USD/JPY swing low in place?

Hawkish Fed members have helped to push US yields and the dollar higher. We saw some volatility across yen pairs on Friday after the favoured candidate to success Kuroda (and a dove) pulled out of the nomination, and Japan’s PM backed a more hawk candidate. If a hawk takes the helm, the yen will likely strengthen on hopes that the BOJ will abandon YCC. But until that happens, the BOJ remain dovish – and USD/JPY continues to appear oversold to my eyes.

A bullish pinbar formed on Friday after a failed attempt to break below the 130.67 high, and we’re now looking for bullish momentum to return and taker the yen towards the 200-day EMA around 133.75.

Comment:

Yet more hawkish comments from an FOMC member and stronger-than-expected inflation report has helped USD/JPY push to a 27-dayhigh, despite the BOJ officially nominating a new BOJ Governor candidate who may not be as dovish as Kuroda.

Fed fund futures are now pricing in a ~53.1% chance of a third 25bp hike in June, which would take the terminal rate to 5.5%.

Onwards and upwards for USD/JPY?

Trade closed: target reached:

As the original target around the 161.8% / 200-day EMA has been reached (and breached) we have created a new trade idea here: