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FOREX: USD/JPY Sell-off Extends, EUR Bid on Schnabel

FOREX
  • USD/JPY's sell-off has extended into a second session with today's pullback low at 151.43 marking a break below the 200-dma of Y152.00 and, more significantly, the 50-day EMA of 151.56. A close at current or lower levels confirms a reversal of the election-triggered rally, with Trump's tariff threats a key driver on top of the building expectation for a BoJ rate hike at the December meeting (OIS-markets see a 25bps hike near 65% priced).
  • This week's price action also shows well that USD/JPY can shrug off US equity strength, should risk-off be pervasive elsewhere (particularly via European stock markets).
  • The greenback is the poorest performer in G10 FX, with the USD Index showing well through yesterday's lows thanks to both the strengthening JPY as well as a better-bid EUR, which gained on the back of a somewhat hawkish appearance from ECB's Schnabel. She firmed her language on the ECB rate path, stating that the room for further rate cuts is "limited". EUR/USD neared first resistance at the Tuesday high of 1.0545 before fading.
  • The MNI Chicago PMI data due later today is the schedule highlight - markets expect the figure to improve to 45.0 from 41.6, but still signalling contraction. The secondary read for US GDP is unlikely to press prices in either direction, with the weekly jobless claims data to take precedent, brought forward by one day due to the Thanksgiving holidays from tomorrow.
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  • USD/JPY's sell-off has extended into a second session with today's pullback low at 151.43 marking a break below the 200-dma of Y152.00 and, more significantly, the 50-day EMA of 151.56. A close at current or lower levels confirms a reversal of the election-triggered rally, with Trump's tariff threats a key driver on top of the building expectation for a BoJ rate hike at the December meeting (OIS-markets see a 25bps hike near 65% priced).
  • This week's price action also shows well that USD/JPY can shrug off US equity strength, should risk-off be pervasive elsewhere (particularly via European stock markets).
  • The greenback is the poorest performer in G10 FX, with the USD Index showing well through yesterday's lows thanks to both the strengthening JPY as well as a better-bid EUR, which gained on the back of a somewhat hawkish appearance from ECB's Schnabel. She firmed her language on the ECB rate path, stating that the room for further rate cuts is "limited". EUR/USD neared first resistance at the Tuesday high of 1.0545 before fading.
  • The MNI Chicago PMI data due later today is the schedule highlight - markets expect the figure to improve to 45.0 from 41.6, but still signalling contraction. The secondary read for US GDP is unlikely to press prices in either direction, with the weekly jobless claims data to take precedent, brought forward by one day due to the Thanksgiving holidays from tomorrow.