JPY extended yesterday's gains, with USD/JPY and EUR/JPY continuing to trade on a heavy footing. USD/JPY filled in 118.90 bids and stops through 118.80 and 118.75. Selling was noted from speculative accounts, while exporters also lowered their offers. This capped the potential for a recovery and kept pressure on the downside.
Importers, option accounts and CTAs were noted on the bid. The activity limited movement and underpinned USD/JPY between 118.60-70 ahead of the North American open. EUR/JPY followed the USD/JPY move, with technical based accounts and speculative funds unwinding longs. Stops were filled below 148.90 and the pair extended to 148.60. Leverage fund activity elicited support but the pair remain heavy throughout. Bias is expected to remain on the downside.
JPY has benefited from yesterday's Russian central bank announcement on reserves. This will cap the potential for further gains and turn focus on overstretched speculative positioning. A USD/JPY move through 118.30 would increase the chances of liquidation, while EUR/JPY has potential to make an extended run on 147.75 after the 149.00 level gave way.
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