USD/JPY drops to 113.50 and rebounds sharply, rising back above 114.00
- USD dropped as US bond rise but then reversed.
- JPY gained momentum then retreated as Wall Street erased losses.
- Trump to announce Powell as next Fed Chief, tomorrow NFP
The USD/JPY pair dropped quickly to 113.51 amid some disappointment from the details of the tax reform proposal from Trump’s administration. Afterward, it bounced to the upside, recovering almost all the lost ground.
Tax, Fed and NFP
The yen rose sharply during the American session, even against the US Dollar after some details of the tax reform become public. The Japanese currency rose on the back of the slide in equity prices and a rally in bonds. It lost momentum during the last hours as Wall Street rose back into positive territory and bond yields moved back to the upside. USD/JPY climbed back above 114.00.
Markets await now US President Trump nomination for Fed chair. Jerome Powell is likely to be the next Chairman. If Trump surprises with a different name, markets could move sharply, but if he precedes as expected, it could be a non-event.
Traders are getting ready for tomorrow’s NFP. After the positive tone of the ADP employment report, expectations about an upbeat number increased. Average forecasts point to an increase of 312K in payrolls.
Technical levels
To the upside, the area around 114.30 continues to be a key barrier in the short term. The US dollar needs to rise above and hold in order to open the doors to further gains. While if it remains below, price is likely to move sideways.
To the downside the immediate support is seen at 113.50/55 (daily low), followed by 113.20 and 112.95 (weekly low).