USD/JPY popping as Tokyo gets going

USD/JPY runs higehr ahead of NFP.

USD/JPY, where next?

With the BoJ jawboning this week, USD/JPY climbed from 109.20 to 109.75 (Jan 26 high) overnight before drifting back to 109.25, little changed on the day. Currently, USD/JPY is trading at 109.43, up 0.13% on the day, having posted a daily high at 109.49 and low at 109.24.

The market now awaits the nonfarm payrolls while the US data overnight was mixed. The Atlanta Fed upgraded its model prediction for Q1 GDP from 4.2% to 5.4% (annualised). Otherwise, data was mixed. Markit manufacturing PMI arrived at 55.5 (vs 54.9) while the ISM manufacturing index reached 59.1 (vs 58.8).  Details of the ISM included a decline in the employment index to 54.2 from 57.2 and a slide in the new orders index to 65.4% from 67.4%. 

Concerns about higehr yields

Markets are also concerned about the resurgent inflation picture, coupled with tightness in the labour market which should be compelling in respect to the Fed's path of interest rate hikes going forward.  (30-year Treasury bond touched 3% today, its highest level since May). The benchmark US 10yr treasury yields rose from 2.72% to 2.79% - another fresh high since April 2014, while 2yr yields ranged between 2.14% and 2.17% - the latter the highest since 2008. The Fed fund futures have priced price the chance of another rate hike in March by 100%. Locally, the Japanese data in January's mfg PMI  final arrived at 54.8, flash 54.4, and the highest since Feb ’14, December's of  54.0.

USD/JPY level

The Tenkanis now at 109.75-77, ( an area bulls need toovercome before supply comes on heavier, especially over the NFP's). Valeri a Besnariuk, chief analyst at FXStreet explained that in the 4 hours chart, technical indicators maintain their strong upward slopes well above their mid-lines and with the Momentum at fresh 2-week highs, supporting additional gains ahead. "The 100 SMA in the mentioned chart maintains a bearish slope, now offering a dynamic resistance around 110.10, with gains beyond the level probably anticipating a steeper advance ahead."