BUZZ-COMMENT-Yen bulls have upper hand as shares are pressured

Equity volatility gives JPY bulls the upper hand though momentum is lacking.

Yen crosses remain lower though USD/JPY has rebounded as Treasury yields start to firm and oil rises. Tuesday's highlight is a speech by Bank of Japan Deputy Governor Himino at 10:30 am local time, which will be followed by a press conference. Given the yen's decline since September, it would not be surprising if he underlines yen weakness as a policy factor. Speculation is mounting, after recent reports, that he may pave the way for a 25 basis points rate hike on January 24. Current OIS is showing about a 50% chance for a hike though implied odds elsewhere are slightly higher.

Adopting a more hawkish stance as expectations for Fed rate cuts diminish and uncertainty lingers around Trump administration policies should weigh on shares, supporting the yen as a haven.

So far, the decline in the S&P 500 has been orderly. USD/JPY bulls are still anticipating U.S. exceptionalism will lift the broader dollar. As such, the pair found support around the middle of its 21-day Bollinger Bands. A bearish shift would only occur with a close below the December 20 low of 155.97, which could set the stage for a test of the November 6 high of 154.70. While the daily and weekly indicators are leaning towards a bearish scenario, a move back above the 158.09 December 26 high would signal a positive shift.

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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

((robert.fullem@thomsonreuters.com;))