CHINA PRESS: China Core CPI Expected To Maintain Upward Trend

US Equities stalled and drifted lower in the N/Y session as some risk was pared back going into the US CPI. This morning US futures have opened pretty muted, ESU5 +0.07%, NQU5 +0.07%.  The JPY crosses are consolidating their recent gains, GBP/JPY leads the move eyeing a test of 200.00.

• EUR/JPY - Overnight range 171.55 - 172.19, Asia is trading around 172.35. This pair bounced off its support just below 170.00 and has bounced nicely to put a base in now around 170.00. While risk continues to trade positive this will remain bid now on dips.
• GBP/JPY - Overnight 198.19 - 199.06, Asia trades around 199.20. The pair found good demand towards the 195.00 support as risk turned higher. Depending on your view for risk from here, I suspect this bounce could see sellers remerge first up. A move back above 200.00 would negate this and signal another leg higher though.
• NZD/JPY - Overnight range 87.55 - 87.99, Asia is currently dealing 88.10. The pair found solid demand towards the 86.50 area, sellers should remerge on a bounce back towards 88.50 first up. A sustained move back above 89.00 would negate this and reinstate the momentum higher.
• CNH/JPY - Overnight range 20.5056 - 20.6032, Asia is currently trading around 20.6100. This pair found solid demand back towards its first support area around 2.4000. A sustained break back below 2.3000 is needed to turn momentum lower again.

Fig 1 : GBP/JPY Daily Chart

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

The BBDXY range overnight was 1202.73 - 1208.76, Asia is currently trading around 1207. The USD bounced in the N/Y Session as some shorts pared back their exposure as we look toward the US CPI tonight. A sustained break back below 1198 points to a retest of the lows, and a bounce back towards 1220/1230 should probably be faded initially. Where the CPI comes in tonight will determine which level gets tested.

• Robin Brooks on X: “The Dollar troughed on July 2 and has been rising in fits and starts ever since. What's driving this are mounting signs the US recession isn't coming. There's obviously noise around that, like huge downward revisions to payrolls on Aug 1. But this is the story. USD is recovering...”
• Holger Zscaepitz on X: “Apollo's Sløk says the U.S. remains the most dynamic economy in the world — and he uses one simple chart to make his point: the number of new business applications.” See Fig.1 Below.
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
• Data/Events :  NFIB Small Business Optimism, CPI, Federal Budget Balance

Fig 1: Corporations Business Applications

Source: MNI - Market News/Apollo

• The PBOC issued CNY114.6 bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY160.7bn.
• Net liquidity withdrawal CNY46.1bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.41%, from prior close of 1.44%.
• The China overnight interbank repo rate is at 1.30%, from the prior close of 1.30%.
• The China 7-day interbank repo rate is at 1.41%, from the prior close of 1.45%.