Update: potential USD/JPY trade

US dollar strength remains a key theme and we have plenty of data out of Japan today.

Source: Bloomberg

Yesterday I highlighted trading opportunities in USD/JPY on a break above ¥109.54. This would have been triggered and I felt stops would have been placed at around ¥108.40. Given US dollar strength remains a key theme and we have plenty of data out of Japan today, there is room for further volatility.

The pair traded to a high of ¥109.75 and will remain in focus today with a number of releases out of Japan. Today we receive August retail sales, industrial production, unemployment rate and household spending. At 11.30 AEST we get average cash earnings – these are expected to have tapered off from the previous month, which had seen a spike due to bonus earnings.

Japan would want to see earnings growth catch up to inflation and contribute to the recovery. Any data misses would likely see further yen weakness in anticipation of more stimulus. Should the run continue, a potential target would be at ¥110.73 – the point where August 2008 highs come in.

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