USD/JPY rallied last Thursday on upbeat ISM and jobless claims data but fell after non-farm payrolls and has continued to bleed lower. With stocks down today, USD/JPY touched the lowest in 5 weeks.
A few factors point to further declines:
- Seasonality: August is traditionally a poor month for stocks and risk trades
- Positioning: the market is heavily invested in USD/JPY longs, according to CFTC data.
- Central banks pt 1: The BOJ has quietly moved to the sidelines and unlikely to threaten more action at this week’s meeting
- Central banks pt 2: The market is less-convinced the Fed will taper in Sept
- Technicals: Series of lower highs since July and today’s potential break
USDJPY daily
In the short term, strong bids at 97.50 are holding while there are stops below 97.4 ahead of more demand at 97.25/20.
