USD/JPY slides to below 155 for first time since February

A new week begins with the yen remaining the main focus in FX markets. After a slight recovery on Friday, USD/JPY faces renewed selling pressure, dropping through the 155.00 mark for the first time since February.

This is a significant setback for dip buyers and, technically, it paves the way for more downside if the break holds.

The move also broke below key daily resistance near 155.50, adding to its significance.

As previously noted:

Be it any real intervention or yen shorts/speculators bailing for just a bit last week, the line on the charts is clear. The key risk now is on any break below the 155.00 level. Hold the line and dip buyers will stay in with a shout to try and work towards a rebound. But break below, and sellers will then find fresh legs to keep this downside run going. The next key downside target will then be the January and February lows closer to 152.00-25.

The yen is finding relief from both technical developments and modest fundamental shifts.

One factor is the uptick in hawkish BOJ expectations last week. However, traders have fully priced this factor in, limiting any yen upside from a potential BOJ decision.

The second factor involves the GPIF possibly considering changes to its asset allocation. This is not a new development; Finance Minister Katayama has been raising it since July.

But a report last week indicated that the GPIF management committee held an unusual meeting on 21 August, its first publicly disclosed meeting in a holiday month in seven years.

The agenda reportedly featured a report on operational matters, including asset allocation execution, even though the committee decided in March that no review of holdings was necessary. This fuels further speculation that the GPIF might announce a shift toward domestic assets in the future.

For context, the current allocation already provides some flexibility to raise domestic asset holdings. The GPIF's current plan permits a 6% deviation range around the 25% target allocation for domestic bonds.

A formal announcement may only come later in October, if at all. So, bear this in mind.