Suga Out

After a sedate start activity picked up during the Tokyo lunch break as Japanese PM Suga noted that he would not stand for election as LDP Party head in the upcoming leadership vote, effectively ceding his position as PM at the end of his current term. Suga had of course been struggling in the opinion polls, with the LDP Party seemingly worried that a continuation of his leadership may harm their chances in the upcoming general election (please see earlier bullets for more colour on LDP leadership candidates and the situation). After initially moving down to fresh session lows at Y109.80 on the news, USD/JPY pushed to session highs of Y110.07, before settling back around the Y110.00 mark. The Nikkei 225 surged, adding ~2% on the news, with hopes re: better management of the COVID crisis and the potential for fresh policy moves supporting domestic equities.

• A quick reminder that the cross was stagnant on Thursday, with little in the way of forthcoming macro catalysts.
• Friday's NFP print will of course be key re: the direction of the cross into the weekend.
• Out technical analyst notes that despite recent gains, the pair still appears vulnerable and attention is on the key support at the Aug 4 low (Y108.72). A breach of this level would strengthen the bearish case and open the way towards Y108.47, a Fibonacci retracement. For bulls, key near-term resistance remains at the Aug 11 high (Y110.80). A break there would expose the Jul 2 high (Y111.66).