The dollar found some love from its multi-week lows yesterday as another Fed speaker was in the news, but this time suggesting that at some stage it will become important for the Fed to discuss plans to tighten its asset purchase programme. Fed vice chair for supervision, Randal Quarles signalled he’s open to start the taper debate if the economy remains strong, though rates hikes are still a long way off.

It seems there is certainly more debate at the Fed than the “not thinking about thinking” about monetary tightening that Chair Powell characterised as the Fed’s stance last year, but then this is only natural as the recovery builds and emergency monetary policies are needed less. With the June FOMC meeting up in a few weeks, hopes will increase for more hints at taper talk, though the Jackson Hole symposium in August is being targeted by some market observers as the potential ideal time for more concrete signals.

US stocks closed modestly higher with consumer discretionary and communication services leading the way, while the Russell 2000 index of small caps climbed 2%, outperfoming the other major US indices. Asian stock markets are choppy with China faring slightly better after Washington and Beijing held their first trade talks since the election of President Biden. European bourses are set to open in the green, as they generally hover at the highs.

There’s a slew of US data today, with the initial jobless claims getting some focus to see if the ongoing improvement continues in the job market. This weekly data is still some way from the pre-pandemic levels and the surprising labour shortage and struggle to find workers in the US may be a story to unfold which would have implications for the economic recovery and outlook .

USD/JPY unusually quiet

With just two exceptions, we have to go back to 1975 to find a quieter month for USD/JPY. US yields have been quiet and rangebound, which have historically been a driver of this pair. The weekly chart shows a symmetrical triangle playing out with prices trading above a Fibonacci level at present. This pattern is a continuation pattern so there should be a breakout in the direction of the underlying trend, which would be bullish in this case and target the May high at 109.78 ahead of this year’s high at 110.96.

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