AUSSIE BONDS: Post-Jobs Sell-Off Extends, 50bps Of Tightening By Year-End

The USD/JPY range today has been 155.56 - 156.30 in the Asia-Pac session, it is currently trading around {USDJPY Curncy}. USD/JPY tried lower in our session again as South Korea joined them in pushing back on one-sided USD strength against their currency. The BOJ is in a tough spot, and they are going to need to do something significant to turn around the market's perception of a weak Yen. A test of the BOJ/MOF resolve looks inevitable at the moment as the market has its focus on the important 160.00 area. Technically USD/JPY remains in an uptrend, while the support back toward the 154.00 area is intact it remains a buy on dips. In today's session, it's tough to discern direction and we are probably going to have a period of consolidation ahead of us. I remain skewed toward looking for opportunities to fade long though while the price remains above 154.00.

• Bloomberg - “Japan plans to set the provisional debt servicing rate at 3% for the next fiscal year, the highest since 1997. Fresh bond issuance will stay under ¥30 trillion ($192 billion).”
• “A BOJ board member said the central bank needs to be cautious about the timing of rate hikes given inflation risks, October minutes showed.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 157.00($794m), 158.00($589m). Upcoming Close Strikes : 155.50($486m Dec 26), 157.00($545m Dec 29) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 123 Points

Fig 1 : USD/JPY Spot Daily Chart

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

The AUD/USD has had a range today of 0.6698 - 0.6713 in the Asia- Pac session, it is currently trading around {AUDUSD Curncy}. The AUD has poked its head above 0.6700 in Asia as the USD headwinds were added to in our session by South Korea pushing back on one-way USD strength very much in the same vein as Japan. The AUD price action remains constructive as the pair looks to build the momentum to try and break above the 0.6700 area. Technically while the AUD remains above 0.6500-0.6550 dips should continue to be supported. On the day, focus will be around the attempt to break and hold above 0.6700, the AUD does look a little stretched short-term but with risk powering ahead and liquidity not what it would normally be a move higher is possible. I would prefer to fade dips again with the first support on the day 0.6645-0.6665.

• (Bloomberg) -- The Australian dollar climbed to its strongest in more than a year after traders ratchet expectations the Reserve Bank will quickly shift to raising interest rates early next year.
• (Bloomberg) -- “South Korea’s won strengthened after the authorities said excessive weakness in the currency isn’t desirable and foreign-exchange markets will soon see the government’s “strong determination.”  {NSN T7R48GT96OSN <GO>}
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6700(360m Dec29) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 41 Points

Fig 1: AUD/USD spot Weekly Chart

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

• China's bond futures are marginally lower today after yet another liquidity withdrawal by the PBOC during this morning's OMO.  
• December has seen withdrawals for a second month by the PBOC with markets volatility relatively low.  
• The 10-Yr bond future is flat today at 108.20 and remains at the mid point between the 200-day EMA of 108.30 as topside resistance and downside resistance from the 100-day EMA of 108.09.
• The 2-Yr bond future is down -.01 today at 102.51 and remains above all major moving averages. Below is the 200-day EMA of 102.49.
• Cash remains steady with the 2-Yr at 1.358%.  The 2-Yr has traded in a tight range of 1.35-1.45% over the last month.  
• The 10-Yr is at 1.83%, marginally lower in yield today.  The 10-Yr has traded in a 1.81-1.85% range over the last month.