JPY experienced consolidation in quieter trading conditions. The main driver of price action was a pick up in Japanese rate speculation. New articles from the Nikkei and MNSI indicated that BOJ may be considering a hike at next week's policy meeting. USD/JPY's failure to move beyond 120.73 encouraged profit taking, with the rate speculation causing some concern among those overextended on the topside.
The pair edged lower and eventually filled in 120.30 bids to record a 120.26 low. Background dollar support and a positive technical picture saw a slew of buyers emerge and the pair was underpinned into the US session. This tone might continue, with decent bids seen into 120.00 and the market still focused on yield. Option strikes at 120.00, 120.50 and 120.75 grabbed some attention, with price action a little choppy due to ongoing gamma related activity.
EUR/JPY was underpinned, yet well off its highs after tripping 155.85 stops at the European open. The pair also traded defensively, with persistent pressure on 155.10/15 bids. Flight to yield by Japanese investors should continue to support in the near-term.
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