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Lower Core Yields Drives USD/JPY Lower

JPY

Yen gained just over 0.50% for Monday's session, only trailing NOK in terms of top gainers against the USD for the session. We got close to 148.50 in NY trade, but sit in the 148.65/70 in latest dealings. The yen benefited from a pull back in core yields across EU and US markets.

  • Recent highs in the pair come in around the 149.75 region, while the 20-day EMA is also close to this region, around 149.80. Focus on the downside will be Nov 21 lows at 147.15, a break sub this level would cancel the reversal pattern and instead open 146.38, trendline support drawn from the Mar 24 low.
  • The yen benefited from lower EU core and US yields. German fiscal headlines and Lagarde talking about looking at PEPP reinvestment soon aided the move, while Treasuries continued to rally once 2Y and 5Y supply had been absorbed relatively smoothly. The US 10yr is back to 4.39%.
  • The latest MNI piece from our Tokyo policy team, late yesterday, notes economic outlook concerns are weighing on the potential for an April exit next year from easy policy settings (see this link). BoJ Governor Ueda also reiterated (before parliament yesterday) that the central bank cannot sufficiently foresee the 2% inflation target yet.
  • The local data calendar is empty today but later this week, capex and jobless figures will be in focus, particularly around shaping the BoJ outlook into early 2024.
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