What’s next? – USDJPY 05.06.17

USDJPY

The US dollar is slowly recovering on Monday, after falling sharply on Friday as the nonfarm payrolls for May came in below market expectations and renewed speculation that the Federal Reserve might change its mind on the pace and timing for interest rate hikes this year.

The US Labor Department said 138,000 jobs were added last month, falling short from an initially expected 185,000 jobs build.

Data came in as a surprise for market participants, who are currently pricing in more than a 94 percent chance of a rate move in June.

The USDJPY was trading 110.62 by the time of this writing, adding 0.16 percent as the greenback took back some losses.

Higher interest rates support the dollar and pressure safe-haven assets such as the Japanese yen. The 110.25 mark served as a solid support for the pair and prevented a larger drawdown on Friday’s session.

While the latest jobs data was far from being positive for market participants, chances for a rate move remain considerably high as Fed officials insisted that small variations in economic reports won’t be affecting the regulator’s long-term strategy.

Market analysts are expecting a “risk on” positioning as the week presents itself loaded with key economic events that could weigh on the greenback. Fresh data in the United States will certainly be on the watch, but also the European Central Bank policy meeting and early parliamentary elections in the United Kingdom will be under heavy scrutiny.

So far, there’s plenty of support at the 110.00 level and an upward extension is still likely to take the dollar-yen pair to 111.50 without strong resistance on the way.