JPY: Asia Wrap - USD/JPY Follows The Move Lower In Oil
The Asia-Pac USD/JPY range has been 145.30 - 146.15, Asia is currently trading around 145.45, -0.50%. USD/JPY continues to extend lower in Asia as it follows the capitulation in oil longs, which have reacted to the announcement of a ceasefire in the Middle East. The market is very quick to re-instate its USD shorts.
- (Bloomberg) -- The Bank of Japan shrank its balance sheet by 2.3% to 716.1 trillion yen in the past 10 days.
- Mixed Demand Metrics For 20Y Auction: Overall though today's result is likely to be seen as better than the performance observed in the 30-year JGB auction earlier this month.
- "AKAZAWA: STILL WORKING ON TIMING FOR NEXT ROUND OF TRADE TALKS" - BBG
- There would have been some paring back of JPY longs on the break above 147.00 overnight but the reversal from above 148.00 shows how quickly the market is to reinstate these positions.
- An ugly daily shadow points to a potential top being in place now, first support back towards 144.50/145.00.
- Price now back in a wider 142.00 - 148.00 range, I am not sure that the brief spike higher would have seen positioning altered too much and the long JPY trade is still alive and well.
- Options : Close significant option expiries for NY cut, based on DTCC data: 145.00($582m).Upcoming Close Strikes : 144.50($1.34b June 25), 143.00($1.41b June 26)
- CFTC data shows Asset managers maintained their already extensive JPY longs, while leveraged funds have pared back their own longs that had just begun to be rebuilt.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
