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Is the party over for USDJPY bulls? With North Korean summit canceled, a relatively dovish Fed and deteriorating housing market, the positive sentiment has been pummelled this week. Although geopolitical tensions can certainly be a sore, the true point of stress may be housing.
The halcyon days of 2006-2007 may be over, but housing along with the supporting services still represents 18% of US GDP and with mortgage rates at 7-year highs affordability has clearly become an issue. With price softening the wealth effect could start to work the other way consumer sentiment could quickly wither. Add to that rising gas prices and stagnant wages and you have the perfect recipe for an unexpected slowdown in Q2 of this year that could force the Fed to slow it rate hike process. With 10-year yield already below 3% USDJPY could see further slide over the next few days as support at 108.50 beckons