The bond vigilantes remain firmly in control of the FX market, as well as all the others; while positioning can slow the Dollar down, it won’t justify a change in trend.

The sight of the BoJ verbally intervening to talk up the Yen, and buying JGBs to prevent yields rising, captures the heart of the problem.

If the Fed is committed to shrinking its balance sheet, and the BoJ is committed to capping yields, how on earth can the Dollar be turned around? Significantly stronger European data, or a huge BoJ pivot, could trigger Dollar weakness but otherwise, we’re watching the Treasury market to see where supply/demand find some balance.