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USDJPY Rises Above Pre-NFP Levels Amid Higher Yields/Equities

FOREX
  • Better-than-expected US retail sales and jobless claims data provided a strong boost to global equity benchmarks on Thursday. Furthermore, higher core yields as Fed easing bets were trimmed weighed heavily on the Japanese Yen, with USDJPY erasing the entire post-NFP inspired sell-off.
  • USDJPY has risen 1.15% on the session and in the process, bridged the gap to 149.01, levels last traded before US employment data on August 02. This extends the pair’s recovery to around 5.15% as the market prices out the likelihood of a 50bp FOMC cut in September.
  • The strong risk-on impulse was most notable for crosses such as GBPJPY and AUDJPY, that are nearing 1.5% advances on the day. In similar vein, EURJPY has risen 0.85%, and a close at current or higher levels would mark a breach of key resistance at the 20-day EMA (163.59) and narrows the gap with 164.11 - the 200-dma which has acted as solid support/resistance on several sessions in recent history - most notably across November and December last year.
  • Elsewhere, similar dynamics filtered through to Swiss Franc weakness, with USDCHF rising 0.85% and also bridging the gap to pre-NFP levels.
  • For major pairs, GBPUSD’s climb undermines the recent bearish theme and price remains above the 20-day EMA - at 1.2807. A continuation higher would highlight a stronger reversal and signal scope for a climb towards 1.2955, a Fibonacci retracement. Key support has been defined at 1.2665, the Aug 8 low, where a break is required to once again resume recent bearish activity.
  • RBA and RBNZ Governors may speak overnight before UK retail sales data is due Friday. In the US, building permits and UMich sentiment data will close out the week.
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