USD/JPY: further weakness  expected  - Scotiabank

Eric Theoret, Strategist at Scotiabank noted that JPY is outperforming driven by the broader market tone of risk aversion and the technical perspective remains bearish for USD/JPY.

Key Quotes

“JPY is outperforming all of the G10 currencies with a 0.6% gain, its strength driven by the broader market tone of risk aversion. Domestic releases have been mixed, the upside surprise to machine orders offset by weaker than expected PPI. JPY’s greatest near-term risk lies with the 1:15pm ET speech from Fed BoG member Brainard and its impact on the broader market tone. Continued risk aversion would be expected to provide added support to JPY (pressure USDJPY).”

“USDJPY short-term technicals: neutral-bearish—momentum signals are shifting and the RSI has dropped back below 50. USD/JPY has broken 102 and appears set to decline toward its 21 day MA at 101.67. We look to further weakness toward 101.50 followed by 101.20.”