Key Events Today:

10/09 14:30 UTC: USD – University of Michigan Consumer Sentiment Index.

The decline in US Treasury yields weakens one of the primary catalysts for USD/JPY upside. Following a successful auction of 30-year bonds, demand for US debt securities increased, driving their yields lower. While the Dollar’s yield advantage persists, its current narrowing may temper demand for fresh long positions in the Greenback against the Yen.

Today, Japanese Prime Minister Sanae Takaichi stated that authorities will continue to closely monitor exchange rates and prices and respond appropriately. This heightens market sensitivity to official messaging. Although the statement does not signal an imminent intervention, alongside a commitment to Bank of Japan independence, it provides support for the Yen.

However, Japanese household spending dropped 3.1% year-over-year in August, limiting the case for rapid interest rate hikes. Consequently, the downside thesis for USD/JPY relies predominantly on US yields. An uptick in inflation expectations in today’s University of Michigan report could restore the Dollar’s advantage. In the absence of such a trigger, the fundamental backdrop accommodates moderate Yen strengthening.

Recommendations: SELL 158.00, SL 158.35, TP 157.30.