USD/JPY intermarket: risk on, watching yields, stocks and gold

Currently, USD/JPY is trading at 111.53, up 0.60% on the day, having posted a daily high at 111.57 and low at 110.75.

After consolidating in a tight range around Friday’s close, the yen was sold off with risk on markets back in play. The overnight release of disappointing trade data pressured JPY modestly, pushing it back toward Friday’s two-week low and with Brexit talks underway without any negative headlines, the yen has extended its downside. Gold is also sinking (1244.84 the low) while stocks take up a bid on Wall Street (Dow 21519 fresh highs).

Fed not expected to hike until December - Nomura

For today, domestic risk is set to remain elevated as we look to the upcoming release of BoJ minutes and a speech from Gov. Kuroda, as analysts at Scotiabank pointed out, as well as explaining that there is a narrowing in the 10Y spread, recently testing lows at levels last seen in early November - (JPY-supportive).

USD/JPY levels

"The pair has scope to extend its advance towards 112.00 during the upcoming sessions, particularly if yields recover during the upcoming US session," according to Valeria Bednarik, chief analyst at FXStreet explained. 

"Now above the old resistance area of 110.25-80, which also includes the still-rising 200-day moving average, the path of least resistance is to the upside, at least in the short-term anyway," noted Fawad Razaqzada "Consequently, I am expecting the USD/JPY to rise in the coming days towards previous reference points such 112.10 and 113.30 and possibly a lot higher over time. But a potential break back below 110.25 at this stage would not be ideal for the bulls and I would drop my bullish bias completely in the event of a subsequent break below 108.80/5 – the low from last week."

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