JAPAN DATA: April National CPI Still Shows Firm Underlying Price Pressures

Oil rallied on Tuesday following increased US sanctions on Iran and better risk sentiment and has continued to trade higher in early APAC trading today following comments from President Trump that he wouldn’t replace Fed Chair Powell and that China’s tariffs wouldn’t finish at the current 145%. The US dollar recovered somewhat from Monday’s fall with the USD index up 0.5%.

• WTI rose 1.8% to $63.54/bbl after reaching $64.36, below initial resistance at $64.49. The benchmark is up another 1.1% to $64.34 today but is still down over 9% this month. The bear trigger is at $54.67.
• Brent is up 2.4% to $67.82/bbl following a high of $68.04 but the move above $68.00 was short lived. The benchmark approached initial resistance at $68.14, 17 April high, but fell short. It continues to trade above the April 9 low though maintaining a more positive short-term tone but the rally remains corrective as the oversold position unwinds. Initial support is at $62.00 and the bear trigger at $58.40. It is now down 9.3% in April.
• Bloomberg reported that there was a significant US crude stock drawdown of 4.57mn barrels last week, according to people familiar with the API data. Products continued their decline with gasoline down 2.18mn and distillate 1.64mn suggesting that demand is robust. The official EIA data is out later today.
• Despite ongoing talks between the US and Iran on its nuclear programme, US actions on Tuesday were tougher against the oil producer with President Trump supporting Israel’s stance on Iran and new US sanctions on an Iranian LPG businessmen and his shipping network for allowing oil exports to avoid sanctions. There will also be stricter enforcement.
• Trump is due to travel to Saudi Arabia, Qatar and UAE in May.

The range on Tuesday was 139.89 - 141.67, price opened very bid and has raced to print a high of 143.22 so far. A big bounce in US stock futures and then a second leg higher in Asia as Tesla shares rally up to 7% during its earning call as Elon Musk says he is to pull back significantly from DOGE.

• Treasury Secretary Bessent Tuesday privately told investors the tariff standoff is unsustainable and he expects de-escalation with China. Trump added with comments later from the White House stating that final tariffs on China would not be 145%, while also stating he has no intention of firing Fed Chair Powell (which has been a worry for markets in recent weeks).  
• (Bloomberg) -- “Nomura Holdings Inc. is telling clients to stay invested through the turmoil that’s pervaded financial markets during the escalating trade tensions. With its $1.8 billion acquisition of an asset management business, the Japanese brokerage is putting its money where its mouth is.”
• Risk has managed a significant bounce and the follow through in Tesla after the close has seen USD/JPY shorts quickly pared back after its failure to sustain a break sub 140.00.
• The consensus view has quickly changed now to a short USD bias, should risk actually manage a decent rally these holdings will be challenged.
• On the day sellers should emerge first up around 143, then more importantly the 145/146 area should once more offer good levels for shorts to reengage.
• CFTC data shows Asset managers continuing to add to JPY longs, while leveraged are only just starting to get long, they will be waiting for a decent bounce to add.
• USD/JPY: upcoming notable strikes, 140.00($1.61b), 145.00($1.38b)  Exp Apr 24 NY cut(Source DTCC)
• Data : Jibun Bank Japan Mfg, Services PMI, US S&P Global Services & Manufacturing PMI

Fig 1 : USD/JPY Daily Chart

Source: MNI - Market News/Bloomberg 

In post-Tokyo trade, JGB futures closed weaker, -11 compared to settlement levels, after US tsys finished modestly mixed on Tuesday.

• US curves unwound a large portion of Monday's steepening, with bonds outperforming weaker short-end rates as markets reassessed tariff-tied risks to global trade and the Trump Administration's efforts to meddle with the Federal Reserve's independent policymaking.
• Unwinding of haven demand and a poor 2-year auction saw the yield close 6bps higher at 3.82%. The long end was in the green all session, and the 10-year yield was 1bp lower at 4.40%.
• Europe’s return from its extended Easter holiday improved market depth.
• Risk-on sentiment extended into today’s Asia-Pacific session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears had weighed on broader US asset-related sentiment.
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• Today, the local calendar will see Jibun Bank PMIs and the Tertiary Industry Index. PPI Services is due on Thursday.