USD/JPY bears yet to emerge within daily resistance to guard 131.00

• USD/JPY sits at daily resistance, consolidating Friday's rally. 
• The US dollar turned heavily bid on Friday following NFP. 

At 103.86, USD/JPY is starting out the week where Friday left off, in the green. The US dollar ended last week firmly bid following a tight US labour market. Investors got back behind the Federal Reserve trade in anticipation of an aggressive path of interest rate hikes.

The US Nonfarm Payrolls increased by 390,000 jobs last month, the Labor Department said in its closely watched employment report on Friday, way exceeding the forecasts or around 325,000 jobs in May. 

''The May report supports the view that while the labour market remains firm, it continues to gradually slow,'' analysts at TD Securities said. ''We think today's report does not change the calculation for the Fed, supporting their inclination to front-load interest rate hikes until it reaches a more neutral stance by the fall.''

''This report will do little to change the price action in the FX space, but it does mean that the better the data, the more difficult that a pause or reduced pace of tightening later this year becomes. The upcoming US CPI report and MoM reading will be far more important for broad USD dynamics.

Core prices likely stayed strong in May, with the series registering a second consecutive 0.5% MoM increase. A drag on inflation recently, we now expect used vehicle prices to be a contributor, advancing for the first time in four months. We also look for continued momentum in airfares and shelter inflation. Our MoM forecasts imply 8.4%/5.9% YoY for total/core prices.''

Meanwhile, JPY's net short positions have fallen for a second week, though they remain elevated. Data show that Japan has held a current account surplus for two consecutive months. Stronger inflation data in Japan keeps traders watchful for a change of tact at the Bank of Japan with respect to its YCC policy.

''The BoJ currently appears steadfast that it will not budge from its YCC control policy that is aimed at preventing the 10 year,'' analysts at Rabobank had previously argued.

''JGB yield from moving beyond 0.25%. However, if US yields push higher and encourage further upside in USD/JPY, the costs of this policy in terms of currency weakness could prove to be greater than the benefits.  This explains why the market is likely to continue to suspect that the BoJ could do a policy U-turn in the coming months.''

''A policy change could take the shape of widening the fluctuation band for the 10-year yield or targeting a different maturity with YCC.  Whether or not the BoJ is forced to make a policy change will likely depend on the direction of US yields which will have a bearing on USD/JPY as well the build-up of domestic pressure.''