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Oct 08 - 12:12 PM
USD/JPY - COMMENT-USD/JPY Bulls Facing Daunting Array Of Bearish Event Risks
First appeared on eFXplus on Oct 08 - 10:20 AM

USD/JPY faces an expanding list of potentially risk-off events that could hasten Fed easing, reduce Treasury-JGB spreads, increase haven JPY buying and drive USD/JPY below key 106.47 support toward 2019's 104.10 low.
On Monday, hopes for a narrow U.S.-China trade deal increased nL2N26S135.
Those hopes have since been dashed by the U.S. announcing an expanded blacklist of sales to Chinese companies and retaliation from China after a tweet by an NBA GM regarding Hong Kong protests nB9N25O05J.
Also weighing are a Bloomberg story saying the U.S. is eyeing ways to limit capital flows to China and an SCMP story saying China has already reduced its trade talk expectations and its delegation would leave one night earlier nL2N26T0F3.
Throw in increasing Brexit and geopolitical angst and weak U.S. PPI ahead of Fed Chair Powell's speech this afternoon, and USD/JPY's 106.80 low thus far looks positively stoic and transient.
Today and Monday's 107.46/45 highs were rejected by the tenkan and 10-DMA, but prices have found support the past three sessions above 106.47, the kijun and 50% Fibo of the August-September rebound.
Probability of an October Fed cut has risen to 79% today, 10-year Treasury-JGB yield spreads are their lowest since 2016 and S&Ps are down 1%.
USD/JPY downside risk look high.

Chart: Click here

Chart: Click here

Refinitiv IFR Research/Market Commentary


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