USD/JPY trades on a supportive footing after recovering from the low 115's. Option accounts, institutional investors and importers have been among the Japanese buyers that were noted at the lows. Since the overnight recovery, prices have consolidated below 115.55 and the 115.80 high.
Speculative names and exporters continue to sit on the offer and this is restricting the potential for extended gains. The downside is finding support from interbank names and CTAs booking profits after the decent bounce overnight. The near-term trend is skewed to the downside, with the deteriorating US economic picture fueling a shift in positioning by longer-term investors and macro accounts.
The market shift towards yield and general flight to quality into the year-end should bring the 115.00 handle back under pressure. Option positions at 114.90 provide the first level of defense, with 114.75 and 114.50 interest beyond. The focus remains on the 113.45 trend low set on July 10th.
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