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USD Softening
USDPY has come under heavy selling pressure this week amidst a softening in USD and a resurgence in JPY strength. On the Dollar front, month-end flows seem to be favouring an unwinding of longs following the heavy gains seen over the month-to-date. Relative equity performance is fuelling a rebalancing of portfolios ahead of the US thanksgiving weekend. Last night, the FOMC minute showed that policymakers were supportive of pursuing further rate cuts but at a gradual pace. Many on the voting panel saw a reduced risk of a labour market downturn than in September though saw much uncertainty in the outlook. In terms of risk, participants note that easing too quickly could undo the progress on inflation while easing to slowly could weaken the economy and labour market conditions.
BOJ Tightening Expectations
On the JPY front, the Yen has been boosted recently by an uptick in BOJ tightening expectations ahead of the upcoming December BOJ meeting. Comments from BOJ governor Ueda last week pointed to further rate hikes if the economy continues to develop in line with the bank’s forecasts. Traders have taken this as a signal that the BOJ will hike rates again next month following a sharp depreciation in JPY over the last two months. If these expectations continue to grow in line with incoming data and BOJ comments, JPY is likely to strengthen further ahead of the meeting.
Technical Views
USDJPY
The failure above the 154.74 level has seen the market reversing sharpy with price now testing below 152. If the market holds below this level, focus is on a further drop lower towards the 146.81 level next and the bull trend line.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.