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USD/JPY traded sideways on Monday, with the foray above Friday high failing to result in any meaningful upswing, with global Covid-19 situation & U.S. fiscal matters in focus. The rate last deals at Y103.77, little changed on the day, with bulls looking for a break above channel top at Y104.02. Above there opens Jan 11 high of Y104.40. Conversely, a slide through Jan 21 low/61.8% retracement of the Jan 6 - 11 rally at Y103.33/28 would open up the 76.4% Fibo support at Y103.02.
- BoJ Gov Kuroda told the virtual Davos forum that Japan's economy is set to return to pre-pandemic levels by the end of FY2021 or in early FY2022. He warned that a renewed state of emergency would weigh on Japan's economic recovery.
- Kyodo reported that Japan's ruling LDP plans a resolution urging the organisers to clarify their plans on holding the Tokyo Olympics.
- Japanese FinMin Aso said that the gov't looked into using tax measures to extend economic support amid the ongoing pandemic and has approved tax reform bills at today's Cabinet meeting.
- Little of note seen in the minutes from the BoJ's Dec MonPol meeting. On the data front, services PPI fell less than exp. in Dec.
- Implied USD/JPY volatilities sit at depressed levels:
- 1-month implied volatility hit a six-month low of 5.0625 this morning before edging higher. It continues to hover just above multi-month lows.
- 3-month tenor also slipped to a half-year low of 5.7625 today.
- 6-month tenor has dipped to 6.1725, its worst level since Feb, still sits just above there.
- Thursday will see the release of retail sales data out of Japan, while Tokyo CPI, unemployment & flash industrial output will hit the wires on Friday.