USD: BBDXY - Struggling To Bounce Even With Yields & Oil Tailwinds

The GBP/AUD range Friday night  was 1.8979-1.9072, Asia is trading around 1.9050. The pair gapped higher toward 1.9200 this morning on the failed talks but has since spent the morning filling in that gap. A tough choppy market but we are seeing some demand now return around the 1.9000 area after a decent move lower. The first support on the day is toward 1.8950-1.9000 where demand could return. How risk reacts to this setback and how far it pulls back will dictate whether GBP/AUD has another crack back toward the 1.9200 area again.

• The GBP/AUD Average True Range(ATR) for the last 10 Trading days: 131 Points

Fig 1: GBP/AUD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The AUD/JPY range Friday night  was 112.40-112.86, Asia is currently trading around 112.35. The pair gapped lower but has spent most of the morning filling that in. Technically the trend remains up, and the pair has traded very well considering the negative risk sentiment from geopolitics. The inability for the Yen to bounce meaningfully in the crosses during this period of upheaval has been telling. On the day, I suspect it could struggle above 112.50 initially as the market works through the pullback from last week’s relief rally. AUD/JPY looks to be 111-113 for now as the market tries to get a handle on how risk can trade from here.

• The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 88 Points

Fig 1: AUD/JPY spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

In Tokyo morning trade, JGB futures are weaker, -31 compared to settlement levels, but off session cheaps.

• Risk sentiment is firmly weaker in early Monday dealings, with oil prices higher. This follows the failed talks between US and Iran officials in Pakistan over the weekend and then US President Trump's subsequent announcement of a naval blockade of the Strait of Hormuz.
• The US blockade of the Straits has seen a lot of differing opinions this morning, but a couple of things it can't get away from is the inflationary impact it will have.
• (Bloomberg) “The Bank of Japan's approach to conducting policy at times of high uncertainty would be to wait and see, according to Kazuo Momma, a former executive director. The Bank of Japan's approach to conducting policy at times of high uncertainty would be to wait and see, according to Kazuo Momma, a former executive director. The April meeting will be a close call.”
• Cash US tsys are 3-4bps cheaper in today's Asia-Pac session after Friday’s modest sell-off.
• Cash JGBs are flat to 6bps cheaper across benchmarks. The benchmark 20-year yield is 5.8bps higher at 3.388% ahead of tomorrow’s supply.
• Swap rates are 1-7bps higher, led by the 5-year.

Source: Bloomberg Finance LP