USDJPY Selling Pauses For Now

Selling in USDJPY looks to have paused for now on the back of the severe declines we’ve seen over the month so far. The pair has fallen 5% from the monthly open fuelled by a period of USD weakness, hawkish BOJ expectations and suspected intervention from Japanese authorities. USDJPY is now down around 7% from the year’s highs, with JPY recovering off 40-year lows against the Dollar.

Weaker USD Helps Yen

On the USD front, the greenback has been skewed lower recently amidst fluctuating September FOMC expectations linked to conflicting Fed commentary. We’ve also seen a drop in treasury yields we’ve seen after the US treasury announced a doubling of its bond buyback program. Friday’s NFP beat failed to lift USD suggesting that the bigger focus is on tomorrow’s US inflation data. With that in mind, there is strong two-way risk for USDJPY tomorrow: CPI confirmed at 3.4% or above and USD should lift on a rise in September tightening forecasts, a downside surprise and USDJPY should plunge as traders price out a hike this month. Ahead of that today we’ll get US PPI later today which will no doubt be used as a gauge of tomorrow’s consumer reading and could cause volatility itself if we see a surprise.

Technical Views

USDJPY

The move lower in USDJPY has now completed a potentially corrective ABCD pattern into the current lows. If bulls can get back above 154.65 near-term, the broader bull trend remains intact, and focus will be on a recovery towards 157.85 next. If we break sub 152 however, this marks a much deeper shift turning focus towards 148.58 next.