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Although the US labor markets have started to slow and US data overall has shown some disappointments as of late, many traders in the fixed income markets remain convinced that the Fed may consider a rate hike as early as June. The US 10 year yields have started to rise and that has put the bid back into USD/JPY which recovered the 120 figure and looks ready to test the recent highs at 122.00 Tomorrow’s FOMC minutes could offer a clue as to how the Fed is leaning and if the tilt is hawkish than the pair has more upside left.
USD/JPY has found strong support at the 118.00 level and has now made a higher low at 119.00 but the 122.00 overhang still provides considerable resistance. A break above however could target the pair to 125.00 over the medium term horizon.