This week the USD JPY confirmed last week’s closing price reversal bottom with a follow-through rally to the upside. The primary catalyst behind the Dollar/Yen rally was the interest rate differential. Treasury Bond yields rose this past week while Japanese rates held steady. The increased spread helped draw investors into the Dollar.

The USD JPY lost ground during the Asian trading hours Wednesday, driving the market closer to the “intervention bottom” at 82.88.

The primary force driving the U.S. Dollar lower was the Bank of Japan’s quarterly survey of business sentiment which showed a better-than-expected improvement in a key index known as the Tankan survey.

The U.S. Dollar continued to mount its strong recovery against the major currencies on Thursday. The Dollar Index rose sharply, led primarily by a strong gain in the Dollar/Yen and reasonable advances against the commodity-linked currencies.

The June E-mini S&P 500 followed through to the upside Tuesday night confirming the daily closing price reversal bottom formed earlier in the day. Based on the current short-term formation, traders should watch for a 2 to 3 day retracement with 1105.75 to 1122.00 the next possible upside target.