EURJPY TECHS: Moderated Into Weds Close
- RES 4: 147.76 1.236 proj of the May 12 - Jun 28 - Aug 2 price swing
- RES 3: 145.64 High Sep 12 and the bull trigger
- RES 2: 144.48 High Sep 14
- RES 1: 144.08 High Oct 4
- PRICE: 141.55 @ 14:17 BST Oct 7
- SUP 1: 141.37 / 20 20-day EMA / Low Oct 7
- SUP 2: 139.44/137.40 Low Sep 29 / 26 and key support
- SUP 3: 136.02 Low Aug 25
- SUP 4: 135.52 Low Aug 24
EURJPY hit reverse Wednesday and extended losses well into the Friday close. The price action has put prices back below 143.70 resistance - the 76.4% retracement for the Sep 12 - 26 downleg and prices have pierced the 20-day EMA of 141.37. Key support lies at 137.40. For any recovery to gain a firmer footing, attention is on key resistance at 145.64, the Sep 12 high. A break of this level would confirm a resumption of the broader uptrend.
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EURJPY TECHS: Impulsive Rally Extends
- RES 4: 145.00 Psychologicals round number
- RES 3: 144.28 High Jun 28 and key resistance
- RES 2: 143.85 1.764 proj of the Aug 2 - 10 - 16 price swing
- RES 1: 143.38 Intraday high
- PRICE: 143.55 @ 17:01 BST Sep 7
- SUP 1: 141.37/139.56 Intraday low / Low Sep 6
- SUP 2: 138.69/27 Low Sep 5 / 50-day EMA
- SUP 3: 137.03 Low Aug 29
- SUP 4: 136.02 Low Aug 25
EURJPY continues to climb as the Yen stays offered. This week’s impulsive gains reinforce current bullish conditions and the move higher maintains a positive price sequence of higher highs and higher lows. The cross has cleared resistance at 142.32, the Jul 21 high. The break opens 144.28, the Jun 28 high and the next major resistance. Firm trend support is seen at the 20-day EMA. The average intersects at 138.44.
US OUTLOOK/OPINION: Goldman On FCI Hitting Fresh Peaks
- Helped by Chair Powell's comments at Jackson Hole, the market has now fully unwound the easing in financial conditions in July on prior hopes of a Fed pivot, taking Goldman’s FCI to fresh peaks after tightening 90bps since Aug 12.
- Hawkish policy shifts are the clear driver “as the market has relaxed somewhat about growth risks since the middle of the summer”, but “given the deceleration in global activity, a further hawkish-policy-driven shift in financial conditions would likely see the market revisit its growth worries”
- They see the risks to front-end US rate pricing as more balanced than before but fading rallies here likely makes sense. However, “there are more ways for real yields to move higher over time than lower, and there is room for the market to price a higher risk of hikes extending into 2023.”
- Still broadly USD-supportive, particularly against JPY and CNH where policy is not tightening, “but while USD longs are more robust to growth worry than rate shorts, we think the Sharpe ratio may be lower here too, particularly after some large moves.”
- Equities may be being supported by commodity price relief and continued positive US growth to stay off June lows “but the ongoing rise in real yields continues to pressure valuations, and we think the balance of risks there still skews lower”.
OPTIONS: Mixed Call Structures And Vol Trades
Wednesday's US rates / bond options flow included:
- EDZ2 96.00/96.25/96.50c fly sold at 3.5 and 3.25 in 20k
- SFRZ2 96.87c, sold at 3.5 in 1k
- SFRZ3 96.50^, sold at 124/123.5 in 1.5k
- TYX2 118 call, bought for 29 in 10k
