USD/JPY extends gains as the market clears offers at 119.50. The next batch of interest is seen at 119.55 up to 119.65, where a mixture of stops and offers are noted. Model funds and CTAs have had stops triggered in today's session amid the spot move through 119.00 and extending through 119.20/25 and now through 119.50.
The move above the 119.05 resistance has raised the prospects of another attack on the 120.00 handle. However, price action should be extremely choppy on any upside test, with sovereign names, exporters and option accounts reportedly leaving sizeable offers at 119.75/80. Some traders have placed some significance on a report from a well known New York based advisory that is touting no change in Japanese rates at next week's BOJ policy meeting.
In spite of this rumour, JPY was already in the decline with leverage funds and speculative accounts discounting the impact from any move in rates given the sizeable yield advantage in other developed economies. More importantly are rumours that BOJ does not want USD/JPY to trade above 120.00 in the near-term. In light of this talk price reaction towards 120.00 will be pivotal going forward.
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