Off Tokyo Lows, Little Changed Into Europe

The wider defensive feel to Tuesday's NY session saw USD/JPY pull further away from the recent highs, aided by the move lower in oil futures (from fresh cycle highs), a weaker than expected U.S. ISM services survey reading and questions surrounding China's clampdown on U.S. listed Chinese entities. The move lower extended into Wednesday's Tokyo fix, with the rate bottoming out at Y110.40, before rebounding to trade a handful of pips lower on the day, just shy of the Y110.60 mark.

• Broader macro headline flow has been light since the NY close, with the USD trading ever so slightly softer vs. its major counterparts ahead of European hours (but the net moves are minimal).
• Japanese headline flow has been limited to the continued speculation surrounding domestic speculators at the upcoming Olympic games. Elsewhere, the latest Bloomberg survey pointed to expectations that Japanese PM Suga's government will unveil a fiscal support package totalling somewhere between Y20-30tn in the coming months, in order to garner support ahead of the expected election campaign in the autumn. That is in line with previously touted expectations, although some junior officials within the ruling coalition have pushed for a larger package in recent days.
• The aforementioned intraday low now provides initial support, with any sustained move through there set to open the way to the 50-day EMA (Y109.85) and the Jun 21 low (Y109.72). However, the broader bull trend remains intact despite the recent pullback, with the Jul 2 high (Y111.66) representing the initial point of resistance.
• Notable FX option expiries of note at today's 10AM NY cut include: Y109.00 ($1.1bn), Y111.00 ($1.1bn), Y111.50 ($1.1bn-USD calls)