The Fed is arguably also going to offer some pushback to rate expectations by making clear that tapering will not necessarily mean immediate rate hikes to follow.

But again, the market reaction may not be as straightforward considering the train of thought that a policy accident is in the works. Thus, we’ll only get more clarity on things once the dust settles later in the week.

For now though, yen pairs are feeling some pressure with AUD/JPY in particular falling back below 85.00 for the first time in over a week:

The 22 October low around 84.60 may offer some reprieve after the failure on buyers’ part to hold a break above 86.00 but below that, there isn’t much stopping a further drop/retracement lower in the pair.