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Yen Outperforms On Core Yield Pullback, Q2 GDP Inputs On Tap Today


Yen was comfortably the best performer in the G10 space for Thursday's session, gaining nearly 0.50% against the USD. Moves above 146.00 post the Asia close were faded by the market, while in NY trade the pair fell under the 145.50 level (hitting a low around ~145.35). We sit slightly higher now, last in the 145.50/55 region.

  • Technically, Thursday's pullback is still considered corrective. Support to watch on the downside lies at 145.01, the 20-day EMA. MA studies remain in bull mode condition, with upside focus on 147.49, a Fibonacci projection and the next objective.
  • Yen benefited from the broad pull back in core yields and softer equity tone, particularly against the EUR. EUR/JPY fell 1.20% to 157.80, in the process, the pair has pierced initial support at the 20-day EMA, intersecting today at 158.06. More notable support comes into play between 156.87 and 156.42, the Aug 23 low and the 50-day EMA. Slightly dovish ECB comments also helped.
  • USD/JPY is tracking more in line with the US-JP 10yr swap spread, as we noted yesterday, the pair looked too high relative to such trends, although a wedge still persists, see the updated chart below.
  • On the data front today we have Q2 GDP inputs in terms of capital spending and company profits. The final August read for the manufacturing PMI is also out.

Fig 1: USD/JPY Versus US-JP 10-year Swap Rate Differential

Source: MNI - Market News/Bloomberg

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