USD/JPY is hanging tough with the help of Fibo and 21-DMA support at 112.87/73, but it needs some gains to keep its recent rally out of danger. In particular, bulls need a close above the tenkan and October 6 low at 113.56.
Long spec position pruning and global derisking flows into the yen could usher in a broader retreat if the bear market in emerging markets and Chinese-entangled currencies continues.
Though China appears to be trying to prevent USD/CNH from breaking above this year's 6.9331 high and the widely watched 7 threshold, the broader dollar advance on rising Treasury yields and spreads over Chinese debt complicates efforts.
Tough talk ahead of the U.S. Treasury's semi-annual currency report reinforces the view that nearly all Chinese goods may eventually see tariffs -- increasing yen-bullish derisking, adding to U.S. import costs and Fed tightening expectations, which in turn hurts emerging markets.
Slowing euro zone growth, Italy angst and Brexit bracing are weighing on key crosses and USD/JPY. Still, U.S.
stocks are a better barometer for USD/JPY, and it should benefit if dip-buyers prevail in equities this week.