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Day two: potential USD/JPY trade

The most interesting aspect of the overnight US session was the four basis-point move higher in the US two-year treasury. 

JPY
Source: Bloomberg

Following on from my potential trade idea yesterday, at 54 basis points (or 0.54%) the yield is the highest since May 2011. Anyone wanting to know what is underpinning the moves in the USD of late should look here.

Fixed income traders are clearly positioning themselves for an end of QE from the Fed in October; however I feel some are also expecting more hawkish rhetoric from the Federal Reserve in tonight’s (04:00 AEST) central bank meeting.

It’s worth highlighting that while the Fed meeting will be key, US Q2 GDP (+3%yoy) and ADP private payrolls are also released in upcoming trade.

AUD/USD continues to hold up fairly well, however USD/JPY has found buyers from my potential entry point yesterday at 101.84. I continue to focus on upside for the USD over the coming weeks.

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