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USD/JPY : Strong downside potential

With risk appetite having fallen around the world, the bears dragged the USD/JPY down to its largest five-day drop in almost two months on Friday on speculation about an expansion of stimulus efforts form the BoJ at the October 30 policy meeting. If one also considers the latest US economic data that have been increasingly topping economists’ expectations, it looks like there are choppy waters ahead for the Japanese yen. At 79.60 this morning the pair is in undecided territory. First target for the bears to watch sits at 79.28. A break below that level would expose the 78.77 area. Although an alternative scenario is hard to imagine, only a break above 79.95 could delay the downtrend movement. Keep an eye on the US economic calendar as another potential source of Yen volatility.

Dafni Serdari
Market Analyst
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