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Yen Weakens On Tokyo Holiday

JPY

USD/JPY staged a round trip from a weekly low of Y131.74 Thursday, managing to eke out some modest gains come the end of the day, as participants assessed the outlook for Fed policy in the light of recent U.S. inflation figures and comments from officials seeking to cool enthusiasm about slowing prices.

  • The pair went offered in London hours but found poise in NY, clawing back earlier losses into the WMR fix. Tokyo markets were closed in observance of a public holiday.
  • Equity sentiment was fragile, with U.S. benchmarks giving back initial gains as the VIX index rebounded from a cyclical low printed the day before.
  • Higher commodity prices may have sapped some strength from the yen, due to Japan's reliance on imports of raw materials.
  • The rate's rebound in the NY session coincided with a move higher in U.S. Tsy yields. As flagged before, they have been a key driver of USD/JPY price action in the past months, despite some divergence opening up recently.
  • Risk reversals climbed anew but one-year skews failed to return above par. They briefly rose above the breakeven threshold earlier this week for the first time since mid-Jun.
  • Spot USD/JPY trades at Y132.96, down 7 pips on the day. Should the 100-DMA at Y131.35 give way, bears could target Aug 2 low of Y130.41. Bulls look for a rebound above Aug 8 high of Y135.58 before setting their sights on Y135.96, the 61.8% retracement of the Jul 14 - Aug 2 sell-off.
  • On the radar next week we have flash GDP & final industrial output (Monday), trade balance & core machine orders (Wednesday) as well as national CPI (Friday).
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USD/JPY staged a round trip from a weekly low of Y131.74 Thursday, managing to eke out some modest gains come the end of the day, as participants assessed the outlook for Fed policy in the light of recent U.S. inflation figures and comments from officials seeking to cool enthusiasm about slowing prices.

  • The pair went offered in London hours but found poise in NY, clawing back earlier losses into the WMR fix. Tokyo markets were closed in observance of a public holiday.
  • Equity sentiment was fragile, with U.S. benchmarks giving back initial gains as the VIX index rebounded from a cyclical low printed the day before.
  • Higher commodity prices may have sapped some strength from the yen, due to Japan's reliance on imports of raw materials.
  • The rate's rebound in the NY session coincided with a move higher in U.S. Tsy yields. As flagged before, they have been a key driver of USD/JPY price action in the past months, despite some divergence opening up recently.
  • Risk reversals climbed anew but one-year skews failed to return above par. They briefly rose above the breakeven threshold earlier this week for the first time since mid-Jun.
  • Spot USD/JPY trades at Y132.96, down 7 pips on the day. Should the 100-DMA at Y131.35 give way, bears could target Aug 2 low of Y130.41. Bulls look for a rebound above Aug 8 high of Y135.58 before setting their sights on Y135.96, the 61.8% retracement of the Jul 14 - Aug 2 sell-off.
  • On the radar next week we have flash GDP & final industrial output (Monday), trade balance & core machine orders (Wednesday) as well as national CPI (Friday).