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USDJPY Edges Higher Following Corrective Pullback

  • Currency markets have had a subdued session on Monday with the USD index holding a very narrow 20 pip range, sliding into moderate negative territory as we approach the NY crossover.
  • The Japanese Yen remains on the back foot with USDJPY trading at fresh session highs of 145.73 in recent trade, edging further away from the 144.93 pullback lows on Friday. The overall technical uptrend in USDJPY remains intact and short-term pullbacks are considered corrective. Moving average studies are in a bull mode condition, highlighting current positive sentiment. The focus is on 147.49, a Fibonacci projection.
  • USDCNH reached as high as 7.3361 overnight as concerns surrounding the Chinese economy continue to dampen sentiment. Reactions were exacerbated by no change in the 5-yr LPR rate, which kept onshore equities on the back foot on Monday with consensus looking for a 15bps cut to boost the under pressure growth backdrop.
  • However, in recent trade the Yuan has been bolstered by source reports that major state-owned banks were seen mopping up offshore yuan liquidity on Monday and a large squeeze in front end CNH forward points. In similar vein, the likes of the Euro and AUD have recovered off the lows and are now trading in positive territory.
  • The Fed's Jackson Hole conference is the week's key event, with announced speakers so far including Chair Powell and ECB Pres Lagarde on Friday. Key data will be Wednesday’s European flash PMIs.

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