US TSYS: Asia-Pac: Yields Slightly Higher In A Quiet Session

The Asia-Pac USD/JPY range has been 147.93-148.58, Asia is currently trading around 148.20, +0.50%. USD/JPY collapsed lower with US yields on Friday in reaction to the NFP, again challenging its support on a 146 handle. This support looked destined to be challenged to start this week but news of Ishiba stepping down has given the JPY bears another reprieve as the market has gapped higher on the open in response. CFTC data shows leveraged funds again added a decent clip to their short JPY position last week so this morning's move will have taken some pressure off them to start the week. Is this news enough to turn USD/JPY higher ? I suspect not but time will tell.

• MNI BRIEF: Japan Q2 GDP Revised Up On Consumption. Japan’s economy expanded faster in April-June than initially estimated, as stronger private consumption offset weaker capital investment, second preliminary GDP data from the Cabinet Office showed Monday.
• Focus will now turn to the LDP leadership race. When Ishiba secured the PM position last Oct, the runner up was Sanae Takaichi. Via ABC news: "A Nikkei survey held at the end of August put Ms Takaichi as the most "fitting" successor to Ishiba."
• Takaichi could arguably generate the most significant market reaction if she is successful becoming the new PM, as she has been outspoken in terms of being more dovish in terms of the BoJ outlook and looking to boost fiscal spending.
• "JAPAN LDP'S AIZAWA: WILL SET LEADERSHIP ELECTION DATE TUESDAY" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($1.1b), 149.00($882m), 145.75($792m).Upcoming Close Strikes : 145.75($1.12b Sept 11), 150.00($1.1b Sept 9)  - BBG.
• CFTC data shows last week asset managers again added to their JPY longs after a consistent period of reduction +78427( Last +76761), leveraged funds though again used the dip to add a decent clip to their newly built short JPY position -66914(Last -52275). One of them is going to be wrong.

Fig 1 : JPY CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P

Gold reached a new record of $3600.16/oz on Friday following disappointing August US payrolls data. It has been unable to return to that level during Monday’s APAC session but has range traded between $3579.73 and $3597.26 and is currently down 0.1% to $3583.5 as the US dollar is marginally stronger and yields slightly higher. Non-interest bearing bullion has found support this month from growing Fed easing expectations. 

• Fed independence remains in focus too with markets awaiting the legal ruling on whether President Trump can remove Governor Cook.
• Silver is underperforming falling 0.9% today to $40.64 after a low of $40.532. It spiked to $41.066 early in the session.
• Equities are generally stronger today with the S&P e-mini up 0.1%, Nikkei +1.3% and Hang Seng +0.4% but the CSI 300 is flat. Oil prices are higher with WTI +1.2% to $62.60/bbl. Copper is up 0.1%.
• Later August NY Fed 1-yr inflation expectations, July US consumer credit and German July trade & IP print. The focus of the week will be on Tuesday’s US payroll benchmark revisions, Wednesday’s August PPI and Thursday’s August CPI.

The AUD/USD has had a range of 0.6546 - 0.6568 in the Asia- Pac session, it is currently trading around 0.6560, +0.05%. The AUD tried to move higher initially on NFP but momentum failed and it spent the rest of the N/Y session trading heavy and drifting lower. The AUD remains in the middle of its recent multi-month range of 0.6350-0.6650 with little clear long-term direction for now.

• Tuesday sees September Westpac consumer confidence which rose each of the four months to August helped by lower rates and the prospects of further RBA easing. At 98.5 last month, it is now approaching the neutral 100-level. The NAB August business survey is also out on Tuesday. Business confidence has been trending higher since March and is positive again. Conditions however remain soft, although June/July printed above the 2025 average. Employment and cost/price components will be monitored closely.
• MNI INTERVIEW: Fed To Cut Faster After Weaker Jobs - William English. "There's no doubt the labor market report was soft, and that causes them to lean in the direction of easier policy," he said in an interview Friday. "It leans in the direction of easing policy further, faster than maybe the Fed had been inclined to."
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6475(AUD596m), 0.6500(AUD531m), 0.6625(AUD445m). Upcoming Close Strikes : 0.6650(AUD597m Sept 11) - BBG
• CFTC Data last week shows Asset managers reduced their shorts for the first time in a while -66025(Last -78758), the Leveraged community though look to be rebuilding their own shorts after winding them down -11860(Last -6447).
• AUD/JPY - Asia-Pac range 96.95 - 97.33, Asia is trading around 97.20.The pair looked to have topped out again after NFP, but this morning’s Ishiba news has thrown a spanner in the works. A sustained break above 97.50/98.00 is needed to reignite the upward trend.

Fig 1: AUD CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P