USD/JPY bulls pulling out at hourly resistance near 128.60

At 128.59, USD/JPY is higher by 0.17% and hs ranged between a low of 128.26 and 128.69. The USD/JPY was supported by the US yield rising overnight after Federal Reserve chair Jerome Powell tightened the screw in his remarks in Washington DC as part of the IMF and World Bank spring meetings.

He signalled again that a 50 bp hike is on the table for May. He also said that it was appropriate to speed up and front load tightening. However, he did not discuss the policy path beyond that. With that being said, it has driven analysts at Nomura to predict that the Fed will actually raise rates by 75 basis points at each of their meetings in June and July. After a 50 bps move in May, that would push the fed-funds rate to a 2.25%-2.5% range by the end of July.

US bond yields rallied again and the curve bear flattened after the comments from Fed’s Powell who commented that a 50bp hike is on the table for the upcoming FOMC meetings. The 2-year government bond yields rose from 2.57% to 2.68%, and 10-year government bond yields climbed from 2.82% to 2.91%.

As for data, the US Weekly Initial Jobless Claims were close to expectations at 184k (estimates of. 180k). Meanwhile, Continuing Claims undershot expectations again at 1.417m (est. 1.459m). However, the US Philadelphia Fed Manufacturing Index was considerably weaker than expected. The index fell to 17.6pts in April (down from 27.4 in March) and well below expectations. 

With regards to the value of the yen, the Japan finance minister Suzuki spoke in recent trade and said that he confirmed with Yellen that the US and Japan will communicate closely on FX. They spoke in particular about the recent USD/JPY moves. He explained to Yellen that recent yen falls have been rapid and confirmed with US Treasury Secretary Yellen to adhere to G7 agreement on FX.