JPY: Asia Wrap USD/JPY - A Whippy Session With An Underlying Bid
The Asia-Pac USD/JPY range has been 143.85 - 144.77, Asia is currently trading around 144.35. USD/JPY has had a very whippy session with a big spike seen into the Japanese Fix, it drifted lower from there but bounced again in our afternoon to make a new high around 144.77.
- " Regarding a recent spike in super-long yields on government debt, market participants cited the unwinding of existing positions and a drop in demand, Bank of Japan Governor Kazuo Ueda says. Moves in short- and long-term yields tend to affect the economy more than those in super long-term yields. Will monitor market developments closely along with their economic impact by keeping in mind that major moves in super long-term yields can affect shorter-term yields." (per BBG)
- "A Japanese government advisory panel is urging authorities to intensify fiscal consolidation efforts, according to Bloomberg News on Tuesday, citing a proposal submitted to Finance Minister Katsunobu Kato on the same day. This comes as the Bank of Japan's ongoing monetary tightening increases the risk of higher debt-servicing costs for the nation, said the news wire." (per MTN)
- (Bloomberg) - “The JGB 40-year sale has come in weak after all. The bid-to-cover dropped back to 2.21, the weakest since July. And the yield of 3.135% is above the poll estimate of 3.085%. That global bond bounce may fade.”
- This move yesterday would have caught out a few shorts, but we are approaching resistance back towards 145.00/146.00 which should see some sellers emerge.
- It is worth noting though we are heading into the corporate month-end and this could see some USD demand over the next day or 2 making it uncomfortable for the considerable JPY longs that have been built up.
- The market has been very confident of a move lower in USD/JPY but with positioning quite large now the risk of pullbacks does increase. Resistance is now back towards 145.00/146.00 area first up.
Options : Close significant option expiries for NY cut, based on DTCC data: 145.00($2.14b), 143.00($1.98b), 144.00($1.67b). Upcoming Close Strikes : 143.00($3.34b May 30), 140.00($2.78b May 30).
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
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GOLD: Gold Softer Again as Profit Takers Move In.
- Gold has kicked off the week with a fall in Asian trading, down -0.80% today.
- Up over 25% year to date on trade war concerns, gold is one of the best performing assets in what is proving to be a volatile start to the year.
- Reaching a new all-time high of US$3,423.98 this month, gold has surged through most predictions at the beginning of the year.
- Gold started the trading week this week in Asia at $3,325.21 and fell to $3,292.74
- Key central banks globally have reported increases to their gold reserves, boosting demand for the precious commodity whilst China’s Gold Association reported a 6% decline in gold consumption in Q1.
- Data out from the CFTC last Friday showed that Hedge Funds have reduced the number of their gold longs to the lowest level in one year indicating that the rally for now may be stalled.
- For now, all major moving averages are pointing upwards: a sign that the bullish momentum remains in place but with the CFTC positioning data, it is possible we could see a modest week for gold should trade war headlines not dominate.
OIL: Geopolitical Uncertainty Clouding Oil Outlook
Oil prices are moderately higher during today’s APAC session as markets watch and wait for progress on US trade negotiations. WTI is up 0.5% to $63.34/bbl off the intraday low of $62.88/bbl and Brent is +0.3% to $67.10/bbl after falling to $66.70 earlier. The USD index is off its high to be little changed on the day.
- The oil markets looked through today’s China economic press conference which included a statement that rates and the RRR would be reduced and that the 5% 2025 growth target is expected to be met.
- Geopolitical uncertainty is at the fore with significant uncertainty around US tariffs, threats to increase sanctions on Russia if it doesn’t reach a deal on Ukraine and ongoing US-Iran talks on Iran’s nuclear programme. In addition, with a meeting on May 5 the outlook for OPEC production is also unclear after the larger-than-expected increase in April.
- Later US April Dallas Fed manufacturing and UK April Nationwide house prices are released. ECB’s de Guindos presents ECB’s 2024 Annual Report. Oil markets will be monitoring Friday’s US payrolls.
FOREX: Antipodean Wrap - AUD & NZD Drift Sideways
Risk has struggled to hold onto its gains leaking lower in Asia as the market gives back some of its gains made on Friday night. (Bloomberg) -- RBNZ increased its foreign currency intervention capacity to a record NZ$26.7b at the end of March as it sold New Zealand dollars, according to data released by the central bank Monday. (Bloomberg) -- S&P Global Ratings warned Australia’s prized AAA sovereign credit rating may be at risk if election campaign pledges result in larger structural deficits, debt and interest costs, highlighting fiscal pressures facing the next government.
- AUD/USD - Asian range 0.6373 - 0.6407, AUD has traded sideways most of the Asian session. Dips back to the 0.6250/0.6300 area should continue to find demand while the market continues to focus on a lower USD.
- AUD/JPY - Asian range 91.54 - 92.04. Price goes into the London trading around 91.80, testing the highs within the last 10 days range of 0.8950/0.9200. Goldman’s like AUDJPY as the best vehicle to tactically express JPY strength.
- NZDUSD - Asian range 0.5943 - 0.5968, going into London trading around 0.5960. Demand should return first around 0.5900, then around the 0.5850 area.
- AUD/NZD - Asian range 1.0717 - 1.0737, the cross has drifted sideways in the Asian session. Watch for supply to return on any bounce back towards the 1.0800 area.
