FOREX: JPY Crosses - Regain Momentum As Risk Powers On & Mkt Eyes Election
US stocks have powered once again to new all-time highs as US data continues to outperform. This morning has seen US futures open a little stronger as Waller talks up rate cuts, ESU5 +0.08%, NQU5 +0.05%. The combination of a positive risk backdrop and worries mounting that Prime Minister Shigeru Ishiba’s ruling coalition could lose its majority is keeping the JPY under pressure.
- EUR/JPY - Overnight range 171.94 - 172.60, Asia is trading around 172.70. 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 198.72 - 199.55, Asia trades around 199.50. The pair found very good demand around its support at 198.00 and is now once again looking to test above the 200.00 area. A sustained move through this area could see the move higher regain momentum.
- NZD/JPY - Overnight range 87.56 - 88.60, Asia is currently dealing 88.45. The NZD/JPY support around 87.50 found good demand and it is now attempting to regain momentum higher. The Support towards 87.00 needs to hold for the focus to remain on the 90.00/91.00 area.
- CNH/JPY - Overnight range 20.6425 - 20.7389 Asia is currently trading around 20.6700. This pair pulled back from its highs but the pair still looks like it could continue to press higher. Look for demand now back towards the 2.40/50 area.
Fig 1 : GBP/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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USD: Headwinds Mount, Can It Bounce ?
The BBDXY range overnight was 1201.66 - 1209.66, Asia is currently trading around 1209. The window for a peaceful resolution in the middle east seems to be closing and with the US potentially now getting involved, the USD is finally looking to bounce. The USD has been able to ignore the multitude of reasons for it to bounce, but with the pressure on risk mounting and the market positioned very short USD the probabilities of some sort of a retracement is increasing. We have seen this movie before though, is it different this time ?
- Bloomberg - “Israel-Iran situation “has demonstrated that the USD still retains a bit of haven status in certain situations, such as when the War is seen to raise the risk of disrupting global oil supply, and when the war diverts traders’ attention away from those risks that are US centric, including, of course, tariff risk, and the US’s fiscal uncertainties,” wrote Thierry Wizman, a macro strategist at Macquarie Group in New York. “But we wouldn’t stretch this to say, however, that foreign traders have found renewed confidence in the US and its political economy,” he said.”
- ZeroHedge on X: "Biggest Pain Trade Is Long The US Dollar": Latest Fund Manager Survey Finds "Everyone Is Short The Buck”. See Graph Below.
- The BBDXY has bounced strongly off its 1200 support area, it is still in a clear downtrend but with positioning at extreme levels and headwinds increasing the potential for some sort of a retracement is increasing.
- The BBDXY rejected the 1225 area pretty strongly, the USD should continue to be met with supply towards the 1225/30 area, only a sustained break above here would start to get the bears a little worried.
- 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. This will also result in some decent short squeezes as a lot of the market is positioned the same way.
Data/Events : Data/Events: MBA Mortgage Applications, Housing starts, Initial Jobless Claims, FOMC
Fig 1: Investor USD Position
Source: @zerohedge/BofA Research
AUSSIE BONDS: ACGB Jun-35 Auction Absorbed With More Demand Present
Today’s auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.37bps below prevailing mid-yields, according to Yieldbroker. Moreover, the cover ratio jumped to 3.4444x from 2.75x at the previous auction.
- As noted in our preview, the current yield for this bond was approximately the same as the previous auction, notably about 50bps below the high recorded in early November 2024.
- The 3/10 yield curve was also around the same level as the previous auction but sits around 20bps below its recent high.
- Following the auction, both the cash line and XM remained relatively unchanged.
CHINA PRESS: Officials Cannot Host Illegal Banquets To Boost Economy
Government officials cannot host illegal banqueting under the excuse of revitalising the economy, the People’s Daily said in a commentary. Rules banning illegal eating and drinking are to prevent corruption and allow the economy to develop better, the paper said. Normal catering practices are the pulse of the economy with revenue exceeding CNY5.5 trillion in 2024 and supporting more than 30 million jobs, the paper added. Non-compliant dinners are eroding public trust and must be eradicated with a zero tolerance attitude.
