JGBS: Futures Higher, 30yr Yield Falls Further, Q2 GDP Revisions Monday

The Asia-Pac USD/JPY range has been 147.34 - 147.75, Asia is currently trading around 147.35, -0.20%. USD/JPY initially tried higher after weaker than expected wage data, but good sellers towards 148.00 continue to cap for now. Price has moved very quickly away from the pivotal 151/152 area much to the relief of Institutional Yen longs and the BOJ. CFTC Data shows leveraged accounts had started to aggressively build Yen shorts last week so this quick move lower would be a bitter pill to swallow. Price is holding above the support area around 146.50/147.00 for now, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate.

• "HAYASHI: AGREED W/ US THAT JAPAN PHARM WON'T BE AT DISADVANTAGE” - BBG
• "JAPAN'S KONO: NECESSARY TO RAISE RATES TO STRENGTHEN YEN" - BBG
• (MNI) Japan's inflation-adjusted real wage, a key gauge of household purchasing power, remained in negative territory for a sixth consecutive month in June but narrowed to -1.3% from May's 2.6% decline, preliminary data from the Ministry of Health, Labour and Welfare showed Wednesday.
• (Bloomberg) - The Japanese currency’s recent strength can be expected to wane somewhat after wages data came in substantially weaker than had been expected. That’s likely to be seen as reinforcing the BOJ’s instinctive policy caution, pushing traders to pare back already modest bets on a rate hike this year.
• Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($1.5b).Upcoming Close Strikes : 147.65($1.14b Aug 7), 148.50($1.24b Aug 7) - BBG.
• CFTC data shows asset managers surprisingly added slightly to their JPY longs +75119( Last +72326), while leveraged funds aggressively added to their newly built short JPY position -31280(Last -11571).

Fig 1 : USD/JPY Spot Weekly Chart

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

The AUD/USD has had a range of 0.6465 - 0.6492 in the Asia- Pac session, it is currently trading around 0.6490, +0.25%. The AUD has bounced in our session as Asian equities trade positively ignoring the wobble seen in the US in response to the ISM Services data. The AUD bounced nicely off the 0.6400 area but I suspect sellers might return back towards 0.6500/50 initially. I feel the performance of US equities over August/September will be crucial as seasonality points to some strong headwinds approaching. 

• MNI Exclusive - The Reserve Bank of Australia looks set to cut the cash rate by 25 basis points to 3.6% on Aug 12, but further easing could prove a policy mistake and force the Bank to reverse course within six months unless a major global shock intervenes, former RBA board member Warwick McKibbin told MNI.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6575(AUD701m). Upcoming Close Strikes : 0.6500(AUD4.27b Aug 8), 0.6600(AUD1.97b Aug 7), 0.6800(AUD1.72b Aug 7) - BBG
• CFTC Data shows Asset managers reduced their shorts slightly -49183(Last -53959), the Leveraged community added to their own shorts -13997(Last -12010).
• AUD/JPY - Asia-Pac range 95.40 - 95.76, Asia is trading around 95.70. The pair failed on multiple attempts above 97.00 and has moved swiftly back to test its first support toward the 95.00 area. There should be sellers around the 96.00/96.50 area initially, a sustained break below 94.50/95.00 could signal a deeper move lower.

Fig 1: AUD/USD spot Daily Chart

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

The TYU5 range has been 112-04 to 112-07 during the Asia-Pacific session. It last changed hands at 112-04, down 0-05 from the previous close. 

• The US 2-year yield has edged higher trading around 3.726%.
• The US 10-year yield has moved higher trading around 4.222%, up 0.01 from its close.
• The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area. 
• Bloomberg - “Trump said he’ll pick a successor for Adriana Kugler before the end of the week. He added that the replacement for Jerome Powell is down to four people and that Scott Bessent declined to be considered for the role.” - BBG
• The Department of the Treasury will auction $42 billion of August 2035 notes
• Bloomberg - “Bond traders are increasingly betting on up to 75 bps in Fed rate cuts in 2025 amid signs of a weakening US economy. The shift in sentiment follows soft payrolls data and stagnation in the services sector.”
• Truflation on X: “PCE close to 2%! All inflation metrics are falling. No more excuses. No more empty words. It's time to act, Powell.”
• Data/Events: MBA Mortgage Applications

Fig 1: 10-Year US Yield Daily Chart

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