JPY: Asia Wrap - USD/JPY Extends Above 148.50

The Asia-Pac USD/JPY range has been 146.20 - 147.20, Asia is currently trading around 147.00, +0.25%. USD/JPY continues to frustrate the market and has given back a large portion of its recent gains, around 250 points in 2 days. The move lower in US yields is providing serious headwinds for the pair and the USD seems to be floundering in all scenarios. We are probing the first support around 146.50 this morning where some demand should be seen first up as the market digests the trade deal with the US, next level is the pivotal 144.00/145.00 area.

• Kelly Eckhold(Westpac) on LinkedIn: “Trump trade deals progressing. Japan interestingly opens up the rice market in exchange for their tariff being reduced to 15%. That’s a huge change for Japan where rice imports have not been allowed.”
• "ISHIBA: DEAL WON'T SACRIFICE JAPAN AGRICULTURE AT ALL, WILL INCREASE US RICE IMPORTS WITHIN EXISTING BRACKET" - BBG
• MNI: BOJ's Uchida - Gradual Rate Hike, But No Pace Signalling. TOKYO - Bank of Japan Deputy Governor Uchida stated on Wednesday that the central bank will maintain its approach of gradually raising the policy interest rate, citing persistently low real interest rates. However, he offered no guidance on the timing or pace of future rate hikes, citing elevated levels of uncertainty.
• JAPAN Local Media States PM Ishiba To Resign In August : Headlines have crossed from local newspaper Mainichi that PM Ishiba will resign by the end of August. Via Rtrs: "Japan's Prime Minister Shigeru Ishiba has made up his mind to resign, Mainichi newspaper reported on Wednesday." A later headline from the Yomiuri newspaper reported he may announce resignation as soon as this month.
• "JAPAN 40-YEAR BOND BID-COVER RATIO 2.13 VS 12-MONTH AVG 2.48, SALE DRAWS WEAKEST DEMAND RATIO SINCE 2011, BOND FUTURES HOLD LOSS AFTER 40-YEAR DEBT AUCTION" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($734m), 148.00($902m).Upcoming Close Strikes : 147.50($1.5b July 24), 145.00($1.15bm July 25) - BBG.
• CFTC data shows Asset managers starting to reduce JPY longs more aggressively +71610, while leveraged funds have started to build into a new short JPY position -12606.

Fig 1 : USD/JPY Spot 120min Chart

Source: MNI - Market News/Bloomberg Finance L.P

The AUD/USD has had a range of 0.6548 - 0.6569 in the Asia- Pac session, it is currently trading around 0.6565, +0.15%. The pair pushed higher in the New York session as the USD came back under pressure with US yields pushing lower. The follow through below 0.6500 was quite disappointing for AUD shorts but with Stocks making new highs and risk outperforming, it makes it a hard environment for AUD/USD to collapse in. The pair looks to be consolidating in a 0.6450 - 0.6600 range as the market awaits a catalyst to provide clearer direction.

• AUSTRALIA DATA: Westpac Lead Indicator Signals Around Trend Growth. The Westpac lead indicator for June fell 0.03% m/m following an upwardly-revised 0.05% rise. The 6-month rate, which leads detrended growth by 3 to 9 months, is hovering just above zero signalling that growth is likely to return to around trend towards year end. Westpac believes that sluggish growth and the Q2 CPI outcome on July 30 will enable the RBA to cut 25bp on August 12 but it will maintain a “gradual easing cycle”.
• (Bloomberg) -- Australia’s economy will expand 0.5% in 2Q, according to the latest median estimate from a Bloomberg News survey conducted from July 17 to July 22.
•  "AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY - KEEPS ITS MACROPRUDENTIAL POLICY SETTINGS STEADY" - RTRS
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6525(AUD603m), 0.6500(AUD445m), 0.6580(AUD403m) . Upcoming Close Strikes : none - BBG
• CFTC Data shows Asset managers have maintained their shorts -38267, the Leveraged community added slightly to their shorts to -20048.
• AUD/JPY - Today's range 95.85 - 96.55, it is trading currently around 96.45, +0.35%.   The pair continued to trade heavily overnight. The support has held between 95.00 - 96.00, demand has materialised first up, and the trade deal between the US and Japan should provide it with some tailwinds initially.

Fig 1: AUD/JPY spot 120min Chart

Source: MNI - Market News/Bloomberg Finance L.P

The TYU5 range has been 111-06 to 111-10+ during the Asia-Pacific session. It last changed hands at 111-07, down 0-06 from the previous close. 

• The US 2-year yield has edged higher trading around 3.844%, up 0.01 from its close.
• The US 10-year yield has moved higher trading around 4.365%, up 0.02 from its close.
• The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, expect supply around 4.30/35% first up. A close back below 4.30% would begin to get the bulls excited once more and the chopfest within the range will continue.
• Nick Timiraos on X: Goldman: "Market participants seem to agree that the risk to Fed independence is rising, as 5-year 5-year forward inflation swaps have recently decoupled higher from their prior close relationship with the 2-year note yield."
• Bloomberg - “Lawrence Summers backed Scott Bessent’s questioning of the Fed’s non-monetary policy activities, saying that there were some areas that are distinct from the broader issue of central bank independence.”
• Jeff Weniger on X: “Understand this and you'll be ahead of 99% of the public on official inflation dynamics. Similar to work by my WisdomTree colleague @JeremyDSchwartz, we see that the CPI for rent is still playing catch-up after the Covid money splash. The CPI reports of 2025 are overstating rent and will continue to do so until the catch-up is complete.” See Graph Below.

• Data/Events: MBA Mortgage Applications, Existing Home Sales

  Fig 1: CPI Vs CPI For Rent

  

  Source: MNI/@JeffWeniger/Refinitiv