IRAN: "- IRAN'S REVOLUTIONARY GUARDS NAVY SAYS FOUR VESSELS WERE HIT AND [...]

The USD/JPY range today has been 157.27-157.57 in the Asia-Pac session, it is currently trading around 157.50, +0.10%. The pair stalled toward 158.00 at the first time of asking and there were reports the BOJ might have conducted a rate check on Friday night. All in all, last week was not great for the Yen and those potential green shoots that had just started to take root, CFTC data showed the market turning long for the first time(ouch). A dovish hike thanks to the Takaichi appointments and a BOJ that will not give a signal to the timing of the next hike, while the Fed comes out hawkish is not a recipe to encourage those buyers. The 149-152 area has now proved to be solid support again. The market is now punishing those longs and back testing the 157.00-159.00 area which technically looks important, hence a possible reason for the BOJ to check rates on Friday. It is probably also reminding the market it is around as they head into a three-day holiday which could further impact liquidity and embolden the Yen bears to add more pressure to the already struggling currency. So much for Bessent having asymmetric information about the pace of Japanese rates going forward.  

• “Further intervention by Japan to prop up the yen would offer a good opportunity to sell, according to UBS Asset Management’s Kevin Zhao, who’s “very skeptical” the currency can sustain gains from BOJ tightening.” - BBG https://blinks.bloomberg.com/news/stories/TLKBLSKK3NYB
• “Washington and Beijing remain divided on the terms of a trade truce extension, USTR Jamieson Greer indicated. The US government’s reliance on a Pentagon blacklist to target China’s biggest companies threatens to cast a pall over the leaders’ summit this week.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 157.00($923m), 158.00($1.3b), 160.50($497m). Upcoming Close Strikes : 155.00($1.88b Sept 25), 156.00($1.79b Sept 24), 156.50($1.43b Sept 24) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 116 Points

Fig 1 : USD/JPY Spot Daily Chart

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

"*LANE: INFLATION TO BE HIGHER, MORE PERSISTENT THAN THOUGHT" - BBG

"*ECB CHIEF ECONOMIST PHILIP LANE COMMENTS IN LE TEMPS INTERVIEW" - BBG

"*ECB'S LANE: GEOPOLITICAL RISKS NOW APPEAR HIGHER AGAIN"

The NZD/USD had a range today of 0.5694-0.5739 in the Asia-Pac session; it is currently trading around 0.5735, +0.35%. The pair had quite the turnaround on the day thanks to Breman warning near-term inflation may be higher than MPS forecasts. It has been a favorite to express a short in and it was trading particularly poorly, challenging 0.5700 ahead of those comments. CFTC data showed shorts had been drastically cut but price action suggests some of that could have been re-instated in recent days. I suspect we might need the US Dollar to actually break higher for this pair to sustain a challenge below the 0.5700 area but for the moment the rebound in risk is muddying the water a little. The Breman comments just add to the difficulty of sustaining a break lower through there. I will be watching the price action of the US dollar closely. Can its divergence from Risk persist ? Look for initial resistance on the day between 0.5740-0.5770, through here the 0.5820-0.5860 area comes back into play.  

• MNI - NZ Near-Term Inflation Higher Than Expected Due To Oil Price Rise: Governor Breman has observed that current higher oil prices are likely to mean that NZ inflation will be above its September forecast in the near-term. Ahead of the 28 October decision, the MPC will remain focused on the data and geopolitical developments but especially the inflation outlook. She said that Q3 information suggests the recovery continued in the quarter but remains "uneven" as growth is driven by the external sector and investment, while private consumption continues to lag given purchasing power pressures but is expected to improve gradually as inflation eases. Ongoing labour market weakness should improve as growth picks up..
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5742(NZD307m Sept 24), 0.5960(NZD333m Sept 23) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 37 Points

Fig 1: NZD/USD Spot Daily Chart

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