No Reprieve For Embattled Yen

Participants continue to dump the yen, with spot USD/JPY taking out Feb 2, 2016 high (Y121.04) while running as high as to Y121.41. Familiar drivers are in play, with the yen battered by the prospect of widening policy divergence between the BoJ and its DM peers. Hawkish comments from Fed Chair Powell from earlier this week have helped reinforce this expectation.

• The latest upleg comes on the heels of a notable surge which took the pair through the Y120.00 mark and resulted in a brief look above Y121.00. USD/JPY RSI printed its highest levels since 2016, suggesting that the rate is heavily overbought.
• Tuesday's prince action inspired jaw-boning from Japan's Finance Minister, who underscored the importance of stability in FX markets and reminded that resultant benefits to exporters come alongside increased pressure on importers. Neither FinMin Suzuki's comments, nor moderation in crude oil prices prevented the yen from retreating on Tuesday.
• USD/JPY operates at Y121.26 at typing, 46 pips better off, after lodging new cycle highs. The next layer of resistance above is provided by Y121.69, which limited gains on Jan 29, 2016. Conversely, bears keep an eye on Mar 21 low of Y119.04.
• Focus moves to Japan's final machine tool orders (today), flash Jibun Bank PMIs, BoJ Jan MonPol meeting minutes & comments from BoJ's Kataoka (Thursday) as well as Tokyo CPI (Friday).