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Yen Ticks Away From Cycle Lows In Early Tokyo Trade


The yen extended its bearish cycle Thursday with USD/JPY clearing the Y122.00 mark after Y121.00 and Y120.00 gave way earlier this week. Thursday's surge allowed the pair to move above a long-term descending trendline drawn off the 2002 peak. Its RSI kept pushing deeper into overbought territory, rising to levels not seen since September 2014.

  • USD/JPY 1-week risk reversal rose to its highest level since 2016 Thursday, while implied volatilities kept soaring across the curve.
  • Selling pressure has emerged this morning, sending spot USD/JPY 23 pips lower thus far. The rate sits at Y122.12, with bears looking for a slide towards round figure support at Y120.00. Bulls need a clearance of the 2.382 projection of the Dec 3 - Jan 4 - 24 price swing at Y122.47 before targeting Nov 18, 2015 high of Y123.76.
  • Core CPI inflation in Tokyo accelerated to +0.8% Y/Y this month, reaching the fastest pace in two years. The key measure of underlying price growth was boosted by higher energy prices, but still remains far from the BoJ's +2.0% Y/Y target for nationwide inflation.
  • Next week's data highlights include unemployment (Tuesday), retail sales (Wednesday), flash industrial output (Thursday) & Tankan Survey (Friday).
  • In addition, the BoJ will publish the summary of opinions from its most recent monetary policy decision on Tuesday.

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