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FOREX: USD/JPY Rally Undermined by Softer Stocks

FOREX
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  • GBP proved to be the poorest performer in G10 through the Friday close, extending the losing streak for GBP/USD on both a daily and a weekly basis. A seventh consecutive week of losses for the pair outstrips the duration of the sell-off that followed both the Brexit referendum as well as the onset of the COVID pandemic in 2020 - the last longer weekly losing streak came in 2010, where 8 consecutive lower weekly closes made for a total loss of 923 pips (vs. 741 pips in seven weeks of losses this year).
  • JPY gained against all others, helping USD/JPY return back below the Y155.00 as part of corrective weakness posted off the November high. For now, the underlying bull trend remains intact, but Friday's price action proves it won't be one-way, however near-term weakness could provide opportunity for those pursuing a buy-on-dips strategy.
  • While US yields rose across the curve on solid economic data, softer equity markets undermined USD/JPY, particularly in light of Powell's hawkish comments on Thursday evening, in which he noted the near-term strength of the US economy - thereby reducing the odds of a further rate cut in December.
  • Focus across the coming week turns to the UK CPI print - ahead of which markets price only a small chance of a further 25bps rate cut in December - as well as the Canadian and Japanese equivalent. Central bank decisions include Turkey, Hungary and South Africa.
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  • GBP proved to be the poorest performer in G10 through the Friday close, extending the losing streak for GBP/USD on both a daily and a weekly basis. A seventh consecutive week of losses for the pair outstrips the duration of the sell-off that followed both the Brexit referendum as well as the onset of the COVID pandemic in 2020 - the last longer weekly losing streak came in 2010, where 8 consecutive lower weekly closes made for a total loss of 923 pips (vs. 741 pips in seven weeks of losses this year).
  • JPY gained against all others, helping USD/JPY return back below the Y155.00 as part of corrective weakness posted off the November high. For now, the underlying bull trend remains intact, but Friday's price action proves it won't be one-way, however near-term weakness could provide opportunity for those pursuing a buy-on-dips strategy.
  • While US yields rose across the curve on solid economic data, softer equity markets undermined USD/JPY, particularly in light of Powell's hawkish comments on Thursday evening, in which he noted the near-term strength of the US economy - thereby reducing the odds of a further rate cut in December.
  • Focus across the coming week turns to the UK CPI print - ahead of which markets price only a small chance of a further 25bps rate cut in December - as well as the Canadian and Japanese equivalent. Central bank decisions include Turkey, Hungary and South Africa.