Yen Keeps Busting Ceilings, USD/JPY Piercing 50-DMA Provides Initial Trigger

The adjustment of yen positions resumed towards the end of a week marked by the repricing of Fed rate hike trajectory in response to the latest FOMC meeting and a disappointing U.S. GDP print.

• The initial downleg in USD/JPY came as a result of bears forcing their way through the 50-DMA, with no apparent headline catalysts crossing the wires. The said moving average limited losses on Thursday and provided support on the rate's corrective pullback in May, which added to its significance.
• The cross remained heavy amid talk of further JPY short covering. Spot USD/JPY briefly probed the water below Y133.00 for the first time since Jun 17. This puts the $1.2bn of Y132.50 option expiries set to roll off at today’s 10AM NY cut within notably closer proximity.
• Cross-asset signals were conducive to JPY strength, with weakness in Chinese & Hong Kong equities providing a cue to seek shelter in the regional safe haven. Sales of USD/JPY may have been facilitated by a downtick in U.S. Tsy yields.
• The greenback underperformed as a function of its sales against the yen, while the loonie was the second-worst performer. The European FX bloc was broadly softer, save for the Swiss franc.
• The Antipodeans diverged from their high-beta peers and were among the best G10 performers, with regional stock benchmarks eking out some gains. AUD/USD punched through the $0.7000 mark after two consecutive failures to close above there, while NZD/USD moved above its 50-DMA for the first time since April.
• As we head for the European session, focus turns to preliminary EZ GDP, German unemployment and flash CPI figures from France & Italy.
• Later in the day, the American docket features U.S. core PCE data, MNI Chicago PMI & the final reading of Uni. of Mich. Sentiment as well as Canadian GDP.