JPY was largely range bound in the European morning, with focus elsewhere as EUR/USD scaled 1.3600 and GBP/USD pushed through 2.0100. In this environment USD/JPY traded defensively, yet held up relatively well due to ongoing appetite to sell JPY from investors. USD/JPY made a challenge on the mid 118's but was unable to overcome good size bids from importers and real money names from 118.50 down to 118.20.
The pair hovered around 118.60 for the most part and expected to continue in this vein amid a limited data schedule and good size 118.50 and 119.00 expiries. EUR/JPY saw a similar theme, bouncing out of 161.00 amid investor demand, yet unable to make significant gains. Deteriorating technical studies and risk of further bond related JPY demand kept this pair range bound.
Broad EUR strength left the pair tied to the mid 161's, although outstanding 161.00 option strikes could encourage another downside test as the European afternoon progresses. The afternoon session is expected to trade on rate expectations, which should see out-performance in leading European currencies vs JPY, while USD/JPY should range trade as USD weakness offsets.
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