NZDJPY: NZD/JPY - Turns Lower With Risk, Targets 85.00 Initially
The overnight range was 86.60 - 87.36, Asia is currently dealing 86.45. This pair stood out as the outlier when cross-yen was accelerating higher and was the best vehicle to be short of if you wanted a hedge against those in your basket. This turnaround in risk has seen the pair very quickly gather pace lower again. A lot obviously depends on how long and how deep this correction in risk turns out to be, but NZD/JPY should now be a sell on rallies as the focus turns back toward the 85.00 area. A break back below 85.00 could potentially signal the start of a bigger move lower and the beginning of a new downtrend.
Fig 1 : NZD/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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USD/JPY gains are the main focus point so far in Monday trade. We are close to late Sep highs near 150.00. A clean break higher would see attention shift to 150.92, the Aug 1 high. As we noted earlier, US-JP yield/swap rate differentials don't argue for a sustained move higher in USD/JPY beyond 150.00, but these spreads have moved in favor of the USD so far today. BoJ hike odds have fallen dramatically in the first part of trade, with a full hike not priced in until April next year. Oct hike odds are around 20%.
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- Focus for the EU session will be French President Macron's cabinet appointments, which largely saw continuity. French bond futures are weaker in the first part of trade.
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- AUD/JPY is up to 98.75/80, fresh highs back to Jan of this year.
- The data calendar is very light today with only second tier Aust and NZ releases out a short while ago.
