JPY: Will Corrective Sell-Off Continue?

CNH/JPY is poised for its fourth week of losses as its pullback from Apr 20 cycle high accelerates, with yuan facing intensifying headwinds and yen finding some poise.

• China's ultra-strict methods of COVID-19 containment are wreaking havoc on the economy and ramp up pressure on the authorities to maintain easing policy bias.
• A streak of firmer-than-expected yuan fixings from the PBOC failed to arrest redback depreciation to any significant degree, in the broad scheme of things.
• Meanwhile, the yen's policy-driven retreat has lost steam this month and USD/JPY moved into consolidation mode amid stabilisation in U.S. Tsy yields.
• But yen sales today have allowed CNH/JPY to move away from a two-month low of Y18.71 printed on Thursday, as the rate came close to testing the floor of a descending channel drawn off Apr 20 high.
• The rate last trades at Y18.91, up 11 pips on the day, with bulls looking for a rally towards channel top at Y19.29. Conversely, a fall through channel floor at Y18.62 would give bears hope for a deeper sell-off.
• Note that the Apr 20 inflection point roughly coincides with the RSI's pullback below the 70 overbought threshold. The index continued to slide thereafter, testing the boundary of oversold territory earlier this week.