FOREX: JPY Crosses - Look To Regain Momentum Higher, NZD/JPY The Outlier
US Equities, just another day and another all-time high, nothing stops this train. This morning US futures have opened pretty muted, E-minis +0.05%, NQU5 +0.01%. The JPY crosses outside of NZD/JPY are beginning to pick up momentum to the topside again, the BOJ today will have a say in whether these moves extend or not.
- EUR/JPY - Overnight range 173.72 - 174.47, Asia is trading around 174.35. The pair has broken the tops just below 174.00 and is looking to start another leg higher. Event risk today with the BOJ the caveat but price action is looking very constructive.
- GBP/JPY - Overnight 200.32 - 201.27, Asia trades around 200.45. This pair rejected the move above 201.00 overnight, it needs to hold the break above 200.00 to regain the momentum higher.
- NZD/JPY - Overnight range 86.84 - 87.18, Asia is currently dealing 87.05. The pair remains the outlier thanks to the poor NZ GDP data yesterday, while below 88.00/88.50 I continue to have a bias lower. Any hawkish rhetoric from the BOJ today and this is the clearest vehicle to express it in the crosses.
- CNH/JPY - Overnight range 20.6999 - 20.8480, Asia is currently trading around 20.8000. This pair has remained above its pivotal 20.30/20.40 support. The pair continues to trade comfortably within its recent 20.40-21.00 range.
Fig 1 : EUR/JPY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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STIR: RBNZ-Dated OIS Slightly Firmer Ahead Of RBNZ Decision
RBNZ-dated OIS pricing is slightly firmer across meetings ahead of tomorrow’s RBNZ Policy Decision.
- 22bps of easing is priced for today’s meeting, with a cumulative 37bps by November 2025.
- Notably, pricing is 6-11bps softer across meetings versus late July’s pre-CPI levels.
Figure 1: RBNZ Dated OIS Current vs. Prior (%)
Source: Bloomberg Finance LP / MNI
FOREX: AUD Crosses - AUD Underperforms As Risk Tops Out
US equities saw some profit-taking heading into Jackson Hole led by big Tech, this saw risk sensitive currencies like the AUD trade heavy. This morning US futures trade a little lower, ESU5 -0.20%, NQU5 -0.35%. The AUD has come back under pressure in the crosses as risk looks to be stalling and potentially correcting lower. Some big levels approaching in the crosses but not sure we break these before the event risk at Jackson Hole is dealt with.
- EUR/AUD - Overnight range 1.7972 - 1.8061, Asia is currently trading around 1.8045. With US stocks turning lower overnight potentially signaling a pause in its recent runup, this pair has started to regain upward momentum. It is currently probing the top end of its 1.7650/1.8100 range, which has seen decent supply cap it the last few months, a sustained break above 1.8100 could see the move extend higher.
- GBP/AUD - Overnight range 2.0814 - 2.0909, Asia is trading around 2.0900. The pair found solid demand around the 2.0800 area and extended higher overnight as risk turned lower. Having broken above the pivot within its 2.0400 - 2.1050 range, dips should be supported now enroute to testing 2.10/11.
- AUD/JPY - Overnight range 95.13 - 95.96, Asia is trading around 95.20. The pair broke through 95.50 overnight and has put in another lower high. Although the price is still in the 94.00-97.50 range the multiple failures towards 97.00 looks like a rounded top and with risk looking vulnerable a test of the lower end of the range looks possible. A sustained break below the 94.00/94.50 area could potentially see momentum lower pick up. Not sure we see this until the Jackson Hole event risk is out the way.
- AUD/NZD - Overnight range 1.0939 - 1.0960, the cross is dealing in Asia around 1.0950. The Cross is trying to push higher but continues to stall back towards 1.1000 and will need a sustained break here to potentially extend. Until then the range looks to be 1.0850-1.1000.
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JGBS: Slightly Mixed, Machine Orders Stronger, Trade Balance In-Line
In Tokyo morning trade, JGB futures are little changed, +3 compared to settlement levels.
- Japan June core machine orders were better than forecast. We rose 3.0%m/m, versus -0.5% forecast and -0.6% prior. The y/y print was 7.6%, against a 4.7% forecast and 4.4% prior. Today's machine orders print continues to paint a resilient capex picture for Japan's economy.
- Japan July export and import outcomes were fairly close to market expectations, but the trade balances were slightly weaker. Exports fell -2.6%y/y (-2.1% forecast and -0.5% prior), while imports were -7.5%y/y, (-10.0% forecast and 0.3% prior). The trade deficit was -¥117.5bn, against a ¥198.5bn forecast. In seasonally adjusted terms we printed at -¥303bn, against a -¥67.2bn forecast (June's outcome was -¥247.6bn).
- US tsys are little changed in today’s Asia-Pac session.
- Cash JGBs are slightly mixed across benchmarks, with yields 1.5bps lower (7-year) to 1bp higher (40-year). The benchmark 10-year yield is 1bp lower at 1.592% versus the cycle high of 1.616%.
- Swap rates are flat to 1bp higher, with a steepening bias.
