USD/JPY rebounds from one-month low
USD/JPY is asking two questions:
- Will the Fed hike?
- Will the BOJ ease further?
Those questions aren't that tough to answer. The Fed will hike and the BOJ will ease... eventually. The timing is the tricky part because it could be months before either central bank makes a move.
Non-farm payrolls changed the Fed timeline last Friday and Yellen eased up on the hawkish talk on Monday. The pair dropped down close to the May lows after non-farm payrolls and then bounced Monday but it set fresh lows earlier today.
With the rejection of today's low (and the NFP low) the market is saying that the weak jobs report isn't the final word. The stock market is cooking and oil prices (aside from today) are pushing up inflation.
To me, this is a strong signal about consolidation above 106.30.
Sure, the market has rallied a full cent for the lows but I think there's room to get to at least 107.90. I'm not sure where the risk-reward comes down on that but there will be opportunities on consolidation.
