USD/JPY Back To Pre US NFP Levels, Underperforms On Crosses Amid Buoyant Risk Mood

USD/JPY surged through US trade on Thursday, as US retail sales and initial jobless claims printed better than market expectations. From near 147.20 we rallied through 149.00. The pair tracks close to 149.30 in early Friday dealings, just off late US session highs from Thursday trade. Yen lost just over 1.3% yesterday.

• Importantly, USD/JPY has now bridged the gap to levels that prevailed at the start of the month prior to the US NFP release (with that weaker print helping kick off a strong yen rally and global risk aversion).
• This extends the pair’s recovery to over 5.0% as the market prices out the likelihood of a 50bp FOMC cut in September. Levels wise for USD/JPY we have 149.77, the August 2 high, while the 20-day EMA is at 150.07. 144.29 is the Aug 7 low.
• Outside of the core yield move higher, we saw a buoyant global equity mood, with strong gains across US and EU bourses. Better US data aided sentiment in the space. Commodity indices were also higher.
• This left yen and CHF weaker on a cross basis as well. EUR/JPY is back above the 20-day EMA, last near 163.80. This narrows the gap with 164.11 - the 200-dma which has acted as solid support/resistance on several sessions in recent history - most notably across November and December last year.
• On the data front today we have weekly investment flow figures, while later on the tertiary industry index prints. Local focus is also likely to remain on the Prime Minister contenders, with views on monetary policy to be scrutinized (see this BBG link).