USDJPY is pressured towards lows of the week
- USDJPY bulls move back in following a test of the week's lows.
- Risk-on is supporting the beta currency bloc.
USDJPY has dropped as the Tokyo session gets going and risk currencies catch a bid. The Nikkei is sharply higher and high betas are tagging along. At the time of writing, USDJPY is trading at 146.40, down some 0.12% and has dropped from a high of 146.72 reaching a low of 146.33 so far.
Japan's benchmark Nikkei average opened up 0.69% at 27,718.84 on Tuesday, while the broader Topix gained 0.56% at 1,945.00. Equity markets rose and the US Dollar slid on Monday as traders embraced the idea that China may ease COVID restrictions. Additionally, the US economy could be slowing enough to allow the Federal Reserve to ease its aggressive hiking of interest rates. Traders have latched on to a risk-on sentiment that emerged from last Friday's activity in the US session. There are signs of some easing of market conditions following last week's mixed Nonfarm Payrolls report that shows that the Unemployment Rate rose to 3.7%.
US midterms and CPI in focus
Meanwhile, the attention will soon turn to the US midterms and US inflation data. ''America goes to the polls next week on November 8th for the midterms, where control of both chambers of Congress and dozens of governorships are on the line,'' analysts at TD Securities explained. ''Polls suggest a Republican majority in the House and Senate, which is in line with historical relationships as well as the low approval ratings of President Biden due to the economy, inflation, and crime.''
As for US Consumer Price Index, the analysts explained that core prices likely slowed modestly in Oct, but to a still strong 0.4% MoM pace. ''Shelter inflation likely remained the key wildcard, though we look for used vehicle prices to retreat sharply. Importantly, gas prices likely shifted from offering relief to the CPI in recent months to contributing to it in Oct. All told, our m/m forecasts imply 7.9%/6.5% YoY for total/core prices.''