USD/JPY and EUR/JPY were range bound in the European morning amid reduced volumes ahead of the US employment report. USD/JPY hovered around the 118.00 handle, while EUR/JPY retained a supportive tone around the mid 149's. Large USD/JPY option expiries at 118.00 restricted price action, with reports of large gamma related interest in quiet trade. The pair was unable to progress on the topside, with large 118.20 offers fueling interbank selling. The downside was stymied amid background geopolitical risk. US sources claimed that North Korea could carry out a nuclear test as soon as Sunday, which left JPY on heavier footing.
This was in part the reason for EUR/JPY's supportive tone, along with general interest from Japanese investors. The pair struggled to make an impression on the topside though, with large standing offers ahead of 149.90/00 capping gains. Both pairs looked in need of fresh impetus, which is likely to come from the September US employment report. The headline consensus is 120k, although there may well be a muted reaction given the long weekends in both Japan and the US.
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