JPY: Asia Wrap - USD/JPY Finds Demand On The Dip
The Asia-Pac USD/JPY range has been 147.73 - 148.66, Asia is currently trading around 148.50, +0.45%. The USD had a bit of a roller coaster of a ride yesterday as rumours of a potential Powell sacking gained traction, this was later denied by Trump, though he also left the door open to Powell being dismissed for fraud. What is clear from the price action is the market is very quick to sell USD’s again if given the excuse, the last couple of weeks has been painful for the JPY longs but the market still strongly believes the USD will ultimately end lower and does not want to miss out. Decent demand was seen towards the 147.00 area overnight and would think unless there is confirmation of Powell being dismissed dips lower should be supported initially.
- (Bloomberg) - USD/JPY is seeing a short squeeze as algo systems react to headlines from Fed’s Williams which sound supportive of the US dollar. There was also likely dollar buying going into the Tokyo yen fixing as it was set at 148.51. “WILLIAMS: FACTORS SUPPORTING STRENGTH OF DOLLAR STILL IN PLACE.”
- JAPAN DATA Exports Fall Y/Y For Second Straight Month, Below Forecasts.
- Earlier we saw some verbal jawboning on FX comments from Japan officials. Aoki is the Deputy Chief Cabinet Secretary Via BBG: "AOKI: CONCERNED ABOUT MOVES IN FX MARKET INCL. SPECULATIVE ONES, KEY FOR FX RATE TO MOVE STABLY, REFLECT FUNDAMENTALS"
- Personally I don’t feel the BOJ would consider intervention again unless USD/JPY is back above 155.00 and looking to challenge 160.00 again.
- The USD/JPY market did not hold above its breakout very long, is the mere threat of Powell being dismissed enough to turn around the fortunes of USD/JPY ?
- Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($1.25b).Upcoming Close Strikes : 147.00($1.29b July 22), 145.50($1.29b July 21) - BBG.
- CFTC data shows Asset managers reduced their JPY longs slightly +89331, while leveraged funds have almost squared their newly built JPY longs +5224.
Fig 1 : USD/JPY Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
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FOREX: Asia FX Wrap - The USD Continues To Struggle
The BBDXY has had a range of 1201.63 - 1203.68 in the Asia-Pac session, it is currently trading around 1201.”FX traders will be impressed at the PBOC’s confidence in the yuan, despite all the uncertainty around the Middle East. Meanwhile, US importers are increasingly being asked by their foreign counterparties to settle transactions in currencies other than the US dollar, including renminbi.”(BBG)
- EUR/USD - Asian range 1.1543 - 1.1567, Asia is currently trading 1.1565. EUR has rejected the move above 1.1600 but dips should continue to find demand, first support back towards the 1.1400 area then 1.1100/1200. EUR/USD looked to have broken the pivotal 1.1500 area last week, this needs to be sustained to signal a larger move higher.
- GBP/USD - Asian range 1.3558 - 1.3580, Asia is currently dealing around 1.3575. The GBP continues to hold above its Weekly pivot around 1.3500, it needs a catalyst for the move higher to regain momentum. First support seen back towards 1.3400/50.
- USD/CNH - Asian range 7.1787 - 7.1860, the USD/CNY fix printed 7.1746. Asia is currently dealing around 7.1820. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.40%, Gold $3390, US 10-Year 4.436%, BBDXY 1201, Crude oil $72.18
Data/Events : Germany ZEW Survey
Fig 1: USD/CNH Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
NZD: Asia Wrap - Building For A Move Higher
The NZD/USD had a range of 0.6045 - 0.6072 in the Asia-Pac session, going into the London open trading around 0.6070. A relatively quiet session for the NZD, as it continues to build for an extension higher.
- NZ Data - Food & Power Inflation Higher As Petrol & Rents Ease. Monthly price data was mixed in May with food, power, accommodation and alcohol seeing a rise in inflation, while air travel, rents and petrol fell.
- GDP Preview - Q1 GDP Likely To Be Robust Due To Agriculture & Manufacturing. The focus of the week will be on Thursday’s Q1 GDP release. Bloomberg consensus is forecasting another 0.7% q/q increase in production-based GDP, driven by the primary and manufacturing sectors, leaving the annual rate still down 0.8% y/y but up from Q4’s -1.1% y/y. Thus, expenditure-based GDP should see a significant contribution from agricultural and also services (tourism) exports. This is stronger than the RBNZ’s May forecast of a 0.4% q/q rise.
- The USD’s inability to bounce given the geopolitical backdrop is a worrying sign, the NZD will continue to benefit from its malaise.
- The NZD continues to find solid support around the 0.6000 area and has built a decent base from which to push higher from.
- While the support around 0.5850 holds in NZD/USD there should be buyers around on dips. A clear sustained break above 0.6050/0.6100 and the move could start to accelerate forcing some shorts to further reduce positioning.
- CFTC Data showed Asset managers paring back their shorts slightly over the week, the leverage community did likewise.
AUD/NZD range for the session has been 1.0757 - 1.0777, currently trading 1.0760. A top looks in place now just above 1.0900, the cross topped out last week towards the 1.0800/25 sell area, the first target looks to be around 1.0650.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JPY: Asia Wrap - Probes Lower After BOJ, Focus Turns To Press Conference
The Asia-Pac USD/JPY range has been 144.50 - 145.11, Asia is currently trading around 144.60. USD/JPY has tested lower after the BOJ but has stalled again back towards the 144.50 area, the focus will now turn to the press conference. A market that is very long JPY is having its conviction tested at the moment, especially in the crosses.
- On Hold As Expected, Pace Of Bond Taper Slows : The BoJ kept rates at 0.50%, as widely expected. That decision from the central bank board was unanimous. The bond buying program is unchanged through to end March 2026. The central bank did announce that it would trim bond buying by 200bn/per quarter from April 2026 next year. The current pace had been at a reduction of 400bn per quarter. There was one dissenter to this decision, board member Tamura, who wanted to keep the pace around 400bn. He also argued that long term rates should be determined by the market.
- (Bloomberg)- “Asian currencies are looking increasingly vulnerable as oil prices climb on the back of escalating Middle East tensions, threatening to reverse the supportive backdrop that’s buoyed regional FX in recent months. Historically, falling oil prices have gone hand-in-hand with stronger Asian currencies, given that the region’s biggest economies including China, Japan, India and South Korea are major energy importers.” See Graph Below
- USD/JPY continues to hold above its support back towards the 142.00 area, with oil surging again and US yields bouncing this pair has drifted back to the middle of its recent range. The JPY longs are feeling the pressure in the crosses.
- 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. The large interest around 145.00 expired overnight.
- 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. A break above 147.00 would be needed to challenge the conviction of any shorts.
Options : Close significant option expiries for NY cut, based on DTCC data: 143.25.($350m). Upcoming Close Strikes : 146.00($1.85b June 20).
Fig 1 : USD/JPY Vs Brent Futures
Source: MNI - Market News/Bloomberg Finance L.P
