USD/JPY jumps to one-month high of 112.07, is this a BIS rally?

The Dollar-Yen pair jumped to a one-month high of 112.07, ignoring the weak US data and flatter yield curve as investors fear the Fed may continue to push forward with policy normalization as suggested by the Bank for International Settlements (BIS).

The key measures of the treasury yield curve dropped to the lowest since 2007 on Monday as investors switched to the long-end of the curve following the release of the dismal US durable goods orders data and regional manufacturing data.

The dollar did suffer minor losses, but quickly regained poise, indicating the investors do not see Fed deviating from its policy normalization plans despite weak data. Investors also fear that Fed Chair Yellen would reiterate her hawkish stance last this week.

BIS asks central banks to go ahead with the great unwind

Over the weekend, the BIS asked major central banks to go ahead with the policy normalization, given the global economy looks stable, while the ultra easy policy has largely failed to boost inflation. The Fed’s decision to maintain the outlook for three rate hikes earlier this month also suggests the central bank is no longer as data dependent as it used to be.

USD/JPY Technical Levels

The spot was last seen trading around 111.95 levels. A break above 112.53 (38.2% Fib R of Dec high - Apr low) would open up upside towards 112.60 (Jan 17 low) and 113.00 (zero levels). On the downside, breach of support at 111.81 (session low) would expose 111.34 (50-DMA) and 111.00 (zero levels).