JPY: Asia Wrap - USD/JPY Not Letting Up, Eyes 150/151
The Asia-Pac USD/JPY range has been 148.29 - 148.73, Asia is currently trading around 148.70, +0.07%. This pair is just not backing off and the price action suggests the JPY longs could face further angst as a test of the 150.00/151.00 area is looking likely unless something changes(Powell being removed ?). Support should now be seen back towards 147.00 first up, then more importantly the 145.00 area. A close back above 151.00 would be very worrying for USD/JPY and it was interesting to see Japanese Officials rattling the cage yesterday regarding the speed of the move.
- (Bloomberg) - “BOJ’s Eye Will Be on Heat Hidden in Cooler CPI. Japan’s June CPI report reveals mixed inflation dynamics, with softer energy costs tempering headline and core price gains. Firms continued to pass on higher costs of labor as well as rice to consumers in a variety of areas, nudging up the gauge that excludes fresh food and energy. The Bank of Japan will focus on the underlying strength, a sign the wage-price cycle is gaining traction and moving inflation closer to its 2% target.”
- (Bloomberg) - “Polls for Japan’s July 20 upper house election suggest Prime Minister Shigeru Ishiba’s Liberal Democratic Party and its coalition partner Komeito risk losing their majority in the chamber. That outcome would leave Ishiba heading a weakened coalition — unable to drive key legislation or, in the worst case, stepping down as leader.”
- Should Prime Minister Shigeru Ishiba’s ruling coalition lose its majority this could see further JPY weakness in response.
- 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.
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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BONDS: NZGBS: Closed Little Changed, Subdued Session, FOMC Due, Q1 GDP Tomorrow
NZGBs closed little changed after a subdued session.
- Cash US tsys are slightly cheaper ahead of today’s FOMC Decision including a Summary of Economic Projections (Dots). The June FOMC meeting communications should reflect an increasingly patient attitude since May and certainly since March’s projections.
- The NZGB 10-year underperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials widening 2-3bps.
- Westpac Q2 consumer confidence picked up to 91.2 from 89.2 in Q1.
- Swap rates closed unchanged.
- RBNZ dated OIS pricing closed little changed across meetings. 4bps of easing is priced for July, with a cumulative 26bps by November 2025.
- Tomorrow, the local calendar will see Q1 GDP. Bloomberg consensus is forecasting the production-based measure to rise 0.7% q/q again, bringing the annual rate to -0.8%, higher than forecast by the RBNZ in May. The central bank is expecting a rise of 0.4% q/q.
- With rates now in the “neutral zone” and RBNZ Governor Hawkesby saying the MPC doesn’t have a bias, and especially if GDP prints stronger than it expects, the RBNZ may be on hold on July 9.
- Tomorrow, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 2.75% Apr-37 bond and NZ$50mn of the 2.75% May-51 bond.
NZD: Asia Wrap - Holds Above 0.6000, For Now ?
The NZD/USD had a range of 0.6010 - 0.6034 in the Asia-Pac session, going into the London open trading around 0.6025. The NZD has drifted higher in a quiet Asian session, still holding above 0.6000.
- NZ Data - Westpac Consumer Confidence Signals Spending Outlook Remains Soft. Westpac Q2 consumer confidence picked up to 91.2 from 89.2 in Q1, while the number of pessimists declined they continue to outnumber optimists with the breakeven-index 100. Sentiment also remains below Q4 2024’s 97.5. Households remain cautious about the outlook despite 225bp of RBNZ easing given heightened global uncertainty, an unbalanced recovery and a soft labour market.
- "NZ TREASURY CONFIDENT OF 2025 GROWTH DESPITE WEAK MAY DATA" - BBG
- The USD is finally looking like it could potentially bounce as the risk backdrop deteriorates. We have seen this before, is this time different ?
- The NZD is back to testing its support around the 0.6000 area, a break back below here and we could see a deeper pullback.
- 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 is needed for the pair to push higher.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5760(NZD1.16b). Upcoming Close Strikes : 0.5830(NZD300m June 23), 0.5755(NZD300m June20)
AUD/NZD range for the session has been 1.0758 - 1.0776, currently trading 1.0770. A top looks in place now just above 1.0900, the cross topped out last week towards the 1.0800/25 sell area, but the momentum lower seems to have stalled for now, with the range for June basically being captured within a 1.0750 - 1.0800 range.
Fig 1: NZD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUD: Asia Wrap - Drifts Higher
The AUD/USD has had a range of 0.6469 - 0.6494 in the Asia- Pac session, it is currently trading around 0.6490. The AUD has drifted higher in a quiet Asian session +0.26%.
- AU Data - Westpac Lead Index Signals Slower Growth. The Westpac lead indicator fell 0.06% m/m in May after -0.01% but this resulted in the 6-month annualised rate falling to -0.08%, the weakest since September but importantly signalling that growth could ease to below trend over the second half of the year.
- (Bloomberg) -- “China is willing to enhance the level of trade and investment facilitation with Australia, Chinese Commerce Minister Wang Wentao says. China is willing to work with Australia to adhere to cooperation and openness, and not to engage in closed-door confrontation, Wang says.”
- The AUD failed miserably again to break above the 0.6550 area, with momentum stalling and the USD starting to bounce the probability of it moving to the bottom end of its range increases.
- Price remains in the 0.6350 - 0.6550 range for now, a sustained break above 0.6550/0.6600 is needed for the move higher to accelerate.
- Buyers should continue to be around on dips while the support in the AUD/USD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD321m). Upcoming Close Strikes : 0.6600(AUD 1.1b June 19)
AUD/JPY - Today's range 94.02 - 94.30, it is trading currently around 94.15.Choppy price action as the pair establishes a range between 92.00 - 96.00. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
