USD/JPY: Bulls in the driver’s seat looking to the 200-DMA

• Overnight,  USD/JPY made a three-month high.
• USD/JPY a touch  away from a test of the 200-DMA.  

USD/JPY is currently trading in the 108.60s in a tight spot and touch away from the 200-day moving average as risk appetite  kicks in again. Overnight,  USD/JPY made a three-month high at 108.94 before slipping to 108.60 and resting there for the Asian session. Brexit progress has lifted spirits and investor cheered progress over Turkey and Syria where a ceasefire  was orchestrated  by the US, announced by VP Pence in a press conference in the US session.  

Risk-on supporting USD/JPY

On Wall Street, however,  third-quarter U.S. earnings reports were a major focus which lifted the benchmarks and subsequently, the Dow Jones Industrial Average, DJIA, closed with a gain of around 26 points, or 0.1%, near 27,028. The Yen was thus pressured and USD/JPY was firm despite  US September industrial production softer, falling  -0.4%m/m against estimates of -0.2% while August was revised to +0.8%m/m from +0.6%m/m.

As for yields, the US 2-year treasury yields rose from 1.58% to 1.64% on the Brexit headlines then slipped back to 1.60%, the 10-year yield from 1.72% to 1.80% and back to 1.75%. “Markets are pricing 20bp of easing at the 31 October meeting and a terminal rate of 1.24% (vs 1.88% currently),” analysts at Westpac explained.  

As for Japan, the US consumer Pirce Index was out ahead of the open, likely forcing the hand of the Bank of Japan. Japanese inflation data for September arrived with the headline Consumer Price index in at  0.2% Year over Year, (YoY)  vs. the expected 0.2% & prior 0.3%.

• Japan CPI  (YoY) sep: 0.2% (est 0.2%, prev 0.3%).
• Ex fresh food (YoY): 0.3% (est 0.3%, prev 0.5%).
• Ex fresh food, energy (YoY): 0.5% (est 0.5%, prev 0.6%).

USD/JPY levels