USD/JPY Nearing Y114.00 Again

The combination of the previously outlined call between Messrs Yellen & Liu He, in addition to U.S. tech giant Facebook boosting the size of its share buyback scheme, provided a modest boost for risk appetite during Tokyo dealing. This left USD/JPY the best part of 30 pips higher on the day as the Nikkei 225 outperformed, just shy of Y114.00, although a real test of the figure was not forthcoming.

• Local news flow remains relatively light, headlined by PM Kishida noting that he plans to draw up his economic policy proposals in November (there is the small issue of the upcoming lower house elections to contend with, which will be held over the coming weekend). Kishida's comments pointed to focus on social security, digital garden cities and public sector pay.
• Our technical analyst notes that the recent USD/JPY dips are considered corrective and bullish trend conditions remain intact. A recent key bullish technical development has been the confirmed breach of a long-term trendline drawn off the Dec 1975 high (at Y113.41). The trend higher has accelerated, and momentum and MA studies continue to point north. Attention is now on a Fibonacci projection (Y114.99). Initial firm support is seen at the Sep 30 high (Y112.08) and a recent breakout level.
• A continued uptick could bring $1.1bn of FX option expiries with a strike of Y114.50 into play at today's 10AM NY cut.