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JPY Plummets as Markets Opens Door to Y130

FOREX
  • JPY weakness was evident throughout the Asia-Pac session as well as the early European morning, but gains for USD/JPY and EUR/JPY really accelerated following the publication of an interview with former top currency chief Sakakibara (also known as Mr Yen), who stated that Japanese authorities do not need to take any action against current FX weakness, but should begin to intervene should USD/JPY cross Y130.00. This is considerably higher than the market's perceived tolerance band of Y125.00 for the pair, and helped spur fast money sales of the JPY vs. both the USD and EUR.
  • The market moves open the door to the next key psychological level at Y130.00 - a level last crossed in 2002. Technical signals all point to a slowdown in gains for the pair in the near-term, with the RSI indicator now flashing at its most overbought level since 2001.
  • As such, no surprise to see JPY at the bottom end of the G10 pile, with the greenback and EUR among the strongest. Markets continue to reshuffle monetary policy expectations, with Eurozone money markets now pricing over 50bps of rate hikes from the ECB by the December rate decision.
  • Focus turns to US wholesale and retail inventories data as well as an appearance from the BoE governor Bailey, who speaks on the economy just a few hours after S&P downgraded their UK growth view, with accelerating inflation crimping on disposable income.
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