USD/JPY. Sitting on 84

USD/JPY (84.46) is down overnight and consolidating just above the low of August.

Technicals:

• Trend: Daily higher; Weekly lower.

• Overbought/Oversold (stochastics): Daily oversold; Weekly oversold.

• Support/Resistance Levels: Support lies at 83.60 (Aug24 low) and 79.75 (Apr 1995 low). Resistance lies at 88.12 (Jul28), 89.16 (Jul12 high), 92.89 (Jun4 high) and 94.99 (May4,5 high).

Positioning:

• The risk reversal (3m, 25delta) ticked lower overnight. The skew is still in favor of USD/JPY downside, but is consolidating in neutral territory relative to its range the past six months, thus providing little guidance as to the direction of spot.

• Implied vol (3m): fell overnight but is trending higher from deep in the lower half of its 6-month range.

Cross-asset valuation: The correlations of USD/JPY with the US 10yr yield (positive) the US-JGB 10yr spread (positive) and the S&P500 (positive) are significant.