JPY: USD/JPY Downside Sticks into NY Crossover, Underlying Long Plays Through

The step lower for USD/JPY triggered by a phase of dollar weakness is picking up into the NY crossover, with rate now having fully erased the Monday rally tripped by the interim US-China trade agreement.

• JPY's progress off the week's lows despite a healthier equity picture may reflect market that remains happy to stay long JPY, despite USD/JPY's bounce off the pullback low: Our CFTC positioning tracker shows a net long of ~50% of open interest, pushing the 52w Z-score to 1.68, the highest among all currencies surveyed.
• This keeps focus on 145.30 support initially - the 38.2% retracement for the upleg posted off 139.89 - with momentum pointed lower - the 50-dma/200-dma differential is now it's largest since October last year.
• Nonetheless, JPY strength is also playing a part here - we know from a WSJ report that neither currency management nor FX rate target levels were mentioned in US-Japan trade talks - meaning there are few implications or conditions on the BoJ's slow tightening cycle ahead.