USD/JPY inter-markets: 105.00 back on track?

USD/JPY sunk nearly 2% following today’s horrible results from US Non-farm Payrolls, where the economy has added only 38K jobs in May vs. 164K initially forecasted, the worst job creation since September 2010. The results prompted spot to re-test the area below the 107.00 handle (levels last seen in early May), once the onset of the nascent USD rally.

Today’s results had a huge negative impact on expectations of a rate hike by the Federal Reserve at the June meeting, reflected by a drastic drop in US yields - mainly in the lower end of the curve – and Fed Fund contracts, all morphing into a marginal probability of higher rates next month when tracked by CME Group’s FedWatch tool (currently at 3.8%).

While market participants continue to digest today’s results in the US docket, the focus of attention will shift to the speech by Chief Janet Yellen on Monday at the World Affairs Council of Philadelphia on ‘Economic Outlook and Monetary Policy’, keeping the dollar under further scrutiny.