Yen Underperforms, No Clear Consensus Around BoJ Bond Buying Reduction Plans

USD/JPY mostly tracked higher post the Asia close on Tuesday. In NY trade we got just above 161.50, before retracing modestly. The pair is around 161.30 in early Wednesday dealings after losing 0.31% for Tuesday's session, the worst performer in the G10 space. Broader USD indices rose a touch for Tuesday's session.

• Most focus rested on the Powell testimony, which provided little really new information. The recent rise in the unemployment rate has not met the FOMC's cutting "test" of unexpected weakness in the labour market and this may have provided a moderate boost to the greenback on Tuesday.
• US yields finished a touch higher at the back end (10yr towards 4.30%), while the 2yr was close to unchanged. Equities were weaker in EU markets, and only posted modest gains in US markets.
• Still, JPY was weaker on crosses. EUR/JPY tracks around 174.40 currently, just short of recent highs in the 174.60/65 region. AUD/JPY is at 108.70/75, just off fresh cycle highs.
• This suggests the recent move lower in USD/JPY being a correction and that bulls remain in the drivers seat. Upside focus rests at the 161.95 level, the July 3 high, beyond that is Fibonacci projections (the first being 162.21). On the downside, the 20-day EMA is at 159.74.
• Late yesterday, it emerged there was no clear consensus on reduction in size of the BoJ's bond buying program according to market players surveyed by the central bank (see this link).
• Today we have the June PPI out, along with BoJ bond buying ops.
• In the option expiry space note the following for NY cut later: Y159.50($1.6bln), Y160.00($2.1bln), Y161.00-20($1.8bln), Y161.50($1.1bln).