USD/JPY is enjoying a rebound from oversold conditions as U.S. rates recover from brink of recession pricing last week, but the currency pair still needs help to rally -- particularly from the Fed and trade issues. With Mexican tariffs now on hold and weak U.S. employment data not enough to push the 10-year Treasury yield below key supports by 2% , USD/JPY is retracing the May 31, post-tariff announcement 109.15-8.27 drop.
Stock markets are rebounding because the Fed and other central banks nF9N20D01G are willing to ease if needed.
Japan's government says it will make "all policy tools" available if economic risks materialize nL4N23I2KH.
Thus USD/JPY's enjoying an oversold rebound in U.S. rates that isn't yet threatening global risk taking and yen-funded carry trades.
Of course, risk flows hinge heavily on resolving U.S.-China trade conflicts, particularly around the June 28-29 G-20 meeting nW1N22401M.
It also hinges somewhat on whether U.S. May CPI and retail sales undercut or support the rebound in U.S. yields and USD/JPY. Supportive news is needed to clear the 21-DMA and the downtrend line from 2019's high at 109.22-29 Wednesday.