USD/JPY: broader tone set to dominate into Tuesday’s election - Scotiabank

Eric Theoret, Strategist at Scotiabank noted that USD/JPY bias remains neutral to bullish with the broader tone is set to dominate into Tuesday’s election and this week’s domestic releases are limited to Wednesday’s current account data.

Key Quotes

“JPY is weak, down 1.2% from Friday’s close with a decline driven by broader developments and shifting U.S. election risks. The broader tone is set to dominate into Tuesday’s election and this week’s domestic releases are limited to Wednesday’s current account data.”

“CFTC positioning is JPY bullish and JPY’s risk profile leaves it vulnerable to knee-jerk strength in periods of risk aversion, and vice versa. The 2Y U.S.-Japan yield spread has widened in a JPY-bearish manner, implied JPY vols are down, and risk reversals hint to a potential moderation in the premium for protection against JPY strength.” 

“USDJPY short-term technicals: neutral-bullish—momentum signals are close to neutral and DMI’s are muted. USDJPY has climbed back above its short-term MA’s (21 day at 103.99 and 9 day at 104.13) to the mid-point of its one month range roughly bound between 102.50 and 105.50. We note the emergence of near-term resistance above 104.50 and look to near-term support around 103.80.” 

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USDJPY from Tip TV Productions on Vimeo.