USD/JPY rises above 112, bottom formed?
Hawkish comments from 2 non-voting Fed members that a rate hike as early as April or June supported the US dollar overnight. Comments from BoJ deputy governor Nakaso also suggest that more rate cuts remain an option, though possibly not in April. Nevertheless, firmer equity markets and improving risk sentiment pushed USD/JPY above 112 with stops being triggered. While it is encouraging to see prices moving higher, we see more resistance towards 112.23. Selling interest from exporters around the 114 region also lies ahead. Indicators from the options market imply that the demand to hedge against further strength in the JPY has declined. Nevertheless, the options market is pricing that over the next one month, USD/JPY is likely to be in a range of 109.50 to 114. Technically, only if prices break and close above 115 will we have confidence to say that a bottom has been formed.