COMMODITIES: Gold and Oil Gain Overnight

The Friday night range was 143.48 - 144.44, Asia is currently trading around 143.85. No real direction for USD/JPY on Friday as US stocks and bonds contended with month-end rebalancing and a rise in US-China tensions.

• Bloomberg - “Scott Bessent said he’s confident the latest trade clash between Trump and Xi Jinping “will be ironed out” in a call “very soon.” He also told CBS’s Face the Nation the US “is never going to default” on its debt, while declining to say when the Treasury will run out of cash.”
• “Pete Hegseth pressed Asian partners to boost defense spending toward 5% of GDP, warning at the Shangri-La Dialogue that more urgency is needed to prepare for a potential Chinese invasion of Taiwan. Beijing protested the comments, blaming the US for instability and saying it must “never play with fire.”(BBG)
• “Japan’s top trade negotiator Ryosei Akazawa said the latest round of discussions with the Trump administration on tariffs have them on track toward a deal as early as next month, while refraining from citing specifics.”(BBG)
• The market seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risks of pullbacks increase. Resistance around the 146.00 area held perfectly last week and the JPY bulls would be quite relieved as well as vindicated by the price action. The next pivotal trigger points look to be below 140.00 on the downside and above 146.50 on the topside.
• Options : Close significant option expiries for NY cut, based on DTCC data: 144.00($670m). Upcoming Close Strikes : 140.00($1.88b June 5), 142.00($884m June 5).
• CFTC data shows Asset managers maintained their already extensive JPY longs, and leveraged funds reduced their longs that had just started to be built up.

• Data/Event : Capital Spending, Jibun Mfg PMI

  Fig 1 : JPY CFTC Data

  

  Source: MNI - Market News/Bloomberg

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 141.48/142.95 - High May 2 / High Apr 7
• PRICE: 139.20 @ 14:58 GMT May 30
• SUP 1: 138.54 - Low May 22
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal. 

The highlight of the week will be Wednesday’s Q1 GDP release but before then key components will be released on Tuesday. GDP is expected to rise 0.4% q/q to be up 1.5% y/y after 0.6% & 1.3% in Q4. Investment and real household consumption were little changed on the quarter.

• On Tuesday, the Q1 balance of payments data are released and include the net export contribution to GDP, which is forecast to be flat. Bloomberg consensus has the current account deficit steady at $12.5bn.
• Q1 company profits are also on Tuesday and projected to rise 1.3% q/q after 5.9%. Inventories are part of this data set and consensus has a 0.2% q/q rise after 0.1% in Q4.
• The public demand contribution to GDP is also out on Tuesday. It contributed 0.2pp to Q4 growth.
• The RBA minutes from the May meeting print on Tuesday. It cut rates 25bp at this meeting but no change and 50bp were also considered. Assistant Governor (Economic) Hunter speaks on Australia’s global linkages on Tuesday at 1305 AEST.
• Final S&P Global PMIs for May print this week with manufacturing on Monday and composite & services on Wednesday. Services moderated in the flash May release while manufacturing was stable.
• The May Melbourne Institute inflation gauge is released on Monday. In April it rose 0.6% m/m to be up 3.3% y/y.
• ANZ job ads for May are also out on Monday. They rose 0.5% m/m in April. The labour market remains tight.
• April household expenditure is published on Thursday and consensus expects it to rise 0.2% m/m leaving the annual rate at 3.5% y/y.
• April merchandise trade data are also Thursday and the surplus is forecast to narrow slightly to $6bn from $6.9bn.