JPY flows: Bullishness on JPY Remains
JPY is condolidating, but bias remains for further gains this week.
The JPY stabilised in Europe in thin conditions with the UK closed, after the gains seen in Asia. Government bond and equity market reaction to the Israel/Hezbollah missile strikes has been muted on the widespread view that a war remains unlikely. The focus remains more on the size of Fed rate cuts after Powell signals on Friday. JPY consolidation is expected to give way to renewed JPY gains, as the market wants to test 142.00 on USD/JPY. On EUR/JPY scope also exists to 160, see below. Beyond these levels, JPY gains would likely requires fresh JPY positive news in the form of a renewed U.S. equity selloff or more aggressive U.S. rate cut expectations -- the monthly core PCE inflation numbers August 30 would have to zero or negative (unlikely) or the August employment report on September 6 weak (possible but consensus is +160k for non farm payrolls).
