The US dollar has seen a lot of action in early Friday trading, as the jobs report came out much hotter than anticipated. As yields rose, the pair rallied but has since settled back down.
USD/JPY
The US dollar has been all over the place during trading here on Friday as the jobs report came out much hotter than anticipated, and even the previous months were revised upward. That has people thinking the Fed is going to continue to be hawkish, and quite frankly, I think that's true.
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We are at an area that has been support a couple of times in the past in the dollar against the yen pair, so I am watching this very closely. This might be, for me at least, where the rubber meets the road and I start pulling out of my longer-term positions. We'll just have to wait and see. The trend line has been broken, but the great thing about trend lines is you can draw them pretty much anywhere, so I only put so much credence into that.
Support Defense and Liquidity Concerns
A bounce from here could keep us somewhat range-bound for a while, and with the interest rate differential only widening at this point, I think you have a situation where you could see a little bit of a pushback against the Bank of Japan. That was the initial reaction. Since then, we've seen a drop.
Hard to tell what to read out of that. It's interesting that there was a pushback, but part of this could be a lack of liquidity. It's non-farm payroll Friday on a 3-day weekend coming up, so hard to believe that everybody was at the desk to begin with. With that being the case, I'm watching this area very closely and determining my next couple of months in this currency pair.
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