JPY: Asia Wrap - USD/JPY Consolidates Above 147.50
The Asia-Pac USD/JPY range has been 147.52 - 148.02, Asia is currently trading around 147.65, -0.03%. USD/JPY found good demand around 146.00 last week and has bounced nicely off its first support. Some demand for USD’s was finally seen as the market takes some risk off the table heading into this week which is filled with event risk and also month-end. Corporate month-end to start the week with most of the USD demand most likely to be seen tomorrow.
- First Squawk on X: “JAPAN SAYS ONLY 1–2% OF $550B U.S. FUND WILL BE DIRECT INVESTMENT; REST TO BE LOANS. Japan expects that just 1% to 2% of its recently announced $550 billion partnership fund with the U.S. will involve actual capital investment, with the remainder provided through loan-based financing, officials said.”
- (Bloomberg) - "Japan’s pledge for a $550 billion US investment fund may have been key to Tokyo getting a trade deal, but neither side seems to agree on what it looks like, Gearoid Reidy writes. The market’s sigh of relief about this pact might still be premature.”
- “The Bank of Japan is likely to hold at its meeting in the coming week. We’ll watch for its assessment of Japan’s trade deal with the US and view on the impact of tariffs on the economic outlook. Inflation pressures still point to the need to pare stimulus. We expect that in October.” - BBG
- "JAPAN ISHIBA CABINET APPROVAL RATING DROPS TO 34.6% IN FNN POLL" - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 148.00($1.02b),148.25($1.04b).Upcoming Close Strikes : 145.00($1.3b July 29), 146.00($971m July 31) - BBG.
- CFTC data shows Asset managers surprisingly added slightly to their JPY longs +72326( Last +71610), while leveraged funds have slightly reduced their newly built short JPY position -11571(Last -12606).
Fig 1 : JPY CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
