As the US dollar strengthened, the USD/JPY currency pair continued its three-day winning streak. Despite a decline in Consumer Confidence in September, the US Dollar Index reached a new high of nearly 106.30. In order to maintain inflation in Japan below 2%, wage growth must accelerate.

Futures for the S&P 500 rose in London, suggesting a more bullish sentiment among investors. The US stock market sank dramatically on Tuesday as investors worried about the long-term outlook in light of the Fed’s expected decision to maintain rising interest rates.

The DXY increased to around 106.30 despite a drop in Consumer Confidence for the month of September. According to Tuesday’s report from the US Conference Board, Americans of all ages are losing faith in the economy. The index of optimism dropped from 108.7 in August to 103.0 in September. Households are worried about persistent consumer inflation, political unpredictability, and rising interest rates.

On Wednesday, the US Durable Goods Orders report for August will be discussed. The market anticipates a 0.4% decrease. The economy took a 5.2% hit in July. The long-term outlook for the industrial sector is bleak if the order book for core items is weak.

The Japanese yen is weakening as Bank of Japan Governor Kazuo Ueda calls for a more lenient monetary policy. The BoJ’s Ueda has stated that wage increases are necessary to keep inflation at 2% for an extended period of time. On Friday, investors will be keeping an eye on the latest Tokyo inflation data.

Trade Idea:

Consider a short-term USD/JPY long position with a target near 107.00, as strong US Dollar momentum counters falling Consumer Confidence in September.