- Risk appetite and Bank of Japan restraint weigh on the Japanese yen.
- USD / JPY is expected to appreciate towards 117.00 / 10 – Credit Suisse.
The USD a moderate bid tone on Tuesday, extending its bounce from the low of 113.40 reached last Friday. The pair USD/JPY has returned to levels above 114.00, with the yen safe-haven weighed down in a market in risk appetite mode, before hitting resistance at the 114.30 area.
Yen weakens on risk appetite, Bank of Japan leans
The Japanese yen has opened the week in a soft tone thanks to a moderate appetite for risk with quarterly earnings reports that have led to gains in the world’s major equity markets.
Beyond that, the market is bracing for a dovish monetary policy statement by the Bank of Japan later this week, adding negative pressure on the yen. As the US Federal Reserve is expected to begin reducing its stimulus program in the coming months, the widening yield differential between US Treasuries and Japan has been one of the main reasons behind the almost 5% rally made by the USD / JPY since the end of September.
On the macroeconomic front, new home sales in the United States rose 14% in September, reaching a six-month highest rate of 800,000 units, well above the 760,000 units anticipated by market experts. Additionally, the Richmond Fed Manufacturing Index has improved to 12, from -3 in the prior month, with all components, shipments, new orders and employment showing improvements. On the downside, the US House Price Index and S&P Case-Schiller house prices have risen disappointing expectations.
USD / JPY Expected To Rebound Towards 117.00 / 10 – Credit Suisse
From a broader angle, Credit Suisse economists look at the pair in a consolidation phase, before further appreciation: “With a significant base set above the 2019 high of 112.40, we are looking for an eventual break above 114.73 / 92 in due time for a move to 115.51 initially and then the long-term downtrend of April 1990 at 117.00 / 10. We expect a potentially protracted phase of consolidation to emerge here. “
Technical levels
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