USDJPY – Back to 112.00?

USDJPY – Back to 112.00?

Although US data has continued to impress and US yields are once again within striking distance of the 2.50% level on the benchmark 10-year rate, USDJPY gave up most of its gains in late afternoon trade in NY today and is once again below the 115.00 barrier.

What flipped the pair lower? The problems with the dollar at this point are not economic but political. After weeks of anticipation, Donald Trump will finally take the reigns of power and the currency market may be having a case of buyers remorse. Now that Mr. Trump has to govern, his moves and pronouncements will be heavily scrutinized and if investors perceive that he is losing momentum with respect to economic reform, the rally in the dollar will quickly reverse. Today’s price action should send a note of caution to dollar bulls and if the pair loses the 114.00 figure in tomorrow’s trade it would suggest that another test of 112.00 is highly likely.

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