Risk aversion continues to test the patience of USD/JPY bulls bears. While many - if not most - fundamentals are Japanese yen bearish (therefore USD/JPY bullish), the main story is the continued risk OFF environment created by the U.S. government shutdown and all the ramifications in that wake: the taper, debt ceiling, debt default, equities support. Today the focus is the equities market.
The Dow has been supported at the 200 period SMA close (aka the 200 daily moving average or 200DMA) and this level is closely coinciding with the rally in the USD/JPY. The USD/JPY is rallying with the strength in the U.S. Dollar; one-part a “Yellin-rally”, one part a correction on the U.S. Dollar Index led by the ECB seven-dollar lending. The dollar will be in-demand by eurozone banks fearing a tighter lending cycle as the government shutdown nears the October 17 default deadline; there’s lots to be worries about the yen buyers continue to find opportunities in this risk averse environment.
So it is the equities strength not only the the Dow but the Nikkei today that has allowed for some yen weakness over the course of two sessions now, following a 96.55 low.
Past performance is not indicative of future results
The U.S. dollar will get limited boost from the Fed Minutes revealing that most Fed members that the FOMC was likely to reduce bond purchases this year even as this did not come to pass in September as expected. However this news comes nine days into the (partial) government shutdown and in those nine days the market has seen an NFP report go unreleased, the BLS shutdown and not collect data, all as the debt ceiling and the fear of government default loom over the market...