FOREX: JPY Crosses - JPY Longs Remain Under Pressure, Even While Risk Turns Down
This morning has seen US futures open under pressure, ESU5 -0.11%, NQU5 -012%. The USD has surged higher and Stocks reversed lower on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. The JPY continues to underperform in the crosses which is very unusual considering the reversal in risk, this continues to point to a positioning problem. Should the risk backdrop sour even further going forward this should eventually provide these crosses with headwinds to move higher.
- EUR/JPY - Overnight range 172.45 - 173.08, Asia is trading around 172.80. This pair has had a decent move higher and has led the charge against the JPY longs. Short-term it is starting to look a little stretched but the direction is clear and should expect demand on dips. First support 170.50 area then the more important 168.50 area.
- GBP/JPY - Overnight 198.32 - 199.52, Asia trades around 199.35. The pair has failed initially towards the 199.00/200.00 resistance a break of which could see more JPY longs pared back. First support is around 198.00 then the more important 196.50 area. The pair bounced off its first support brushing off Bailey's comments and renewing the pressure on JPY longs.
- NZD/JPY - Overnight range 88.28 - 88.90, Asia is currently dealing 88.60. NZD/JPY broke through the resistance around 88.00 but has failed to really accelerate through it. Price is consolidating above 88.00 looking for a reason to extend. The Support towards 87.00 needs to hold for the focus to remain on the 90.00/91.00 area.
- CNH/JPY - Overnight range 20.55663 - 20.7344 Asia is currently trading around 20.7200. This pair is now breaking back above its pivot and points to potentially further losses from here as positioning is pared back. Look for demand now back towards the 2.40/50 area.
Fig 1 : CNH/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: House Prices Trending Lower Again (amended)
- China released its new and used home price data for May today and prices have turned down again.
- New home prices were down -0.22% MoM in May, from -0.12% in April representing the 24th consecutive downturn and the worst result since November last year.
- Used home prices were down -0.50% MoM in May, from -0.41% in April and have not printed a positive print since April 2023.
- New home prices rose in 13 cities in May, down from 22 in April
- Used home prices rose in just 3 cities in May, compared to 5 in April.
- No cities have year on year used price gains.
- Shanghai new homes rose +0.7% MoM; +5.9% YoY
- Beijing new home prices -0.4% MoM; -4.3% YoY
- Shanghai existing home prices -0.7% MoM; -0.1% YoY
- Beijing existing home prices -0.8% MoM; -0.7% YoY
CHINA: House Prices Trending Lower Again
- China released its new and used home price data for May today and prices have turned down again.
- New home prices were down -0.22% MoM in May, from -0.12% in April representing the 24th consecutive downturn and the worst result since November last year.
- Used home prices were down -0.50% MoM in May, from -0.41% in April and have not printed a positive print since April 2023.
- New home prices rose in 13 cities in May, down from 22 in April
- Used home prices rose in just 3 cities in May, compared to 5 in April.
- No cities have year on year used price gains.
- Shanghai new homes rose +0.7% MoM; +5.9% YoY
- Beijing new home prices -0.4% MoM; -4.3% YoY
- Shanghai existing home prices -0.7% MoM; -0.1% YoY
- Beijing existing home prices -0.8% MoM; -0.7% YoY
USD: Poor Price Action
The BBDXY range Friday night was 1201.10 - 1207.13, Asia is currently trading around 1203. The US tried to bounce on Friday night but closed really poorly, once more struggling to hold onto its gains. The USD’s muted reaction to the events on Friday will have the market again questioning if it still has a role to play as a safe haven ?
- Bloomberg - “The US currency has displayed a decreased sensitivity to bouts of risk aversion of late, and has instead followed US economic data more closely. Prior to the Middle East escalation, the narrative for the dollar was one of extended weakness as benign inflation prints emboldened traders to add to their bets on Federal Reserve interest-rate cuts by year-end. ”
- Because of consensus the market will be positioned the same way and USD shorts will be prone to some challenging bounces. That's why the price action on Friday does stand out as normally you have expected these positions to have been more challenged in that environment. Is there more to come ? If not that was a pretty poor attempt at a correction.
- The BBDXY rejected the 1225 area pretty strongly, the USD should continue to be met with supply while this 1225/30 area caps price.
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows.
We are testing the key Weekly support around the 1200 area in the BBDXY. A break below here could signal the move is about to accelerate.
Fig 1: CFTC USD Data
Source: MNI - Market News/Bloomberg Finance L.P
