JPY is underperforming into this weekend's upper house elections - Scotiabank

The Japanese Yen (JPY) is weak, down 0.6% against the US Dollar (USD) and underperforming most of the G10 currencies amid broad-based USD strength, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

Trade data seem soft & credit rating risk is up

"Japan's June trade data disappointed, and an unexpected contraction in exports delivered a smaller than expected surplus. National CPI data are scheduled for release at 7:30pm and headline is expected to moderate from 3.5% y/y to 3.3% y/y."

"Japan's upper house election remains a core near-term risk for both the currency and the bond market, as market participants consider the fiscal implications of this weekend's vote. Media are also reporting on local banks' concerns about the country's credit rating."

"Fundamentally, yield spreads have shown remarkable stability over the past week or so, and movement in USD/JPY has largely followed the options market with a significant decline in the premium for protection against USD/JPY downside. USD/JPY's technicals are bullish, and the renewed push above 148 resistance has shifted our focus to the 200 day MA (149.71)."