USD/JPY has retraced 61.8% of its drop from 99.67 and is now pausing to consolidate. Japanese year-end flows have been fairly light of late (JPY repatriation) while the risk-loving nature of the market in recent days have helped give the greenback and EUR each a boost against the Yen.
Very downcast Japanese economic data is contrasting with US data that has shown some signs of stabilization. Retail sales, Philly Fed and existing home sales have all helped calm fear of the US economy spiraling endlessly lower.
US rates have ticked up a bit in the last two session after the Fed shock subsided. Now supply concerns as well as equity gains are helping rates back up along the coupon curve. Nearly $100 bln in Treasury supply comes to market this week as well, a factor in higher rates. 10-year notes now yield 2.63% from lows around 2.50% on Wednesday/Thursday. The firmer rates tend to support USD/JPY as yield hungry Japanese investors look for places to park cash.
Support for USD/JPY is at 96.50/55 on pullbacks while 97.70 is resistance if Fibo resistance at 97.33(61.8% of 99.67/93.56) is taken out.
