JPY: Asia Wrap - USD/JPY In The Middle Of Its Recent Range, Can FOMC move it ?
The Asia-Pac USD/JPY range has been 144.93 - 145.44, Asia is currently trading around 144.93. USD/JPY has drifted lower in a muted Asian session, -0.25%. With the USD bouncing across the board as risk digests the potential of the US entering the fray in the middle east, the long JPY positions continue to be challenged. You would normally expect the JPY to outperform in this scenario but the outsized move in oil and a market that is already positioned very long is providing headwinds to the trade.
- Japan Data - Exports Dip Y/Y, Trade Surplus With US Narrows : Japan's May trade data was close to expectations, with export growth at -1.7%y/y, versus -3.7% forecast. The April outcome was +2.0%. On the import side, we were -7.7%y/y, against a -5.9% forecast (-2.2% was recorded for April). The trade deficit was -637.6bn, close to forecasts but wider than the -115.6bn print in April.
- "ISHIBA: HAD FRANK DISCUSSIONS ON TARIFFS WITH TRUMP, WILL WORK WITH US TOWARD A WIN-WIN DEAL" - BBG
- "ISHIBA: TARIFFS WILL HAVE BIG IMPACT ON COMPANIES, NAMELY AUTOS, SAYS JAPAN MUST NOT SACRIFICE NATIONAL INTEREST FOR DEAL" - BBG
- “ISHIBA: WAGE INCREASE MORE IMPORTANT THAN CUTTING SALES TAX, IMPACT OF CASH HANDOUT IS MORE IMMEDIATE THAN TAX CUT" - BBG
- USD/JPY found decent demand yesterday every time it had a look towards the 144.50 area yesterday. This price action stands out considering the risk backdrop and could hint at a market that is already very long JPY.
- Price is back in the middle of its recent 142.00 - 147.00 range and will need a break either side of that to get a clearer direction. Can FOMC be that catalyst ?
- The market is clearly looking for 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: 144.00($725m). Upcoming Close Strikes : 146.00($1.92b June 20), 143.00($925m June 20)
Fig 1 : USD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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OIL: Crude Monitoring Developments On Many Fronts
After rising over a percent on Friday, crude is moderately lower in APAC trading today following April data showing weaker retail sales and property sector in China. Brent is down 0.4% to $65.16 after falling to $64.69 early in the session, while WTI is -0.3% to $62.28 after a low of $61.77. The early sell off was driven by concern regarding the strength of US growth in the wake of Moodys’ downgrade. The USD index is down 0.2%.
- The progress of negotiations on Iran’s nuclear programme, US trade deals and peace in Ukraine remain highly uncertain. Iranian President Pezeshkian has said it won’t give up its non-military nuclear programme. Estimates suggest that an easing of sanctions on Russia and Iran would only have a moderate impact on global oil supplies as both have been able to find ways around restrictions.
- US President Trump has said that he will speak by phone to Russian President Putin about an end to the war in Ukraine at 10:00 EDT (14:00 GMT) today. This will be followed by a call with Ukrainian President Zelensky and some NATO leaders.
- China’s April IP data showed a 1.5% y/y rise in crude production but 8.1% y/y in natural gas.
- Later the FOMC’s Bostic, Jefferson, Williams, Logan and Kashkari appear. The Atlanta Fed’s financial market conference takes place until May 21. The April US leading index and euro area April CPI are released.
GOLD: Gold Bounces on Market Weakness
- Gold has had a better day today in the Asia trading day, rising +0.36% to US$3,215.30.
- Despite solid Chinese data (I/P beat expectations, retail sales in line) equity markets fell giving gold a boost.
- Gold is also likely being supported by the Moody's downgrade of the US rating given concerns for the economic outlook and budget deficit.
- Gold prices fell 1.1% on Friday to $3203.65/oz pressured by higher US yields after a low of $3154.60 to be down 3.6% on the week and 2.6% in May. Bullion has been trending lower since its peak on May 6 at $3435.62. The USD index rose 0.2%.
JPY: Asia Wrap - USD/JPY Demand Seen Sub 145.00
The Asia-Pac range has been 144.81 - 145.47, Asia is currently trading around 145.30. USD/JPY opened lower and traded heavily for most of our session on the back of a knee-jerk reaction lower in stocks to the downgrade news.
- MNI - China Data: “The April activity outcomes were mixed, with retail weaker than forecast, while IP posted a modest upside surprise. Both measures slowed versus March outcomes. Headwinds still persist in the property sector, while house price growth slipped further into negative territory.”
- "*ISHIBA: CAN'T ACCEPT US TARIFFS INCLUDING FOR CARS" - BBG
- JAPAN FINMIN KATO: JAPAN NOT FACING PROBLEM PROCURING FUNDS FROM MARKET VIA DEBT ISSUANCE, IF JAPAN LOSES MARKET TRUST IN ITS FINANCES, IT MAY FACE RISE IN INTEREST RATES THAT COULD AFFECT DEBT REDEMPTION" RTRS
- USD/JPY tested below 145.00 this morning as stocks turned down, some demand seen below 145.00 after the Japanese fix.
- The support around 144/145 looks important now and a break would once again bring the focus back to the pivotal 140.00 area. The price action though does not look great and the market is still more comfortable selling rallies..
Options : Closest significant option expiries for NY cut, based on DTCC data: Y141.90($1.07bln), Y147.00($969.6m), Y146.50($780.7m), Upcoming Strikes : 145.50($1.03b May 20), 145.00($789.7m May 20), 142.00($878m May21)
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
