FOREX: JPY Crosses - JPY Longs Continue To Be Challenged
Stocks have had an unbelievable run forcing an underweight market to get back in. In the short term it looks a little stretched now and the shorts have been carried out making positioning less of an issue. Could these tariffs and the threat it poses to global growth be the catalyst now for some reversion back to the mean ? The JPY had been underperforming in the crosses even when risk was powering higher which is very unusual, but now with risk looking a little stretched and the chances of a pullback increasing the JPY longs are really being challenged.
- EUR/JPY - Overnight range 171.45 - 172.28, Asia is trading around 172.15. The pair had all the ingredients for a pullback but the move higher has accelerated even in the face of these headwinds. Very interesting price action with first support now back towards the 170.00 area.
- GBP/JPY - Overnight 198.68 - 199.43, Asia trades around 199.50. The pair is challenging the 199.00/200.00 resistance a break of which will see more JPY longs pared back. Like the EUR/JPY with risk showing cracks for the first time you would have been excused for thinking this pair should have been stalling and potentially drifting lower but positioning looks to be an issue.
- NZD/JPY - Overnight range 87.85 - 88.21, Asia is currently dealing 88.05. NZD/JPY is back to testing the resistance around 88.00, a break of which could see momentum return to extend higher. Again these moves are happening with some clear headwinds.
- CNH/JPY - Overnight range 20.3606 - 20.4616 Asia is currently trading around 20.4400. Trading back towards the 20.50/20.60 resistance area, awaiting clearer direction with a bias to sell rallies.
Fig 1 : NZD/JPY Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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LNG: Prices Up On Trade Deal Hopes & Expectations Of Increased Cooling Demand
Natural gas prices were up on Friday and finished the week higher as supply concerns came to the fore at a time of an expected pickup in cooling demand. On the demand side, US-China trade talks scheduled to take place in London on Monday are hoped to reduce risks to global energy consumption from increased protectionism. Europe rose 0.3% to EUR 36.51 after a high of EUR 36.85 followed by a low of EUR 35.87 leaving it up 6.7% on the week.
- With refilling of European storage ahead of next winter a concern, the market remains sensitive to supply disruptions, especially as temperatures are forecast to rise across most of the region.
- Norway is currently engaging in significant scheduled maintenance but there was also an unplanned disruption at its major Troll field on Friday. Inventory building will be impacted by an increase in demand elsewhere in the world, especially as summer progresses.
- US gas rose 2.9% to $3.79 to be up almost 10% last week after rising to $3.82. It was supported by expectations of warmer weather boosting cooling demand in the second part of June. It has started Monday trading 1.2% lower at $3.74.
- Prices have overlooked the large addition to storage and scheduled maintenance reducing demand for LNG processing.
- US lower-48 gas production rose 4.7% y/y while demand fell 1.1% y/y on Friday.
- Net-long positions in US Henry Hub futures rose 46.9k to the most bullish level in seven weeks according to CFTC data reported by Bloomberg.
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