The squeeze on the JPY shorts is on after a very ugly US ISM Manufacturing report (49.0 vs. 51.0 expected and 50.7 last month, particularly surprising after a very strong Chicago PMI on Friday). The reaction was quick and intense as it deservedly derails the market theme that the Fed is headed for a tapering of asset purchases sooner rather than later. The technical implications of a move back through 100.00 in USDJPY were also unmistakable. From here, if US data remains weak through the end of the week and bonds remain on the bid and risk remains off, the USDJPY correction could take us to at least the Ichimoku daily cloud level, which rises to about 97.40 tomorrow. Still – it’s a nervous market and conflicting data means two-way volatility is the danger.
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