JPY: Asia Wrap - USD/JPY Probes Above 148.00, Leveraged Funds Add To JPY Shorts
The USD/JPY range has been 147.88 - 148.38 in the Asia-Pac session, it is currently trading around 148.35, +0.25%. USD/JPY is doing some work just above the 148.00 area. The price is still within its recent 146-149 range, and we need a convincing break on either side to see some clearer direction again. Neither the FOMC nor the BOJ were able to provide any clarity, the market will start turning its focus towards payrolls which seems a lifetime away.
- MNI BoJ Review – September 2025: Cautious But Signals Progress: Policy Decision & Dissents: The BOJ kept rates at 0.5%, but two members dissented in favour of a 25bp hike, arguing the price target is "more or less achieved" and rates should move "closer to neutral," highlighting stronger hawkish voices within the board.
- Governor Ueda's Tone: Ueda remained balanced, noting "underlying inflation is approaching 2%, but the 2% level has not yet been reached" and that there is "little sign of tariff having impact on Japan's economy," while emphasising ongoing global uncertainty and data dependency.
- "JAPAN'S TAKAICHI TOP PICK TO LEAD LDP RACE WITH 28.3%: FNN POLL" - BBG
- "JAPANESE PM CONTENDER AND CHIEF CABINET SECRETARY HAYASHI: JAPAN'S PAST AVERSION TO STRONG YEN HAS DIMINISHED, WHEN ASKED ABOUT RISK FED RATE CUT PROSPECTS COULD PUSH UP YEN VS DOLLAR, HURT JAPAN'S EXPORT-RELIANT ECONOMY.” - RTRS
- Options : Close significant option expiries for NY cut, based on DTCC data: 146.85($430m), 147.25($897m), 146.80($502m). Upcoming Close Strikes : 145.00($1.52b Sept 24), 150.00($922m Sept 25) - BBG.
- CFTC data shows last week asset managers reduced their JPY longs slightly +71162( Last +87239), leveraged funds again used the dip to add their short position believing the support will continue to hold -58811(Last -49951).
Fig 1 : JPY CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: NatWest Now Sees Cuts In 2025, Starting In September
As with Deutsche earlier, NatWest has changed its Fed call after the Powell Jackson Hole speech to reflect a 25bp September cut. Previously, the call was for no cuts in 2025. The new baseline outlook includes further 25bp cuts in December and March, bringing rates closer to neutral ("however, the changing composition of the committee becomes far less clear once Powell term expires in May").
- "While the August jobs and CPI reports will be watched carefully, it is clear to us that Powell has already seen enough to decide renewed action to counter downside economic risks is likely warranted, and so we now look for a 25 basis point rate cut on September 17th.
- "We expect officials will very much downplay the likelihood of a 50bp rate cut leading up to the jobs data, but we have to admit if the report is "weak enough" (e.g., the unemployment rate increases by 0.3pct to 4.5% (where officials had it at year end) anything can happen and wouldn't rule anything out. However, given the latest pivot and with financial markets pricing (86% of a 25bp rate cut) a lot has to happen (unemployment rate 3-handle and core CPI +0.5%) for the FOMC to undeliver and hold off from a rate cut in September. "
USDCAD TECHS: Bull Cycle Hindered
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3968 High May 20
- RES 1: 1.3925 High Aug 22
- PRICE: 1.3840 @ 16:55 BST Aug 22
- SUP 1: 1.3794 20-day EMA
- SUP 2: 1.3769/22 50-day EMA / Low Aug 22
- SUP 3: 1.3576 Low Jul 23
- SUP 4: 1.3557/40 Low Jul 3 / Low Jun 16 and the bear trigger
Gains this week in USDCAD and the breach of resistance at 1.3879, the Aug 1 high, marked a positive development, however the slippage into the Friday close undermines this sentiment - for now. Moving average studies have crossed and are in a bull-mode position, reinforcing current conditions. An extension higher would signal scope for a climb towards 1.4019, a Fibonacci retracement. On the downside, support to watch lies at 1.3769, the 50-day EMA - a level not yet challenged by the correction lower.
CANADA: Q2 Expected To See GDP Contraction, BOC's Estimate Looks Too Negative
The June retail sales release helps wrap up the last major data before Canadian Q2 GDP is released on Friday August 29.
- Current Bloomberg analyst consensus shows Q2 is expected to show a 0.7% Q/Q annualized contraction, versus +2.2% in Q1. The private sector consensus is more optimistic than the Bank of Canada's -1.5% estimate in its July Monetary Policy Report (which MNI thinks is too low) but the component-by-component breakdown is similar if of differing magnitudes.
- Widely expected are: a softening in household consumption growth (+1.2% in Q1), with a pickup in government spending, continued weakness in fixed investment (-3.0% in Q1) though with residential outperforming business capital formation, and a reversal of Q2's positive contribution from net exports. In short, the data are expected to confirm that trade activity was brought forward to Q1 ahead of tariffs, with the effects reversing in Q2.
- Going forward, the BOC envisages growth resuming in Q3 (+1.0% in its "current tariff" scenario). In the meantime, a weak Q2 reading could provide Governing Council with more conviction to resume easing rates in September, with the July meeting decision noting "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate".
