FOREX: JPY Crosses - Challenging A Market That Is Long Jpy
US stocks continue to find demand for now on dips, the S&P looks to be turning its attention back to the all time highs. This would be very frustrating for the JPY Bulls as the JPY starts to come under pressure as a result in the crosses.
- EUR/JPY - Overnight range 164.63 - 165.64, Asia is trading around 165.50. EUR/JPY is now making new highs for the year. If this move can find some momentum it could signal the potential for this move to extend higher and begin an uptrend.
- GBP/JPY - Overnight range 194.79 - 195.86, Asia trades around 195.55. GBP/JPY failed again around the multiple tops just above 196.00. Some poor UK data capped this move overnight, a sustained break above here and the focus will turn to the 200 area.
- NZD/JPY - Overnight range 87.22 - 87.69, Asia is currently dealing 87.65. The pair is trying to break above some important resistance. A sustained move back above 88.00 would turn the focus back to the 90.00 area.
CNH/JPY - Overnight range 20.0941 - 20.1723, Asia is currently trading around 20.1550. CNY/JPY has not bounced as much as the others, a sustained break above the 20.60 area would get JPY longs worried.
Fig 1 : GBP/JPY Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGBS: Bear-Steepener To Start Week As Risk Bounces On US-CH HLs
In Tokyo morning trade, JGB futures are weaker, -38 compared to settlement levels, extending overnight weakness on Friday.
- This move aligns with US tsys, which are trading 2-4bps cheaper in today’s Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. Traders continue to pare back expectations of the Fed easing this year and the next.
- Japan's March trade balance and current account figures were close to market expectations. The trade balance printing at ¥516.5bn, versus ¥547.7bn forecast. The Feb balance was ¥712.9bn. In seasonally adjusted terms, the current account was ¥2723.1bn, slightly above forecasts, while in unadjusted terms we printed, ¥3678.1bn, slightly below market expectations.
- Cash JGBs are 1-6bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 2.4bps higher at 1.393% versus the cycle high of 1.596%.
- Swap rates are 1-7bps higher, with swap spreads wider.
FOREX: AUD Crosses - AUD Gaps Higher On Asian Open
The AUD found decent demand sub 0.6400 on its initial look down there. This morning risk has gapped higher on the positive US-China meeting over the weekend. The S&P is up 1.25% this morning, can this be sustained without any actual details of what a trade deal would look like ? For now though the AUD is benefitting across the board and gapped higher on the crosses in early trading.
- EUR/AUD - Friday night range 1.7524 - 1.7584, Asia is trading around 1.7510. EUR/AUD gapped 150 points lower on the open to touch 1.7400 in early trade, decent demand was again seen down there and the pair has since bounced back, sellers likely to remerge back towards 1.7700.
- GBP/AUD - Friday night range 2.0663 - 2.0766, Asia is trading around 2.0705. GBP/AUD gapped 100 points lower on the open to around 2.0630 in early trade before rebounding. Good demand has seen the pair fail twice now below 2.0500 putting in a double bottom. The 2.0700/2.0800 area found good supply again on Friday night. A break back above 2.0800 is needed to signal a base is potentially in and the uptrend is set to resume first target 2.1000.
- AUD/JPY - Friday night range 92.82 - 93.33, Asia is trading around 93.60. AUD/JPY gapped around 80 points higher in early trade, it has since found some supply towards 0.6400 again and retraced. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- AUD/NZD - Friday night range 1.0839 - 1.0871, the cross is dealing in Asia around 1.0845. Sellers continue to provide headwinds for the cross, a move back above 1.0900 would negate the bearish trend.
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg
JAPAN DATA: Trade & Current A/C Close To Forecasts, Near Cycle Highs
Japan's March trade balance and current account figures were close to market expectations. The trade balance printing at ¥516.5bn, versus ¥547.7bn forecast. The Feb balance was ¥712.9bn. In seasonally adjusted terms, the current account was ¥2723.1bn, slightly above forecasts, while in unadjusted terms we printed, ¥3678.1bn, slightly below market expectations.
- The trade balance sits just off recent cycle highs, presenting less of a headwind to yen, all else equal. This is also consistent with improvement in the Citi Japan terms of trade proxy, although this measure is still in negative territory.
- it's a similar backdrop in terms of the current account trend, although we have also seen improvement in the income balance in the past 6 months, which along with the trade side, has aided the current account balance.
