On Lookout For Intervention Talk After USD/JPY Approached Y145.90 During Holiday

USD/JPY advanced amid holiday-thinned liquidity Monday, with participants eager to test Japanese officials' resolve. The rate moved further into territory of heightened intervention risk (>Y145) and topped out at Y145.80, just 10 pips shy of the multi-decade high printed on Sep 22, when the authorities took action to prop up the yen.

• Negative risk sentiment and some cautious notes in Fedspeak may have shielded the JPY from deeper losses. Benchmark indices were generally lower, while the VIX added ~3.5%. Risk-off headlines from over the weekend contributed to the cautious mood.
• Cash trading in JGBs and U.S. Tsys was closed, with Japan and the U.S. observing public holidays. That said, the yield on 10-Year JGBs finished above the BoJ's 0.25% cap last Friday, while yesterday core global FI markets faced some pressure from UK gilt & European fiscal matters.
• Still, USD/JPY implied volatilities remain comfortably off recent highs. One-week tenor sits at 10.8%, having pulled back from the Sep 15 cyclical high of 18.15%.
• The spot rate last trades flat at Y145.72. Familiar technical contours are in play, with bullish focus falling on Sep 22 high/2.764 proj of the Aug 2 - 8 - 11 price swing at Y145.90/146.03. Bears look for a retreat towards Sep 22 low of Y140.36.
• Japan's BoP current account balance is expected to have flipped into a deficit of Y56.7bn in August from a surplus of Y229.0bn recorded in July. Separately, Eco Watchers survey for September may show slight improvement in both current conditions and outlook.