BTP: Block trade

• Ongoing concerns surrounding the domestic political backdrop in Japan has further weighed on the Japanese currency Tuesday, while the strong rebound for the major equity benchmarks on Monday has continued to provide a supportive tone for cross/JPY.
• US treasuries are also approaching some pivotal levels, which could provide further headwinds for the Yen should the 10-year yield break meaningfully above 4.20. A test of the BOJ/MOF resolve currently looks inevitable and any move for USDJPY above 160.00 would dramatically increase the chances of the MOF getting involved. Until then, the path of least resistance remains higher for Cross/JPY.
• We have highlighted that GBPJPY has extended its sharp upswing, which gathered momentum on a break of 208.00 in December and now places the cross at the highest level since mid-2008. Today’s price action has taken spot to a fresh cycle high of 214.30 this morning, an impressive 400 pip rally from last week’s test of 20-day EMA support
  • A key medium-term target is at 215.88, the July 2008 high, while above here, 219.45 is another notable level, the 76.4% retracement of the 2007-2011 range.
• Both AUDJPY and MXNJPY charts continue to standout as well, extending their recoveries from last year’s lows to around 24% and 30% respectively, and eroding solid portions of the global carry unwind induced selloffs in 2024.
• For AUDJPY, next resistance comes in at 107.41 - top of a bull channel drawn from the Nov 6 ' 25 low (shown below). Key resistance remains at 109.37, a break of which would place the cross at its highest point since 1991.

• RES 4: 113-00+ 61.8% retracement of the Nov 25 - Dec 10 bear leg
• RES 3: 112-31   High Dec 18 and key short-term resistance 
• RES 2: 112-25+ High Dec 30 / 31 
• RES 1: 112-22   High Jan 7
• PRICE:‌‌ 112-02 @ 11:23 GMT Jan 13
• SUP 1: 111-29   Low Dec 10 and the bear trigger
• SUP 2: 111-19   1.236 proj of the Oct 17 - Nov 5 - 25 price swing
• SUP 3: 111-11   1.382 proj of the Oct 17 - Nov 5 - 25 price swing 
• SUP 4: 111-00   Round number support 

Treasuries are softer but for now remain above a key support at 111-29, the Dec 10 low. The trend set-up is bearish and a breach of 111-29 would confirm a continuation of the bear cycle. Note that a head and shoulders reversal pattern on the daily chart also highlights a bearish threat. Scope is seen for a move towards 111-19 initially, a Fibonacci projection. Key short-term resistance is unchanged at 112-31, the Dec 18 high.