USDJPY moved noticeably higher in Monday’s trading [02/10], gaining +0.27% continuing its recent uptrend and inching closer to the psychological level of 150. The JPN225 recovered at the same time, taking back the 32000 mark. Investors’ enthusiastic reaction to the upbeat quarterly Tankan survey results, masking the less encouraging Manufacturing PMI data, was probably responsible for the overall risk-on mood.
Higher T-note yields on Monday were bearish for the Yen, which was also weakened by the BOJ’s action on Monday announcing plans for additional bond purchases of 5- to 10-year bonds for this week. The yen’s decline was contained after Japan’s Q3 Tankan large manufacturing business conditions rose more than expected, and after the 10-year JGB bond yield rose to a 10-year high of 0.78%, reinforcing the yen’s interest rate differential.
Japan has had a lot of verbal interventions, but their effectiveness seems to be decreasing as market participants seem to be less and less interested in them. The sustainability of USDJPY’s current uptrend will be assessed after the non-farm payroll data which will pose some serious challenges to the Dollar.
Although USDJPY’s rise from 127.20 still looks strong, it can still be seen as the second stage of a corrective pattern from 151.93. A rejection at 151.93, followed by a break of the 145.06 support which was previously support would be the first sign that the third pattern has started. However, a sustained break of 151.93 would confirm the resumption of the long-term uptrend.
USDJPY’s rally continued in today’s Asian session [03/10] with a break of 149.69 resistance and intraday bias back to the upside. The current upside from 127.20 could target a retest of the next high at 151.93. On the downside, a break of the 148.51 support is required to indicate a short-term topping. Otherwise, the outlook remains bullish.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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