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USD/JPY unable to hold above water in NY, US yield's slide was heavy

Despite stocks well bid and a hawkish Powell testimony, ("It's time for us to be normalizing rates . . . strong growth now warrants gradual rate rises"), the dollar could not hold onto all of its gains today and USD/JPY has dumped around 40 pips in the NY session.

USD/JPY is currently trading at 111.15, although still up 0.07% on the day, having posted a daily high at 111.49 and low at 110.93. Despite the record highs in the Richmond Fed and the best reading in 17 years on consumer confidence, the dollar dropped back from 93.23 highs in the DXY and the yen rallied from 111.49. However, the major weight came on the slide of US yields. The ten years are down by 0.76% to 2.3100 between a range of 2.3082% - 2.3383%.

  • Fed’s Powell: Recent weak inflation readings are ‘surprising’
  • Fed's Powell: I expect gradual interest rate hikes to continue
  • Fed's Powell: Case for raising interest rates at next meeting is coming together
  • Fed's Powell: It is time to be normalizing interest rates

As always, the renewed geopolitical concerns leave JPY vulnerable to knee-jerk, safe-haven gains as market participants assess the risk of new North Korean missile tests. "The latest comments from BoJ Gov. Kuroda have been in line with themes recently covered by other board members, specifically touching upon cost-benefit considerations of the BoJ’s current policy stance," noted analysts at Scotiabank.

Meanwhile, the latest CFTC speculative positioning data have shown the first liquidation of JPY gross shorts following a doubling in the bearish position from mid-September to mid-November. However, offers have been picked up, so far, below the 111 handle, and just above Monday's 110.85 base, with Japanese importers and some investors among the buyers. 

USD/JPY levels

The key support level comes as the daily cloud base, now at 110.71 while to the upside, 111.46 was an hourly high posted on Monday. Overall, the technical picture is bearish below the  50% of Sep-Nov rise at 111.03. A breakdown to 109.55 as the mid-September low could prevail should the pair not be able to recovery above 113.00 in order to progress towards the 114.40 key resistance level ahead of 114.73 5th Nov high. However, such a recovery depends on the bulls being able to first, break the 38.2% level at 111.90 before 112.90, (4hr 100-SMA). 

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