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USD/JPY Tests Below 138.00, But Yen Lags Broader USD Weakness

JPY

USD/JPY moves towards 139.00 were faded post the Asia close on Thursday. Late in NY trade we dipped sub 138.00, but sit just above this level in early Friday Asia Pac dealings. Yen lagged broader USD weakness, with the currency gaining 0.33% for Thursday's session against a 0.68% dip in the BBDXY. Higher global equities and commodity indices aided higher beta plays against the yen.

  • Technically, the focus remains on downside targets for USD/JPY - with scope for an extension towards 137.36, a Fibonacci retracement and 137.22, the 4.0% 10-dma envelope. Initial firm resistance is at 140.27, the 50-day EMA.
  • US yields retraced further in Thursday trade, 10yr US swap rates back to 3.48%, a 32bp decline versus closing levels at the end of last week. Japan yields are proving stickier though, with the 10yr swap rate ending yesterday at 0.675%, just below recent highs.
  • There has been some speculation of a YCC tweak at the July BoJ meeting. See this piece from late yesterday, where the MNI policy team weighs in on the issue.
  • On the data front today, we have the final IP readings for May, along with capacity utilization.
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