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Higher Yields Weigh On JPY Ahead Of BOJ Meeting

  • The Japanese Yen is one of the poorest performers in G10 to start the week, largely in accordance with higher core yields as major central bank officials push back against cut pricing in early 2024.
  • Despite the move higher for US yields, the USD index has maintained a narrow range on Monday overall, trading in very minor negative territory as we approach the APAC crossover.
  • A softer-than-expected IFO was unable to dent the Euro’s resilient feel on Monday, outperforming its major counterparts. This has seen the likes of EURJPY rise 0.80%, as well as EURGBP receiving a half a percent boost.
  • However, last week’s move lower in EURJPY reinforces the bearish theme and the recent recovery from 153.23, the Dec 7 low is considered corrective. Key short-term resistance to watch is at 157.68, the Dec 11 high.
  • A similar theme for USDJPY (+0.60%) ahead of the key risk event overnight. Bearish conditions have been reinforced and on the upside, key short-term resistance remains defined at 146.59, the Dec 11 high.
  • Our analysis aligns with the prevailing consensus, which once again foresees the BoJ keeping all key targets and YCC parameters unchanged. We anticipate that any revisions to forward guidance would likely coincide with the publication of an Outlook Report.
  • Elsewhere on Tuesday, New Zealand trade balance data and the RBA minutes are scheduled. Final CPI readings for the Eurozone will cross as well as Canada CPI data for November.

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