USD/JPY catches a bounce back above 150.00 for now

The volatility swings are continuing in the pair and the latest move here is part of that. Treasury yields remain on the softer side with 10-year yields at 4.058%, so this isn’t really tied to that. Looking at the chart, the bounce does come after price tested the 61.8 Fib retracement level of the swing higher this year at 148.53 though.

In spite of the bounce, it’s hard to call a bottom just yet for the pair. The Fed was more dovish yesterday and if you’re looking to fade the yen surge following the BOJ, I would argue other yen pairs might be a better option. For example, CHF/JPY is catching a bounce off 170.00 and nudging back above its 200-day moving average. GBP/JPY is also holding at the same key level though the BOE is a risk factor to watch out for later.

Going back to USD/JPY, there is still much work to do on the part of buyers to convince of a stronger rebound. The near-term chart shows that the 100-hour moving average is only seen at 152.90 currently. So, there is some ways to go for buyers to regain back some semblance of near-term control.

The daily chart also sees the 200-day moving average (blue line) only come in at 151.62. So, keep below that and sellers will also continue to stay in the driver’s seat.

That said, the thing to consider with any dollar softness with regards to the Fed is that much of it has already been priced in.

A September rate cut is fully priced in with ~72 bps of rate cuts for the remainder of this year. Looking out to Q1 next year, traders are seeing ~113 bps of rate cuts in the next five meetings.

So, that is definitely something to keep in mind when chasing any further dollar softness in the bigger picture ahead of the US jobs report tomorrow.

This article was written by Justin Low at www.forexlive.com.