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FOREX: Yen Consolidates Weakness Post Dovish BOJ Rhetoric, NZD Outperforms

FOREX
  • Dovish remarks from BOJ Deputy Governor Uchida overnight stoked a strong reversal lower for the Japanese Yen, and despite a moderate pullback, USDJPY trades close to the 147 handle, consolidating near 2% gains on the session. 
  • As a reminder, BOJ’s Uchida stated that rates won't be raised if the market is unstable, and the rate path will shift if market moves affect the economic outlook. This offset earlier comments that rates would continue to rise if projections unfolded as expected.
  • The latest USDJPY recovery - a correction - is allowing an oversold condition to unwind and initial resistance is seen at 149.77, the Aug 2 high.
  • NZDJPY stands out as the key outperforming cross, rising over 3% on the day. This follows the earlier Q2 employment data beat, which prompted RBNZ easing expectations for next week's meeting considerably diminish.
  • NZD/USD remains up 1% and is back above 0.6000, while AUDNZD (-0.45%) continues to grind lower, hovering around the 1.0900 mark.
  • Higher core yields and the associated pressure on the yen has also filtered through to the Swiss Franc, with both EURCHF and USDCHF rising around 0.75%. 
  • Other major pairs such as EURUSD and GBPUSD remain in very tight ranges as the action remains on the low yielders that have been most sensitive to carry unwinds in recent sessions.
  • Canada Ivey PMI and BOC minutes highlight a relatively quiet economic calendar on Wednesday. Despite remarks not being expected, it is worth noting that Boston Fed President Susan Colllins will travel to Rhode Island to meet with a wide range of participants in the economy.
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