USD retained the bid tone seen in the Asian session, helping USD/JPY up to the 118.33. Supporting the USD/JPY move up was talk of sizeable bids below, especially from around the 117.80 to 117.50 level from longer-term players including importers and both retail and institutional investors eyeing fresh asset allocations for the fiscal year beginning next month.
Interest for the JPY crosses was also healthy, with flows relating to Uridashi flows and the fresh investment trust launches. Helping to cap USD/JPY on the topside was aggressive sales from option players, some looking to defend barriers from as close as 118.40 and large exotics up at 118.50. Stops are reported to be building above the latter level however.
A break above would also take USD/JPY above key technical levels including the Ichimoku kijun line at 118.41 and the cloud base at 118.47. The 10-day moving average is just above at 118.68. Focus for the European afternoon is on the Chicago activity index and new home sales data. The latter will be interesting given the concern of a housing market collapse and the impact on the broader economy.
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