Don’t look now but USD/JPY is up nearly 400 pips since it hit swing lows nearly 10 days ago. The pair is forming a classic V-shaped bottom after being grossly oversold. Despite lackluster US economic data, traders are betting that the Fed will maintain its hawkish stance and will guide to confirm that a December rate hike is on track.
US yields have also expressed that sentiment as they rose at their fastest pace since November.
Tomorrow’s FOMC statement could be the make or break moment for the pair. If the Fed reaffirms that a rate hike is a possibility USD/JPY could explode beyond 112.00 and could even push through the key resistance of 112.50 triggering massive short covering rally as a result.
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