- USD/JPY remained firm on the 113 handle in the open of Tokyo's markets as we await key data at the top of the hour with Aussie CPI first up and then Chinese PMIs.
- USD/JPY has been continuing on its de-risking bid, up from yesterdays 112.30 lows in Tokyo.
The DXY was also running on al cylinders and managed to score through the 97 handle in NY trade. This helped the pair along with the risk-off trade unwinding. As for rates, "The US 10yr treasury yield firmed slightly from 3.10% to 3.12%, the 2yr yield up from 2.83% to 2.84%. Fed fund futures yields priced the chance of another rate hike in December at 75%," analysts at Westpac explained.
US data solid
Meanwhile, from the data front, the US consumer confidence comes in at the best in 18 yrs. " US consumer confidence beat expectations in October, rising to yet another 18-year high. Both current and future conditions rose. The Dallas Fed Services PMI was more circumspect, falling in October. Six-month-ahead general business activity fell; employment and wages were generally stable; capital expenditures fell to 12.6 from 18.5," analysts at ANZ explained.
For the day ahead, the market will get a glimpse of how the Chinese economy is performing. "China’s official manufacturing and non-manufacturing PMI surveys for Oct are due at12pm Syd/9am local. Consensus is for little change vs Sep at 50.6 and 54.6 respectively, though the lengthy holidays at the start of the month could produce some distortion," analysts at Westpac explained.
The Bank of Japan is fully expected to hold
"The Bank of Japan is fully expected to hold policy steady today (decision any time from 11:30am Tokyo/1:30pm Sydney) but there will be plenty of new information as the release includes the quarterly outlook on the economy and prices. The “around zero percent” yield target on the 10 year government bond seems likely to be maintained for many more meetings though newswire stories indicate a desire at the BoJ to alter the timing of its JGB purchases to try to stoke some life into the market which it dominates. There is no sign that the bank is brave enough to drop the commitment to purchase JPY80 trillion of JGBs per year even though it clearly does not need to buy so many in order to hit its 10yr yield target," analysts at Westpac explained.
USD/JPY levels
- Support levels: 112.60 112.35 111.95
- Resistance levels: 113.00 113.40 113.85
Valeria Bednarik, Chief Analyst at FXStreet notes that in the 4 hours chart, the Momentum indicator heads north in overbought readings:
"The RSI is flat at around 62, as the price bounced from a bullish 200 SMA multiple times in these last couple of sessions. The 100 SMA in the mentioned chart, maintains its bearish slope below the larger one. As long as bulls keep defending the 112.60 price zone, the pair is poised to extend its advance up to 113.40, September 8 daily high."
