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Yen Rallies, Watching Downside USD/JPY Support At 50-day EMA (~149.20)

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Yen was the second-best performer in the G10 space on Friday, rising close to 0.75% against the USD. We track near 149.60 in early dealing today, slightly firmer in yen terms to start the Monday session. Friday lows came in around 149.20, which is right on the 50-day EMA. We are comfortably below the 20-day EMA (150.35).

  • A clear break of the 50-day EMA on the downside would strengthen a bearish theme and signal potential for a continuation lower, towards 147.43, the Oct 3 low. The broader trend condition remains bullish. A resumption of gains would refocus attention on 151.95, the Oct 21 2022 high.
  • Yen's strength is consistent with lower US-JP yield differentials, although these trends have largely been sideways since the sharp move lower in early November.
  • US yields recovered modestly late in Friday NY trade on Friday, as US housing market data was better than expected, which may have aided USD/JPY support around the 50-day EMA support zone.
  • Interestingly, CFTC data (to end Tuesday last week), showed leveraged funds increasing their yen shorts, see the chart below.
  • The local data calendar just has condominium sales for Tokyo on tap today.
  • Note the following option expiries for NY cut today: 150.00 ($1.09b), 149.25 ($770m), 152.50 ($526.2m) (BBG/DTCC).

Fig 1: Leveraged Funds Net JPY Positioning

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Yen was the second-best performer in the G10 space on Friday, rising close to 0.75% against the USD. We track near 149.60 in early dealing today, slightly firmer in yen terms to start the Monday session. Friday lows came in around 149.20, which is right on the 50-day EMA. We are comfortably below the 20-day EMA (150.35).

  • A clear break of the 50-day EMA on the downside would strengthen a bearish theme and signal potential for a continuation lower, towards 147.43, the Oct 3 low. The broader trend condition remains bullish. A resumption of gains would refocus attention on 151.95, the Oct 21 2022 high.
  • Yen's strength is consistent with lower US-JP yield differentials, although these trends have largely been sideways since the sharp move lower in early November.
  • US yields recovered modestly late in Friday NY trade on Friday, as US housing market data was better than expected, which may have aided USD/JPY support around the 50-day EMA support zone.
  • Interestingly, CFTC data (to end Tuesday last week), showed leveraged funds increasing their yen shorts, see the chart below.
  • The local data calendar just has condominium sales for Tokyo on tap today.
  • Note the following option expiries for NY cut today: 150.00 ($1.09b), 149.25 ($770m), 152.50 ($526.2m) (BBG/DTCC).

Fig 1: Leveraged Funds Net JPY Positioning

Keep reading...Show less