JPY: Asia Wrap - Quiet session trading Around 144.00
The Asia-Pac USD/JPY range has been 144.28 - 143.67, Asia is currently trading around 144.15. USD/JPY had a brief spike going into the Japanese Fix but drifted back off that high for the rest of our session before finding a bid late on.
- Bloomberg - “"Japanese government bonds may find short-term support as authorities signal efforts to rein in volatility. A draft of the government's annual fiscal blueprint highlights the need to boost domestic holdings of JGBs to help cap rising yields, Bloomberg News reports. While the proposal lacks specifics, it underlines broader plans for fiscal consolidation and more stable issuance.”
- “The 10-year auction earlier this week drew strong demand, but attention now shifts to Thursday’s 30-year sale -- the true litmus test for investor appetite. Ultra-long bonds remain the market’s weak point, and their performance will determine whether recent volatility persists.”
- MNI POLICY: June Tankan To Offer BOJ View On Rate Hike Path. TOKYO - Bank of Japan officials will closely watch the upcoming June Tankan survey, due July 1, for signs of resilience in non-manufacturers' sentiment and upward revisions to major firms’ capital investment plans, which would support its baseline view for a gradual rate-hike path, MNI understands.
- The market still seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risks of pullbacks increase. Resistance around the 146.00 area held perfectly and the JPY bulls would be quite relieved as well as vindicated by the price action.
- A break below 142.00 in USD/JPY and all eyes will once again turn to the pivotal 140.00 area. Sellers should emerge on this bounce back towards the 144.00/145.00 area for now. The market might have to wait for Friday’s NFP print to see if it can make another attempt lower.
Options : Close significant option expiries for NY cut, based on DTCC data: 143.50($698m), 145.00($629m). Upcoming Close Strikes : 140.00($2b June 5), 142.00($1.17b June 5), 148.00($1.21b June 5).
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
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OIL: Crude Holds Onto Early Session Losses Following OPEC Decision
Oil prices are sharply lower today following OPEC’s decision on the weekend to increase output by more than 400kbd, close to the higher-than-expected amount in April. The market was already concerned about a surplus and then US tariffs were announced and now OPEC is adding more to supply. It appears to be now focused on increasing its market share rather than supporting prices and by allowing all members to increase output it is punishing overproducers.
- WTI is down 4.0% to $55.93/bbl in APAC trading off the intraday low of $55.30, below initial support at $56.39 but still above the bull trigger at $54.67. Brent is 3.7% lower at $59.03/bbl after falling to $58.50, holding above the bull trigger at $58.00 but below support at $59.30.
- Goldman Sachs has cut its oil forecast by $2-3/bbl in reaction to the further rise in OPEC production and Morgan Stanley has reduced its H2 2025 Brent projection by $5 to $62.50, according to Bloomberg.
- US President Trump said Sunday (ET) that there could be a number of trade deals completed this week. The main worry has been over the possibility of an agreement with China, the world’s largest oil importer, but Trump said that Chinese and US officials were talking about “different things”. He plans to travel to the Middle East this month.
- Later US services ISM/PMI data are released. The UK is closed.
FOREX: G10 Wrap - USD/TWD Drives The USD Lower
The BBDXY has had an Asian range of 1219.84 - 1224.72, Asia is currently trading around 1221. Bloomberg - French PM Francois Bayrou plans to unveil a debt reduction and economic boost strategy, potentially seeking public approval through a referendum." The USD has traded very weakly across the board today in Asia driven by the USD/TWD. Asian holidays and thin liquidity have not helped but almost 8% in 2 days is an extreme event and you would expect buyers to reemerge sub 30.00.
- EUR/USD - Asian range 1.1297 - 1.1347, Asia is currently trading 1.1335. Intra-day support is around the 1.1250 area, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3260 - 1.3301, Asia is currently dealing around 1.3290. Intra-day support is around the 1.3250 area, then the pivotal 1.30/31 support is next.
- USD/JPY - Asian range 144.07 - 145.00, has drifted lower for most of the Asia session. Look for some support initially back towards 143.00, but we would probably need another catalyst to test below that again. Which probably makes a range of 143-147 for the week most likely.
- USD/CNH - Asian range 7.1893 - 7.2187, Chinese markets are shut for a holiday. The Longs in Usd/Asia are now capitulating, this was perceived to be the cleanest expression of the tariff trade but this move lower in USD/TWD is causing forced selling as stops are hit.
- Cross asset : SPX -0.75%, Gold $3257, US TYM5 111-08, BBDXY 1221, Crude oil $55.98.
- Data/Events : US ISM Services PMI
Fig 1: USD/TWD Spot Weekly Chart
Source: MNI - Market News/Bloomberg
BOJ: MNI BoJ Review – May 2025: Policy Unchanged With A Dovish Tilt
EXECUTIVE SUMMARY
- At its May 1 meeting, the Bank of Japan (BoJ) voted unanimously (9-0) to maintain its policy rate at 0.5%, citing increasing risks of a global economic slowdown, particularly in light of escalating US tariffs.
- In its Outlook Report, the BoJ downgraded its forecasts for real GDP growth and core inflation. The central bank also delayed its expected timeline for achieving its 2% inflation target.
- Despite the overall dovish shift, Governor Kazuo Ueda attempted to maintain a degree of flexibility in future policy moves. In his post-meeting press conference, Ueda emphasised that a delay in reaching the inflation target does not necessarily imply a delay in future rate hikes.
- The BoJ now appears to be in a more reactive posture, allowing for flexibility in response to global developments rather than committing to a predetermined tightening path.
- Reflecting the shift in the BoJ’s focus from domestic inflation to external risks, some market analysts have revised their expectations for the timing of the next rate hike. While earlier forecasts anticipated a move in the third quarter of 2025, this has now been postponed to the fourth quarter.
- In summary, the BoJ’s May meeting highlighted a more cautious and data-dependent approach amid mounting global uncertainties.
- Full review here:
