USD/JPY trapped between 200-day SMA and 152, flash PMIs diverge

The rally on US yields took a breather on Thursday, prompting the USD index to trade lower for tis second day over the past 10. Moreover, it was the dollar’s worst day during its entire rally from the September low and closed the day with a bearish outside, engulfing candle. This allowed EUR/USD to finally post a solid day’s gain against is bearish trend and rally from the August, low, and helped GBP/USD recoup Wednesday’s losses and rise in line with yesterday’s bullish bias, despite soft PMI reports from both the UK and the Euro Area.

Flash PMIs lower in aggregate

US flash PMIs

October’s figured marked “a further solid rise in business activity to mark a robust start to the fourth quarter” according to S&P Global
Composite PMI increased to a 2-month high of 54.3
Slower input costs and prices charged for October

Eurozone PMIs

The Eurozone’s services PMI slowed to an 8-month low of 51.2, below expectations of 51.4 (51.4 prior)
Manufacturing contracted for a 19^th month but at a slightly slower pace
New orders lower for a fifth month overall on the eurozone

UK flash PMIs

Composite, services and manufacturing all expanded, but at a slower pace and below expectations
Manufacturing PMI barely expanded, slowing to 50.3 (51.5 prior)
Services PMI slowed to an 11-month low of 51.8 (52.4 prior)

Japan’s flash PMIs

Japan’s economy slipped back into contraction, with a composite PMI of 49.4
Services slipped below 50 to 49.3, down from 53.1 prior
Manufacturing contracted at a faster pace of 49.5, compared with 49.7 prior

MOF get verbal on the yen (again)

Japan’s Finance Minister Kato sent his latest warning to yen speculators, commenting on “one-sided, rapid” moves on the yen. The Japanese yen has fallen nearly 9% against the USD since September, and the comments alongside the move lower in US yields and the dollar saw USD/JPY snap a 3-day winning streak and trade back below 152. The Japanese yen was also the strongest FX major on Thursday, while CAD, USD and AUD were the weakest.

USD/JPY technical analysis:

Thursday’s pullback was the most bearish day in 18 for USD/JPY. Yet it was still an inside day, given the strong rise for yields on Wednesday prompted a surge for the dollar and decent close above 152 for USD/JPY. The 200-day SMA is also nearby for potential support at 151.40, and of course the 151 handle 40-piops beneath it.

Given yen strength and comments from the MOF on the currency, we could see a pullback towards the 200-day SMA this session. But this is a tough level to crack, at least initially. Therefore, my bias is for a cheeky rebound from that key level. The bigger question is whether bulls have the appetite to trade back above 152, which would also clear the 2022 MOF intervention level.

Events in focus (AEDT):

10:01 – UK consumer confidence (GfK)
10:30 – JP CPI (Tokyo)
16:00 – SG CPI
18:00 – ECB McCaul speaks
19:00 – DE business expectations (Ifo)
19:00 – EU loans, money supply
21:00 – IMF meetings
23:30 – US durable goods orders
23:30 – CA employment
01:00 – US consumer sentiment, inflation expectations (University of Michigan)
01:30 – US GDPnow

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.