JPY: Asia Wrap - USD/JPY Doing Work Around The 145.00 Interest
The Asia-Pac USD/JPY range has been 144.66 - 145.16, Asia is currently trading around 145.00. USD/JPY has had a muted session trading around some decent Option interest in the 145.00 area.
- Japan's May PPI was below market expectations, falling 0.2% m/m (against a +0.2% forecast). April's rise was revised to +0.3% (from 0.2%). In y/y terms, we printed 3.2%, against a 3.5% forecast (prior was 4.1%). In terms of the detail, manufacturing PPI was down 0.4%m/m. Weakness was evident in commodities, particularly petroleum, coal (-4.8%m/m). Iron ore and steel were also down in m/m terms. Import prices for commodities were down 1.1%m/m, continuing a negative trend, now off 10.3% in y/y terms.
- (Dow Jones) - “October may be the last chance for the Bank of Japan to raise interest rates, says Norinchukin Research Institute economist Takeshi Minami. Consumer inflation is expected to slow in the summer and slip below 2% after the start of 2026, he says.”
- Some large option interest around these levels has seen it do some work around 145.00.
- The market still seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risk of pullbacks increase.
- With the failure to break below 142.00 last week, price is back in its recent 142.00 - 147.00 range and will need a break either side of that to get a clearer direction. US CPI tonight will dictate price action. Expiries below show a lot of interest around the 145.00 area.
- Options : Close significant option expiries for NY cut, based on DTCC data: 145.00($1.14bm). Upcoming Close Strikes : 143.00($1.28b June 12), 140.00($1.22b June 12), 145.00($4.54b June 16).
CFTC data shows Asset managers maintained their already extensive JPY longs, and leveraged funds try again to build their own longs.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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GOLD: Gold Falls Again as Optimism Grows
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
FOREX: Antipodean Wrap - AUD & NZD Outperform
The S&P is up 1.4% this morning after gapping on thin liquidity at the Asian open. It has held these gains remarkably well for now, with these early Monday morning moves having a habit of failing. There seems to be a view that the outcome of these talks could have significant implications going forward as China now sees itself coming to the negotiating table as a peer and not as a subordinate. Hu Xijin, former Editor-in-Chief of the Global Times, remarked in a recent Weibo post: “China has achieved the most equal negotiation with the United States among all nations. The two sides had been at loggerheads, but their first official contact yielded substantial results—an unexpected turn of events. I believe this breakthrough is precisely the result of China’s readiness to stand firm and its unwavering commitment to principle.” See this X link for more details https://x.com/ShanghaiMacro/status/1921759301284376957
- AUD/USD - Asian range 0.6410 - 0.6432, the AUD is currently dealing around 0.6435. AUD has outperformed this morning especially in the crosses. Good demand was seen on Friday sub 0.6400, on the day this could continue to provide support. A break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 93.40 - 93.99, price goes into London trading around 93.75. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- NZDUSD - Asian range 0.5910 - 0.5931, going into London trading around 0.5935. On the day there is potential for NZD to continue to outperform as the market digests an outcome from the talks that many thought not possible. First support is right here around the 0.5900 area but more importantly the support around 0.5800 needs to hold to keep the bulls in the drivers seat.
- AUD/NZD - Asian range 1.0833 - 1.0859, the Asian session is currently trading 1.0845. Sellers continue to provide headwinds for the cross just above 1.0850, a sustained move back above 1.0900 would negate the bearish trend.
Fig 1 : AUD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded lower within a range of 110-15+ to 110-19+during the Asia-Pacific session. It last changed hands at 110-19, down 0-07 from the previous close.
- The US 2-year yield is higher, dealing around 3.91%, up 0.02 from its close.
- The US 10-year yield is higher, dealing around 4.40%, up 0.02 from its close.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.
- Yields have all moved higher this morning as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, target back towards the top end of the range 4.45/50%.
- Data/Events : US CPI Tomorrow
