AUSSIE 3-YEAR TECHS: (M6) Bounces Off Lows

source:  Bloomberg Finance LP / MNI 

The USD/JPY range overnight was 158.85-159.39, Asia is currently trading around 159.00. The pair again stalled just ahead of the all important 160.00 area as the USD pulled back as we approach the FOMC. The jaw-boning by officials is ratcheting up but I think the BOJ/MOF are in a tough place, who wants to sell USD’s into a market that is looking for them. With their rhetoric becoming more earnest you cannot completely discount them coming in but I suspect they hold off until this market has calmed down and the demand for USD’s has turned lower again. The market is growing tired of the same story without any follow-through. The market does not expect anything from the BOJ this week but MNI’s Hiroshi Inoue’s article last week raised the small possibility of a potential rate hike due to the current Yen weakness. On the day, the first support is back toward 158.00-158.50 and then the 157.00 area. 

• “Commodity currency carry trades are posting the best returns in years from the surge in oil. Borrowing is centered on Japan and other countries more exposed to higher energy costs.” - BBG
• (Bloomberg) -- Japan’s 20-year government bond auction on Tuesday drew solid demand as higher yields attracted buyers, easing concerns that rising oil prices and inflation risks would damp appetite.
• Options : Close significant option expiries for NY cut, based on DTCC data: 159.00($1.23b),159.50($1.31b). Upcoming Close Strikes : 159.00($628m March 19) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 80 Points
• Data/Event : Japan February Trade, Japan to sell ¥4.7 trillion of 3-month bills

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The NZD/USD had a range overnight of 0.5819 - 0.5869, Asia is currently trading around 0.5860. The NZD found demand back toward 0.5800 again and drifted back to its highs as risk stabilised and the USD came off heading into the FOMC. That's a decent rejection of the break below 0.5800 and it will now come down to whether risk can build on this initial rally. The NZD is unfortunately back in its range, I continue to be skewed toward fading this bounce but the size of the reversal highlights the pairs positioning. On the day, if price gets back above 0.5870-0.5880 I suspect we could move back toward 0.5910-0.5930 where I would look for sellers to return and then the more important 0.6000 area. 

• “Whole Milk Powder Average Price Falls to $3,709 a Ton. Average price for whole milk powder fell to $3,709 from $3,863 at the previous auction, according to the GlobalDairyTrade website. GDT's weighted average price for all milk products was $4,330 a ton.” - BBG
• NZ 1Q CONSUMER CONFIDENCE FALLS TO 94.7: WESTPAC
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5800(NZD448m March 19), 05940(NZD847m March 19), 0.6100(NZD416m March 20)  - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 69 Points
• Data/Event: BoP Current Account Balance NZD

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P