Japanese yen flirts with 150, PMIs next

• USD/JPY briefly pushes below 150
• Japan releases PMIs on Tuesday

The Japanese yen is trading quietly on Monday. In the European session, USD/JPY is trading at 149.98, up 0.07%.

The yen showed little movement last week, hovering just shy of the symbolic 150 line. The lack of movement has continued today, but dollar-yen broke above 150 very briefly in the Asian session, during hours with low liquidity.

The US/Japan rate differential has been the driver of the yen’s rapid depreciation in the past few months. US Treasury 10-year yields have pushed above 5.0% on Monday, while Japanese 10-year yields are only 0.87%. Despite this gap, which is widening, the Bank of Japan is standing firm with its ultra-loose monetary policy. Governor Ueda said on Friday that the central bank would “patiently” maintain policy but warned that the economic outlook was highly uncertain.

The BoJ meets on Oct. 30-31 and is expected to maintain policy settings. Traders should be on alert nevertheless, as the BoJ has tweaked policy in the past with no prior warning, which has triggered significant volatility from the yen. The Bank will release new quarterly growth and inflation forecasts, which could affect the yen’s direction. There are growing expectations that the BoJ will shift policy in 2024, first with a shift in yield curve control, followed by a rate increase later in the year.

Japan will release PMI reports on Tuesday. The manufacturing sector remains depressed, with four consecutive months of contraction. Exports have fallen due to weak global demand and China’s slowdown has only made matters worse. The October print is expected at 49.0, compared to 48.5 in September.

The services sector is in better shape, and the September reading of 53.8 (revised upwards) marked 13 straight months of growth. However, growth weakened compared to the 54.3 reading in August, as employment and foreign demand fell. The downtrend is expected to continue in October, with a market consensus of 52.9.

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USD/JPY Technical

• There is resistance at 150.49 and 150.99
• 149.67 is a weak support level, followed by 149.35

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