FED: Goolsbee: "Several Cuts" Conditional On Getting Inflation Back To 2%

The overnight range was 158.10 - 159.20, Asia is currently trading around {USDJPY Curncy}. USD/JPY finally found some sellers, good optionality toward 160.00 and Bessent now jaw-boning the strength of the USD in Asia helped, last night he came out to support the KRW and the day before it was the JPY. The BOJ remains in a tough spot, and they are going to need to do something significant to turn around the market's perception of a weak Yen. A test of the BOJ/MOF resolve looks inevitable at the moment as the market moves its focus back toward the important 160.00 area. In today's Asian session, first support is around 158.00 and then the 157.00-157.50 area as dips continue to be supported. Bloomberg reports Yen Vol is climbing on intervention worries. In my experience this is one of the reasons the MOF tends to come in a lot later than most expect as the market tries to front-run them. So I would not be surprised to see new highs above 162.00 before we start seeing them get involved. Until then it's tough to see what turns this ship around, as words will only get you so far. 

• MNI POLICY: BOJ Faces Hurdle On Real Rates To Justify Hikes. The Bank of Japan will face challenges in using negative real interest rates to argue that policy remains accommodative and to justify further rate hikes, as real rates could flatten or turn positive, while officials remain reluctant to raise the neutral rate estimate for fear of sparking speculation of rapid rate hikes, MNI understands.  {NSN T8UAGM33O5C0 <GO>}
• Bloomberg - “The policy contradictions are evident and that’s why everyone is bearish JPY right now, but that doesn’t preclude a zippy reversal to 155 if they intervene,” wrote Brent Donnelly, president of Spectra Markets, citing loose fiscal policy. “That said, the USD/JPY buyers will be lined up 154/155 on any MOF appearance”  
• Options : Close significant option expiries for NY cut, based on DTCC data: 159.00($1.44b),159.50($1385m), 160.00($525m). Upcoming Close Strikes : 155.00($2.14b Jan 16), 158.00($2.04b Jan 16), 160.00($4.61b Jan 16) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 97 Points
• Data/Event : PPI

Fig 1 : USD/JPY Spot Weekly Chart

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

Source: Bloomberg Finance L.P./MNI 

The NZD/USD had a range overnight of 0.5737 - 0.5756, Asia is trading around {NZD Curncy}. The NZD traded sideways overnight as US stocks ended the session lower but the USD pulled back strongly against the JPY and KRW in particular as verbal jaw-boning increases. The NZD has put in what looks like a top around 0.5850 and while this continues to cap I suspect the short-term could see bounces initially faded. On the day, the NZD bears will be feeling a little more comfortable, watching for sellers again back toward 0.5760-0.5780 as the shorts look for some momentum to build for a retest of the 0.5700 area.  

• CFTC Data of last week shows Asset Managers slightly increasing their short positions in the NZD, -40649(Last -37981). The Leveraged community reduced their own shorts that they had just begun to build quite aggressively, -10605(Last -14480).
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5600(NZD351m Jan 16), 0.5800(NZD420m Jan 16), 0.5895(NZD300m Jan 19} - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 39 Points

Fig 1: NZD/USD Spot Daily Chart

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