Yesterday USD/JPY hardly gave any signs of life. The pair touched 112.47 high, but finished the day back around the open levels. Both Japanese calendar and US docket failed to impress the market.
On Monday, USD weakness sent USD/JPY to the 3-week lows. Anyways, USD still has its three trumps – rates, tax reform and the next Fed chairman.
Trump may announce the new Fed Head by November,3. There are 5 candidates for this position. Two of them – Kevin Warsh and John Taylor - are “dollar-positive options” since they both are considered to be the hawks. Another one, Jerome Powell, has a more dovish stance on monetary policy. If Janet Yellen gets a second chance, it triggers the dollar rally. And the last but not the least, Gary Cohn, is a dark-horse candidate.
USD almost ignored today’s housing data and is still making its way to the north. The bulls now are struggling around 113.00 mark. If USD/JPY takes this level, will it threaten the 114.00 round figure? Unlikely. Now we’re waiting for Japanese export and import data. We expect USD/JPY to return to the mid-112.00 area and wait for some really good triggers.