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USD/JPY Pulls Back Amid Lower Core Yields/Softer Energy Prices

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USD/JPY pulled lower in US trade on Wednesday, amid broadly softer USD sentiment. USD/JPY got to 154.15/20 region before recovering modestly. We trade around 154.35 in early Thursday dealings. The BBDXY fell around 0.35% to 1261.8, with lower US Tsy yields weighing.

  • Wednesday's move down in USD/JPY wasn't as aggressive as what we saw in Tuesday US trade, which, at the margin, may have sparked intervention fears. Wednesday's move was likely driven by a breach of earlier Asia Pac lows following an extremely tight trading range during that part of the session. Relatively low volumes support this theory.
  • Overall, the USDJPY uptrend is overbought, however, this is not - for now - a concern for bulls. Sights are on the 155.00 handle next. Support lies much lower at 152.00 and 151.84, 20-day EMA.
  • Lower US Tsy yields (benchmarks 5.5 to 8.5bps lower) were supported by a pullback in EU yields, with moves away from recent extremes and lower energy prices helping. US data flow was light and didn't impact sentiment greatly. We have some Fed speak from Mester and Bowman coming up this morning.
  • Locally, we have weekly investment flows data in Japan. Later on, the tertiary activity index and machine tool orders print.
  • In the FX option expiry space, we have a busy pipeline for NY cut later: Y151.85-00($3.2bln), Y153.00($4.9bln), Y153.25($1.0bln), Y153.80($980mln), Y154.00($755mln), Y154.50($898mln), Y155.00($1.0bln).
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USD/JPY pulled lower in US trade on Wednesday, amid broadly softer USD sentiment. USD/JPY got to 154.15/20 region before recovering modestly. We trade around 154.35 in early Thursday dealings. The BBDXY fell around 0.35% to 1261.8, with lower US Tsy yields weighing.

  • Wednesday's move down in USD/JPY wasn't as aggressive as what we saw in Tuesday US trade, which, at the margin, may have sparked intervention fears. Wednesday's move was likely driven by a breach of earlier Asia Pac lows following an extremely tight trading range during that part of the session. Relatively low volumes support this theory.
  • Overall, the USDJPY uptrend is overbought, however, this is not - for now - a concern for bulls. Sights are on the 155.00 handle next. Support lies much lower at 152.00 and 151.84, 20-day EMA.
  • Lower US Tsy yields (benchmarks 5.5 to 8.5bps lower) were supported by a pullback in EU yields, with moves away from recent extremes and lower energy prices helping. US data flow was light and didn't impact sentiment greatly. We have some Fed speak from Mester and Bowman coming up this morning.
  • Locally, we have weekly investment flows data in Japan. Later on, the tertiary activity index and machine tool orders print.
  • In the FX option expiry space, we have a busy pipeline for NY cut later: Y151.85-00($3.2bln), Y153.00($4.9bln), Y153.25($1.0bln), Y153.80($980mln), Y154.00($755mln), Y154.50($898mln), Y155.00($1.0bln).