What’s next? – USDJPY 15.05.18

The dollar was trading 0.23 percent higher vs the Japanese yen at 109.91 as of 05:35 GMT on Tuesday, with the greenback recovering from yesterday loses.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.19 percent at 92.64 by the time of this writing.

Ahead in the session, investors will be looking at a series of economic reports in the US, including retail sales for April and the NY Empire State manufacturing index for May at 12:30 GMT, followed by business inventories for March at 14:00 GMT. TIC net long-term transactions for March will be available at 20:00 GMT.

These reports are expected to increase volatility for the pair from the dollar’s side. However, we expect little-to-no changes on market expectations for further monetary adjustments.

Fed funds tracked by CME Group’s FedWatch tool show that market participants are currently weighing in a 95 percent probability of a rate hike in the June monetary policy meeting.

The US dollar has recently moved to the 109.50 mark, which could open the doors to the 110 level in case of an upward extension. The pair has been struggling to overcome that mark for the past weeks and even getting close to it is not a move to ignore.

Lately, this is market is likely to remain volatile and highly sensitive to interest rate and bond yields differentials between the US and Japan.