JPY: Asia Wrap - USD/JPY Can't Move Lower With Risk
The Asia-Pac USD/JPY range has been 144.74 - 145.22, Asia is currently trading around 145.00. USD/JPY has drifted sideways in a muted Asian session. USD/JPY continues to find demand on dips back to 144.00/50 in the short-term, the wider range continues to hold.
- JAPAN DATA - Local Investors Offshore Bond Purchases Rebound : The standout from last week's offshore weekly investment flows was a surge in Japan buying of overseas bonds, see the table below. The near 1.6trln in net purchases was the largest since mid May and ends a run of consecutive weeks of outflows in this space.
- Elsewhere, Japan investors sold overseas equities for the 5th straight week, albeit in reduced sized compared to the prior week.
- USD/JPY again found decent demand overnight back around the 144.50 area. This price action stands out considering the risk backdrop and shows a market that is already very long JPY. A break below 144.00 is needed to see a move to the lower end of the range.
- Price is comfortable in its recent 142.00 - 146.00 range and will need a break either side of that to get a clearer direction.
- The market is clearly looking for a move lower in USD/JPY but with positioning quite large now we have seen the risk of pullbacks increase. A break above 146.00/50 would be needed to challenge the conviction of any shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 146.00($1.92b June 20), 143.00($925m June 20)
Fig 1 : USD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JPY: Asia Wrap - Kato Remarks Test Overnight Lows
The Asia-Pac range has been 144.73 - 145.51, Asia is currently trading around 144.80. Early demand for USD’s going into the Japanese Fix was met by fresh selling reacting to comments from the Japanese Finance minister Kato, this saw a quick move to revisit the overnight lows where some demand again returned.
- "*KATO: ARRANGING BESSENT MEETING TO DISCUSS TOPICS INCLUDING FX, TALKS W BESSENT ON FX WILL SEEK TO FOLLOW EXISTING STANCE" - BBG
- Akazawa made comments this morning reiterating his commitment to seek a removal of “All US Tariffs”.
- Very poor demand seen in the 20-year JGB auction today, tail the longest since 1987.
- Nippon Steel pledged to invest more in US Steel — including building a new mill and preserving jobs — if the US approves their merger, people familiar said.(BBG)
- USD/JPY continues to test its support and the price action is interesting considering the bounce in stocks.
- The support around 144/145 looks important now and a break would once again bring the focus back to the pivotal 140.00 area. The price action though does not look great and the market is still more comfortable selling rallies.
Options : Closest significant option expiries for NY cut, based on DTCC data: 145.50($1.03b May 20), 145.00($789.7m May 20) , Upcoming Strikes : 145.00($2b May 23),144.00($1.37b May 23), 140.00(1.67b May 23)
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
CHINA: Bond Futures Down Modestly
- China's bond futures are down modestly today across all maturities.
- The 10YR is down -0.02 at 108.78 and maintains its position at the mid-point between the 20-day EMA of 108.85 and the 50-day EMA of 108.71
- The 2YR is down -0.03 at 102.35 and remains well below all major moving averages. The nearest being the 20-day EMA of 102.50.
- China's 10YR government bond is higher in yield by +1bp at 1.66%
- China announced a cut in their loan prime rates today by -10bps as expected by the market.
