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JPY Rally Slows, But Trend Direction is Still Higher

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  • The week's JPY rally persisted well through the European morning, pressing USD/JPY through the Y152.00 handle for the first time since early May, marking a total correction off the cycle highs of 1,000 pips. The aggressive short covering-triggered rally pressured EUR/JPY, NZD/JPY and AUD/JPY to new pullback lows.
  • A strong set of US growth numbers briefly interrupted the one-way traffic in the JPY, as advanced GDP data for Q2 came in ahead of expectations. The stabilization above the lows allows the near-term oversold condition in USD/JPY to unwind.
  • Outside of JPY, CHF has extended recent outperformance, as soft global equities and JPY volatility undermines the carry trade dynamics that have dominated across the first half of 2024. USD/CHF broke to a new low and through the 0.88 handle in the process.
  • Focus for Friday turns to Tokyo CPI for July - one of the last looks at inflation momentum in Japan ahead of next week's BoJ decision - at which markets continue to speculate over the possibility of a further rate hike from the Bank of Japan. A 10bps hike from 0.1% is more than 50% priced by markets, but a hot CPI print for Tokyo could help bed in this pricing further. The ECB's inflation expectations survey is also due, ahead of June personal income/spending and PCE price index numbers from the US.
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  • The week's JPY rally persisted well through the European morning, pressing USD/JPY through the Y152.00 handle for the first time since early May, marking a total correction off the cycle highs of 1,000 pips. The aggressive short covering-triggered rally pressured EUR/JPY, NZD/JPY and AUD/JPY to new pullback lows.
  • A strong set of US growth numbers briefly interrupted the one-way traffic in the JPY, as advanced GDP data for Q2 came in ahead of expectations. The stabilization above the lows allows the near-term oversold condition in USD/JPY to unwind.
  • Outside of JPY, CHF has extended recent outperformance, as soft global equities and JPY volatility undermines the carry trade dynamics that have dominated across the first half of 2024. USD/CHF broke to a new low and through the 0.88 handle in the process.
  • Focus for Friday turns to Tokyo CPI for July - one of the last looks at inflation momentum in Japan ahead of next week's BoJ decision - at which markets continue to speculate over the possibility of a further rate hike from the Bank of Japan. A 10bps hike from 0.1% is more than 50% priced by markets, but a hot CPI print for Tokyo could help bed in this pricing further. The ECB's inflation expectations survey is also due, ahead of June personal income/spending and PCE price index numbers from the US.