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USDJPY Consolidates Below 142.00, Uptrend Remains Firmly Intact

JPY
  • The main drivers over the past week for the Japanese Yen have been the widening yield differentials with the hawkish-to-expectations Fed and ECB meetings strengthening carry dynamics. The somewhat more optimistic risk backdrop has also been benefitting the upward trajectory for the notorious risk on long cross/JPY trade which has been most visible for the likes of GBPJPY and AUDJPY over recent sessions.
    • After breaking the top of a bull channel drawn from the Jan 16 high last week, the pair has confirmed a resumption of the uptrend, maintaining the bullish sequence of higher highs and higher lows. This opens 142.25 next, the Nov 21 2022 high.
  • There have been no recent developments re verbal interventions. The party line remains the same that Japan will closely watch currency moves and won't rule out any options, last laid out by a top currency diplomat on May 30 after financial authorities met in the wake of the yen's slide to a six-month low against the U.S. dollar.
  • Also of note over the weekend, Japan’s top currency official Masato Kanda says he welcomes Japan’s removal from the US’s monitoring list for trading partners whose currency practices and macroeconomic policies should be closely watched, according to the latest US FX report published at the weekend.
  • From the domestic policy perspective, we highlight our most recent BOJ review, published earlier today, for the thoughts on potential tweaks to yield curve control going forward. Document here.
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