USD/JPY: bears targetting break of 100 on potential bearish Tokyo open

USD/JPY has been driven on the back of risk sentiment ever since the BoJ and FOMC last week, the U.S. presidential debate, OPEC, and now that the European banking sector's woes have come back to the forefront of the markets.

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USD/JPY dropped heavily to test the 100.00 level in the US shift after a double top at 101.80 and the aforementioned concerns in markets sent investors to the safe havens - the yen rallied across the board. However, looking ahead now, analysts at Bank of Tokyo Mitsubishi explained that data releases and announcements will test the direction of USD/JPY tomorrow and next week. "The BoJ releases its JGB purchase plans for October, which will show how Governor Kuroda intends to control the yield curve. Changes in JGB purchases may be slow, as the BoJ’s September policy statement did not detail concrete plans, less directive."

We now await the Tokyo open and thinner markets in early Asia to see how the Yen fares. A follow on sell-off in global equities could see USD/JPY breaking below 100.00 for the first time since late august business that had lows of 99.54. CPI data for Japan will be out shortly ahead of Tokyo open as a potential catalyst as well.

USD/JPY levels

From a technical point of view, Valeria Bednarik, chief analyst at FXStreet explained that in the short term, the downward potential is moderated, given that in the 1 hour chart, the price is above its 100 and 200 SMAs, whilst technical indicators are turning higher within bearish territory. "In the 4 hours chart, however, is the upside the one looking limited, given that the early rally stalled around the 100 and 200 SMAs, while technical indicators are retreating within positive territory, supporting some further slides, at least towards the critical 100.65 level."