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Thursday's broader USD weakness dominated the impulse from a modest uptick in U.S. equities and higher U.S. Tsy yields, with USD/JPY moving lower on the day, printing lows of Y109.42 in the process. Early Tokyo trade then saw the rate push as low as Y109.36, with the previously outlined weakness in e-minis and Japanese equities resulting in some early JPY strength, before the cross backed away from early session lows. The move away from lows garnered further traction at the final Tokyo fix of the month, taking the rate as high as Y109.61, before it eased back to neutral levels. All-in-all, it has been a fairly limited round of Tokyo dealing (a 25 pip range has been observed), with the rate ~5 pips higher at typing, just above Y109.50, even with e-minis and Japanese equities still comfortably lower on the day.
- Local developments re: the widening/lengthening of the COVID state of emergency in play in areas of Japan have played out in line with broader expectations/recent press reports.
- Friday will likely see the JPY take its cues from the broader risk tone and month-end related swings.
- There is nothing in the way of notable FX option expiries to be concerned with come today's 10AM NY cut.
- Our technical analyst notes that a bearish focus dominates the pair. This follows the recent break of support at the Jul 29 low (Y109.48). The move lower marks a resumption of the reversal from early July and paves the way for an extension lower. Attention is on Y108.47, a Fibonacci retracement. Firm short-term resistance is at the Jul 14 high (110.70), a break there would alter the bearish picture.