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USDJPY Nears 2022 Highs As No Intervention Confirmed

FOREX
  • With late reports on Monday suggesting the Bank of Japan could raise its cap on yields at the October policy meeting, markets were underwhelmed as the BOJ only relaxed the upper limit of its range for the 10-year bond yield. While citing economic uncertainty, the bank indicated that it does not want to see a surge in interest rates.
  • There has been sharp weakness for the Japanese Yen as a result and confirmation that there was no intervention earlier in October appeared to give USDJPY bulls the green light. As such, the pair has risen from overnight lows of 149.03 to reach as high as 151.71, just 24 pips shy of the 2022 highs and up a significant 1.6%.
  • Obviously given the two separate episodes of MOF intervention last year, markets will be eagerly monitoring any step up in verbal rhetoric or indeed any action from Japanese officials.
  • Above 151.95, we have 152.20 and 153.52 as the next resistance points, both Fibonacci projections.
  • The price action resulted in the USD index turning early declines into firm gains, with the index rising just over 0.5% on the session. Greenback strength was underpinned by a higher-than-expected employment cost index for Q3 and October consumer confidence in the US beating also beating expectations.
  • Elsewhere, EURUSD rose substantially in the lead up to Eurozone inflation data that matched Germany’s releases in coming in below expectations. This along with the firmer greenback led EURUSD all the way back to 1.0558 after printing a 1.0675 high during early European trade.
  • Bolstered equity benchmarks did little to enthuse the likes of GBP, AUD, NZD and CAD, all taking their cues from the surging dollar. CHF is also one of the poorest performers on the day with USDCHF rising 0.8% and extending the recovery from last week's lows.
  • New Zealand unemployment data headlines the APAC docket on Wednesday before US ADP, ISM Manufacturing and JOLTS data crosses in the US session. Focus then turns to the FOMC decision where Chair Powell’s press conference and the Statement will attempt to underpin market hike pricing which is broadly aligned with the Fed’s previously signalled path.
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