USD/JPY held onto a tight range around 118.00, continuing the theme seen over the past three sessions. The downside is supported at 117.70-80, 117.73 where the base of the Ichimoku cloud comes in today and 117.95 where the Ichimoku top is. The topside is capped by offers between 118.30 and 118.50.
Stops are tipped above but more offers are noted above towards 119.00 from Japanese exporters. JPY cross demand is supportive. This helped USD/JPY but even these lost some of their lustre amid profit taking interest. EUR/JPY managed to break above 156.00 and stops above sent the cross as high as 156.35/40 in Asia. The cross failed to recapture these levels and selling from interbank names and small speculative accounts sent the pair back into 156.00, where Japanese investor demand supports.
Cross players continue to choose higher yielding currencies against the yen for turn-of-the-year carry plays. GBP/JPY, AUD/JPY and NZD/JPY are the main beneficiaries of such flows; all building on recent gains. We look for JPY to remain on the softer size amid limited top tier data into the Christmas holidays.
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