USD flows: USD continues recovery after data

The USD has continued to recover in early US trading following the jobless claims data and the Philadelphia Fed survey, even though both were slightly on the weak side of expectations, with claims falling less than expected and the Philly Fed index falling slightly more.

There has been no significant movement in US yields after the data, but USD/JPY has popped around another 40 pips higher to 155.20, while EUR/USD has edged another 10 pips lower to 1.0865. These moves don’t look to be based on fundamentals and we see them as corrective and technical. USD/JPY could still have scope to 155.60-156.00 and EUR/USD to the low 1.08s as the technical correction plays out, but USD/JPY in particular looks to have a lot more scope on the downside based on the correlation with yield spreads.