USD/JPY: broader market tone supports the yen - Scotiabank

Eric Theoret, Strategist at Scotiabank, noted that broader market tone is supportive for JPY as it delivers haven-driven strength in an environment of elevated uncertainty, presenting upside risk for JPY into Friday’s U.S. payrolls and Tuesday’s U.S. election.

Key Quotes

“JPY is strong, up 0.3% and outperforming most of the G10 currencies with its third consecutive session of gains, climbing to a fresh one month high around levels last seen in early October. The broader market tone is supportive for JPY as it delivers haven-driven strength in an environment of elevated uncertainty, presenting upside risk for JPY into Friday’s U.S. payrolls and Tuesday’s U.S. election.”

“Domestic developments have been limited, and the near-term outlook for relative central bank policy will likely continue to be dominated by the Fed. We note the narrowing in interest rate differentials as the 2Y U.S.-Japan yield spread softens toward the lower end of its one month range.”

“USDJPY short-term technicals: bearish—USDJPY has broken through its short term MA’s (9 day MA 104.25, 21 day MA 103.97) and momentum signals (MACD and RSI) have turned bearish. Longer-term MA’s (50 and 100 day at 102.84) have been tested and the near-term balance of risk favors further downside. We look to near-term support at 102.50 and resistance 103.50.”