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Greenback Gains Prompt USD/JPY To Recoup Losses

JPY

USD/JPY unwound its initial sell-off on Thursday, eking out some gains at the end of the day, extending its winning streak to five consecutive days. Post-ECB greenback strength facilitated recovery, with Eurozone policymakers deemed not hawkish enough.

  • Note that the pair's RSI remains above 70, pointing to overbought technical conditions, although the spot rate returned below its upper Bollinger band on Thursday. Should the RSI pull back under the 70 threshold, bears be on alert for any further signs of the rate topping out.
  • In the options space, USD/JPY 1-month risk reversal snapped a four-day streak of gains Thursday. But calls remain favoured over puts and the risk reversal still operates near its one-month highs.
  • The yen was the second best G10 performer Thursday amid weak performance from global equity markets and a rebound in the VIX index, yet relative interest-rate dynamics prevented it from beating the U.S. dollar.
  • Spot USD/JPY has added 10 pips this morning and last deals at Y134.46. Bullish focus falls on the psychologically significant number of Y135.00 and a break here would bring Jan 31, 2002 high of Y135.15 into play. Bears look for a retreat past Jun 7 low of Y131.87.
  • Monthly PPI data is the only point of note on the local economic docket today. Worth adding that PM Kishida will make comments on the "Free and Open Indo-Pacific" at a regional security conference in Singapore.
  • Next week's highlights include BSI survey (Monday), industrial output (Tuesday), core machine orders (Wednesday), trade balance (Thursday) & BoJ monetary policy decision (Friday).
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