Dollar may have reached a short-term peak vs yen
Yen sellers may be underestimating the Japanese currency's short-term potential.
Currently, USD/JPY is in the middle of a 151.92-153.62 range as traders await Friday’s U.S. employment report. Volatility levels have been marked lower after the Bank of Japan policy decision and U.S. data.
There are some indications that the recent calm may indicate the tide isturning in favor of the yen. In October, short yen positions were built up based on expectations that the BOJ would stay dovish and that the Trump trade would drive Treasury yields higher.
However, comments by Governor Ueda on Thursday shifted the BOJ’s stance, hinting at a possible rate hike in December. Ueda mentioned factors such as an improving U.S. economy and domestic wage gains. A strong U.S. jobs report on Friday could further validate these improvements.
Additionally, the jobs report might prompt profit-taking in Trump trades ahead of the weekend and the U.S. election on Tuesday. A corresponding drop in Treasury yields could bolster the yen.
Finally, data from Bank of New York suggests a shift away from risk-on trading, which, coupled with weakness in equity markets, could enhance the yen’s appeal as a safe haven.
USD/JPY sellers are already emerging near the 153 level. If USD/JPY fails to surpass 154 in coming sessions, the path of least resistance may be down.
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Yen chart https://tmsnrt.rs/3C61ggJ
(Robert Fullem is a Reuters market analyst. The views expressed are his own.)
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