USD/JPY: headed for a test of the 11 handle in Tokyo, eyes on Trump/nonfarm

Currently, USD/JPY is trading at 110.96, up 0.13% on the day, having posted a daily high at 110.99 and low at 110.77.

USD/JPY is picking up some of the pieces dropped this week from 110.28 lows to scoring a fresh high in Tokyo today with eyes on the 111.13 highs from the US session. The dollar was making a correction, s up 0.1% on the day, with positive jobless claims data, investors expecting a strong labour market report tomorrow and a recovery in US stocks.

High expectations of a good nonfarm payrolls report - Nomura

"US 10yr treasury yields ranged sideways between 2.33% and 2.37%, while. 2yr yields rose from 1.23% to 1.25," explained analysts at Westpac, noting that the Fed fund futures yields are slightly firmer, now pricing a June rate hike as a 75% chance (from 70%). "FOMC moderate Williams said two more rate hikes this year is a “sensible starting point”, allowing for three more if inflation rose further. He also said it makes sense to begin the balance sheet’s shrinkage at the end of 2017, and that it might take around five years to reach a normal size," added the analysts at Westpac.

All eyes now turn to nonfarm payrolls tonight and all the headlines from Trump meeting with Xi and his Chinse counterpart in a summit that started overnight in Florida. The summit will conclude later today. Some sentiment from that meeting has already started to cross the wires. As per Fox news report, President Trump at a dinner with President Xi said, “I can see that long-term, we are going to have a very, very great relationship and I look very much forward to it.” 

Japan’s Aso - US-Japan dialogue will also include Energy & Infrastructure

USD/JPY levels

USD/JPY: It could end up being very choppy

Valeria Bednarik, chief analyst at FXStreet explained that from a technical perspective, the upward potential remains limited according to the 4 hours chart: "The price remains below a bearish 100 SMA, currently around 111.50, whilst indicators in the mentioned time frame barely stand in positive territory with limited upward strength. The pair has  a major Fibonacci resistance at 112.00, the 38.2% retracement of the late 2016 monthly rally, with an extension above it favoring additional gains for the following sessions."