Continuous weakness in the Yen after OPEC deal

The Japanese Yen is the worst performing currency in Asia, following the first OPEC output limit deal since 2008, resulting in an immediate reaction by investors to seek higher yielding assets such as the Canadian, Aussie or New Zealand Dollars while dumping the Yen.

USD/JPY has touched a 1-week high of 101.40, fast approaching a critical resistance on the daily at 101.50. Meanwhile, GBP/JPY is trading with strong impetus, last at 132.20 day highs (not seen since Sept 23th), while AUD/JPY has broken the 78.0 handle, last at 78.10 after reaching quotes as high as 78.20.

Historic OPEC deal

As Kathy Lien, Co-Founder at BK Asset Management explains: "Currencies traded quietly for most of the North American session until OPEC announced that it reached a deal to cut production. This is the first production cut in 8 years and highlights the frustration that oil producing nations feel about the 50% drop in crude prices over the past 2 years. With profits being squeezed the battle for market share can't go on and this deal ushers in a new period of cooperation between OPEC nations and specifically between Saudi Arabia and Iran. According to OPEC sources, production will be cut by 750k barrels to 32.5 million barrels a day. The cut won't take place until November and a committee will be set up to determine the level of reduction for each member. "

USD/JPY outlook

Taking a step back, in the big picture, Valeria Bednarik, Chief Analyst at FXStreet, analysing USD/JPY, wrote: "Despite in a consolidative phase, the dominant bearish trend remains firm in place with the pair trading not far from its year low and below a bearish 100 DMA, these days around 102.80."

In the short term, Valeria notes: "The pair has turned neutral, as the 100 SMA is now pretty much horizontal around the mentioned Fibonacci level, whilst the technical indicators head nowhere, stuck around their mid-lines. In the 4 hours chart, the 100 SMA has accelerated its decline, and converges with the 200 SMA around 101.50, while technical indicators diverge from each other, as the Momentum heads north whilst the RSI resumed its decline, both within neutral readings."