AUSTRALIA DATA: Jan Inflation Sees Y/Y Momentum Edge Up, Few Signs Of Cooling

JGB futures re-opened higher, but ran out of steam at 131.84. Dips have been supported and we last near 131.72, +.36 versus settlement levels. JGB yields are lower across the major benchmarks (except the 1yr), with the back end leading. This follows PM Takaichi's fresh warning over the weekend around curbing abnormal market moves/addressing speculation. We are down around 3-4bps for 7 to 40yr JGB yield tenors, with the 10yr leading the move. 

• Focus is likely to be how far this correction higher in futures/lower yields can continue. Upside focus for JGB futures will be on a move above 132.00, while for the 10yr JGB yield the 20-day EMA support rests around 2.165%. For the 40yr this level comes in around 3.86% (currently we sit at 3.91%).
• The next major litmus test for markets will be Wednesday's 40yyr debt auction. On Friday we also get the month end data dump, which includes the Jan Tokyo CPI.
• Sellers in futures may re-emerge around broader fiscal outlook concerns, but near term momentum still looks higher for futures. 

The USD BBDXY index has found some support sub 1190 (session lows rest at 1189.55/60), but upticks remain minimal. We were last around session lows for the index. Dips under the 1190 level provided support in Sep and July last year (see the chart below), so we may be seeing some technical demand around this area. Focus remains on USD/JPY amid fresh intervention threats, which was last near 154.80, up from earlier lows of  154.22, which was under Dec 5 lows from last year. Japan's Mimura (top FX diplomat) stated earlier that they would keep in close contact with the US on FX matters, but wouldn't confirm whether they intervened in the FX market and wouldn't comment on FX rate checks either. 

• USD/CHF got to lows of 0.7741 earlier, but now sits back at 0.7785. EUR/USD is 1.1850 (earlier highs were at 1.1898).
• AUD/USD is 0.6915 after earlier highs of 0.6935 were reached. Precious metals have rallied, gold through $5000, while silver is up over 3%. NZD/USD is up to 0.5960/65, off earlier highs (0.5975), but largely matching AUD gains.
• US equity futures opened quite weak, but losses have been pared. Eminis were last off around 0.40% (after opening 0.90% weaker). US and Japan bond futures are higher, but Japan equities are underperforming, with yen gains a headwind. 

Fig 1: USD BBDXY Index Eyeing Fresh Break Lower 

Source: Bloomberg Finance L.P./MNI 

Last week's CFTC FX positioning update, for the week ending 20th of Jan, showed mixed flows for JPY, see the table below. Leveraged contracts were yen buyers, paring back on aggregate shorts. Offsetting this though was a trimming of JPY longs by asset managers. The aggregate net short position in JPY is now at -70k, only modestly tighter than the prior week's -73.5k. This of course pre dates Friday's sharp move lower in USD/JPY, which has continued in the first part of Monday trade. From above 159.00 we got to lows of 154.22 this morning, before some demand emerged. A combination of a reported USD/JPY rate check on Friday, along with PM Takaichi's warning from the weekend around curbing abnormal/speculative moves in markets has driven the yen rebound. Focus this week's CFTC update is likely to be on the extent of leveraged contracts curbing short JPY positions.   

• Elsewhere, EUR shorts were added to by leveraged names, while longs were cut back by asset managers. GBP positioning saw modest leveraged buying but asset managers selling.
• AUD positioning was little changed, while NZD positioning was mixed. Leveraged shorts were pared, amid signs of better data momentum, but asset managers added to shorts. 

Fig 1: CFTC Positioning Update By Major Currency - Weekly Change & Outright Levels 

Source: CFTC/Bloomberg Finance L.P/MNI