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USD/JPY Volatility Continues to Stir Speculation of Intervention

FOREX
  • Volatility across JPY markets takes the early focus in FX, as the post-5y auction weakness in Treasury futures persists into Thursday morning. The resulting widening of the US/JN yield differential worked further in favour of USD/JPY, pushing the rate to a new recovery high of 150.78. Shortly following the print, a sharp spike in volumes saw the rate correct lower, prompting a ~75 pip slide to new lows before stabilising.
  • The price action was very reminiscent of a similar move in markets on October 17th, however the total volumes traded were considerably smaller on today's move. Recall that Kanda confirmed that the Japanese authorities will continue not to confirm intervention on a day-to-day basis, raising focus on the October 31st BoJ reserves release, at which markets will gain official confirmation of any market intervention.
  • The USD Index has gained alongside the run higher in yields. The Greenback has firmed through the Oct 13 highs, opening next resistance at the 76.4% retracement for the October downleg. The bull trigger is still someway off at 107.348, but today's strength makes a test in the coming weeks more likely.
  • Focus Thursday turns to the US advance GDP print, at which markets expect a bumper print that's continued to firm across the year, with some sell-side estimates even topping 5% for the Q/Q annualized reading. The ECB rate decision also takes focus. While no change in rates is expected, any discussion of the balance sheet will be a focus, and in particular any tweaks to bank reserve requirements.
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