FOREX: JPY Crosses - Trade Sideways, Looking For Direction
US Equities move higher stalled overnight with the poor Nvidia quarterly earnings seeing it move lower into the close. US Futures extended the move lower this morning on the back of Nvidia though these early losses are now being pared back, E-minis -0.10%, NQU5 -0.25%. The JPY crosses continued to trade sideways for the most part with their upward momentum looking to have stalled for now.
- EUR/JPY - Overnight range 171.26 - 171.79, Asia is trading around 171.60. This pair’s move higher looks to be stalling for the moment. A sustained break above 173.00 is needed to see momentum pick up and the uptrend regain the upper hand. The price action suggests risk is we drift back to 170.00.
- GBP/JPY - Overnight 198.68 - 199.19, Asia trades around 199.00. This pair continued to trade sideways overnight as it looks for direction. A sustained break above 200.00 is needed to see momentum higher restored. Like EUR/JPY momentum higher seems to be stalling, a move back below 197.50 could signal a deeper pullback.
- NZD/JPY - Overnight range 86.17 - 86.43, Asia is currently dealing 86.35. The pair found decent selling around 86.50 the last couple of days as it trades sideways. Is that the end of the pullback, I would have preferred something back towards 87.00/50 to fade.
- CNH/JPY - Overnight range 20.6000 - 20.6824, Asia is currently trading around 20.6000. This pair has again bounced off its pivotal 20.30/20.40 support. A sustained break back below 2.3000 is needed to turn momentum lower again, until then it looks comfortable in a 20.4000-20.9000 range.
Fig 1 : NZD/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US-CHINA: Trump Pushes Back On Speculation For Meeting With China's Xi
US President Trump posted via Truth Social that he is not seeking a a summit with China President Xi Jinping. The full post is below. This comes as US and China officials are set to meet for the second day of trade talks in Stockholm. A potential meeting between Trump and XI was reportedly set to be part of the agenda of the talks.
- "The Fake News is reporting that I am SEEKING a “Summit” with President Xi of China. This is not correct, I am not SEEKING anything! I may go to China, but it would only be at the invitation of President Xi, which has been extended. Otherwise, no interest! Thank you for your attention to this matter."
- Also noted the FT reported overnight: " The US has frozen restrictions on technology exports to China to avoid hurting trade talks with Beijing and help President Donald Trump secure a meeting with President Xi Jinping this year, the FT reports, citing people familiar with the matter." (via BBG).
- Rtrs headlines have also just crossed that Nvidia has placed fresh orders with TSMC for 300k in H20 chips, as demand from China is very strong, but that the US Commerce Department is yet to approve the company's export licenses for the H20.
AUSTRALIA: NZ Q2 Core CPI Suggests Small Moderation In Australia
With Australia’s Q2 CPI data released on Wednesday, it is worth looking at NZ developments given the high correlation between the two countries’ inflation rates. With Australia’s headline CPI impacted by government electricity rebates, it is hard to infer any trends. However, the trimmed mean has a 3-year rolling correlation of around 90% with the RBNZ’s measure of core. The two were in line in Q1 at 2.9% and NZ’s Q2 outcome of 2.8% suggests that Australia’s may also post a small decline. This result would be above the RBA’s May Q2 forecast of 2.6% though.
Australia vs NZ underlying inflation y/y%
- NZ-Australia services CPIs also have a correlation of around 90% and in Q2 NZ’s picked up to 4.7% y/y from 4.2%. Q2 seasonally sees an increase in the quarterly rate in services but it would have to be above 1.0% q/q in Australia for the annual rate also to pick up. However, NZ non-tradeables inflation moderated 0.3pp to 3.7% y/y in Q2.
- Both services and non-tradeables in NZ continue to run above Australia’s, as has been the case since mid-2023.
- RBA Governor Bullock noted that in the monthly CPI data durable goods prices were a bit higher. NZ’s goods inflation was steady at 1.4% y/y in Q2. The 3-year rolling correlation between Aus-NZ goods inflation has picked up recently to around 95%.
Australia-NZ core CPI y/y% correlations
Source: MNI - Market News/LSEG/RBNZ
JGBS AUCTION: 2Y Supply Faces A Higher Yield But A Steeper 2/5 Curve
The Japanese Ministry of Finance (MoF) will today sell Y2.6tn of 2-Year JGBs. The MoF last sold 2-year debt on 26 June 2025.
- Currently, the 2-year yield stands 10-15bps higher than last month’s issuance level.
- Whereas the 2s/5s yield curve has steepened ~5bps since last month and is around its steepest level since late 2023.
- Amid mixed demand at recent short-end auctions, today’s results will be closely watched for signs of renewed weakness, particularly against the backdrop of heightened global bond market volatility.
- Results are due at 0435 BST / 1235 JST.
