LONDON, Nov 6 - USD/JPY remains stuck in a well-defined 156-159 range. This is despite weakness in US equities and oil, and lower US yields, all of which should point to JPY upside. Though the yen has strengthened on the crosses, price action in USD/JPY itself has been tepid.

That said, USD/JPY downside has been an effective hedge for this AI-led sell-off. As the chart below shows, the 1-month correlation between USD/JPY and the tech-heavy Nasdaq has moved sharply into positive territory, supporting the view that the JPY is a better equity hedge than the USD, and it is a key reason the topside in USD/JPY has been truncated.

The same logic explains why US data has had little effect. Friday's robust US payrolls print proving as much with USD/JPY marginally impacted. Thus, the focus instead is on the path of US equities, particularly tech. Another lurch lower would likely see USD/JPY revisit 156, while a sizeable rebound would test the range highs at 159. A clean break there would open up 160.

However, given the softer US tech sentiment and considerably lower yields and oil from where we have been recently, these factors still lean in favour of the yen.
USDJPY vs Nasdaq correlation


USDJPY vs oil stocks and yields

Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))