USD/JPY has taken off in the Tokyo open, eyes a reversal of NY Trump sell-off

• USD/JPY pops in Tokyo, bargain hunters cleaning up.
• The longer-term bullish trend is not yet at risk.

USD/JPY is currently on the bid in the Tokyo opening hourly sticks, with a surge from 112.36 to current highs of 112.58,  (not that the Japanese CPI data will have had much to do with the move).  

The dollar is bouncing in Tokyo as traders pick up the bargain after NY’s sell-off on Trump’s comments that were CNBC aired in a teaser interview clip where he revealed that he is not thrilled with higher interest rates.  This took the DXY off its one-year high that was scored subsequent of the Chinese authorities renewing their pressure on the Chinese yuan in yesterday’s Asian session.  

Japanese data:

Japan inflation data: National headline CPI 0.7% y/y (vs. expected 0.8%).

Meanwhile, there was a flight to Treasuries and US 10yr yields that had initially risen to 2.90% started falling during the NY session and dumped to 2.83% on the Trump noise. The two-year yields similarly fell from a decade high at 2.63% to 2.58% – (Fed fund futures yields continued to price 1 ½ more hikes in 2018). The underlying factor is that the dollar remains king, the world’s commodity currency, massively short offshore in the EMs and the Fed is on its path of raising rates in stark contrast to that of its counterparts around the globe. Hence the dollar is cheap and Tokyo knows it, taking advantage of that in thinner Asian markets ahead of European traders returning to their desks.  

USD/JPY levels

Valeria Bednarik, chief analyst at FXSreet explained that in the 4 hours chart, “technical indicators head lower within bearish territory with strong downward slopes, while the price remains far above bullish moving averages, which means that the longer term bullish trend is not yet at risk, although further downward corrective movements can’t be disregarded.”