- Abe’s win and steady BoJ leaves JPY vulnerable
- As usual, US yields are main drivers of spot
- Room for extra gains on BoJ-Fed policy divergence
- Risks to the upside appear from NK-related headlines
The Japanese Yen is trading on the defensive vs. the greenback on Tuesday, motivating USD/JPY to revert part of yesterday’s pullback and regain the upper end of the 113.00s.
USD/JPY upside capped just above 114.00
In spite of Monday’s retracement, the upside momentum seems unchanged around the pair, always tracking the performance of yields of the US-10 year reference, which have tested once again the vicinity of the critical 2.40% handle earlier in the session.
In the meantime, and following PM S.Abe’s win at the elections on Sunday, the Japanese safe haven appears offered against the backdrop of a ‘lower-for-longer’ monetary stance from the Bank of Japan.
In this regard, prospects of extra tightening by the Federal Reserve vs. the mega-easing stance from the Bank of Japan seem to pave the way for further upside in spot. However, a pick up in the risk aversion sentiment led by potential developments in the Korean Peninsula should lend oxygen to the safe haven JPY and thus plot against occasional up ticks.
On the data front, Japanese key inflation figures are due on Friday, whereas US flash manufacturing/services PMIs are expected later today followed by September s durable goods orders on Wednesday.
USD/JPY levels to consider
As of writing the pair is gaining 0.21% at 113.68 and a break above 114.07 (high Oct.23) would open the door to 114.39 (high May 11) and finally 114.51 (high Jul.11). On the other hand, the immediate support is located at 113.25 (low Oct.23) seconded by 112.71 (10-day sma) and then 112.48 (23.6% Fibo of 107.33-114.07). According to FXStreet’s technical confluence indicator (TCI), relevant support is located in the 113.00 neighbourhood, where is located the 5-day sma.
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