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USDJPY Declines 2.65%, Briefly Trades Below 142.00 Amid Ongoing BOJ Speculation

FOREX
  • Thursday’s moves in currency markets were dominated by the Japanese Yen strength. Initial JPY demand was triggered by the cumulative effect of appearances from BoJ's Himono and Ueda, both of which strongly suggested that the BoJ are already considering how to exit NIRP once economic conditions justifying a policy switch are met. A poorly received longer-end JGB auction added to the early JPY impetus.
  • Throughout the session, JPY dips remained shallow, and the path of least resistance remained lower for USDJPY as markets continued to speculate over the BOJ and liquidity was tested ahead of tomorrow’s US employment report. Session ranges were already notable through to the Europe close with USDJPY breaching below 144.50 from an overnight high of 147.32. However, a sharp bout of further weakness for the pair was triggered as the sell-off gathered momentum, with a confluence of technical levels being breached amid very thin trade. Bloomberg recorded the low as 141.71, an impressive 3.8% from the day’s peak, before markets stabilised and USDJPY came to rest around 143.50, still down 2.65% on the session.
  • In a day dominated by the JPY volatility in currency markets, the greenback broadly traded on the backfoot with some softer US data assisting the USD weakness. This has prompted the DXY to unwind the majority of the week’s climb, declining around 0.65% on the session.
  • More constructive price action for the major equity benchmarks have underpinned the likes of AUD and NZD, which have also performed well. AUDUSD has risen back above 0.6600 after overnight lows closely matched the previous breakout zone around 0.6525.
  • All focus for global markets will be on tomorrow’s US non-farm payrolls release. Bloomberg consensus sees nonfarm payrolls growth of 186k in November, up from the 150k in October owing to a 38k fewer striking workers meaning strike adjusted gains should trend lower.
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