USD/JPY rebounds from 6-week lows, retakes 114.00

The Japanese yen keeps the bid tone intact today amidst prevailing risk aversion, with USD/JPY regaining 114.00 and beyond.

USD/JPY rebounds from 113.60

After testing fresh multi-week lows in the 113.60 area in early trade, spot has managed to regain some traction and advance once again above the key barrier at 114.00 the figure.

Brexit fears have re-emerged over the weekend following news in the UK that PM T.May could intensify her stance on a ‘clear Brexit’ at her speech on Tuesday, triggering a wave of risk-off trade across the board and the subsequent demand for the safe haven.

Data wise in Japan, November’s Tertiary Industry Activity Index has matched estimates today, expanding at a monthly 0.2%, while US markets will remain closed due to the MLT holiday.

In the meantime, spot keeps its correlation with the performance of US yields well and sound for the time being - particularly the 10-year benchmark - while developments over the Bank of Japan and its never-ending battle to spur inflation expectations remains the leitmotif behind the pair’s price action in the next months (years?).

On the positioning side, JPY speculative net shorts have receded to 3-week lows just below 80K contracts during the week ended on January 10, as shown by the latest CFTC report.

USD/JPY levels to consider

As of writing the pair is retreating 0.30% at 114.20 facing the next support at 113.63 (low Jan.16) followed by 113.28 (55-day sma) and finally 111.98 (38.2% Fibo of the November-December 2015 up move). On the other hand, a break above 114.54 (23.6% Fibo of the November-December 2015 up move) would aim for 115.53 (high Jan.12) and then 116.37 (20-day sma).