STIR: RBA-Dated OIS Firms Post-CPI Data

Last week's CFTC FX positioning update, for the week ending 20th of Jan, showed mixed flows for JPY, see the table below. Leveraged contracts were yen buyers, paring back on aggregate shorts. Offsetting this though was a trimming of JPY longs by asset managers. The aggregate net short position in JPY is now at -70k, only modestly tighter than the prior week's -73.5k. This of course pre dates Friday's sharp move lower in USD/JPY, which has continued in the first part of Monday trade. From above 159.00 we got to lows of 154.22 this morning, before some demand emerged. A combination of a reported USD/JPY rate check on Friday, along with PM Takaichi's warning from the weekend around curbing abnormal/speculative moves in markets has driven the yen rebound. Focus this week's CFTC update is likely to be on the extent of leveraged contracts curbing short JPY positions.   

• Elsewhere, EUR shorts were added to by leveraged names, while longs were cut back by asset managers. GBP positioning saw modest leveraged buying but asset managers selling.
• AUD positioning was little changed, while NZD positioning was mixed. Leveraged shorts were pared, amid signs of better data momentum, but asset managers added to shorts. 

Fig 1: CFTC Positioning Update By Major Currency - Weekly Change & Outright Levels 

Source: CFTC/Bloomberg Finance L.P/MNI  

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• The key data release will be the Industrial Profits for December, where investors will look for signs that pressures from 'price involution' may be moderating.
• The CSI 300 has struggled year to date, despite onshore analysts revising upwards the outlook for earnings.
• The PBOC set the yuan's daily reference rate below 7 for the first time in over 2-years, potentially a sign of allowing further appreciation.
• The AI / tech euphoria seen in other markets remains more cautious for domestic investors with valuations less stretched.

• RES 3: 140.08 - High Jun 13  
• RES 2: 139.05 - High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 131.28 @ 15:54 GMT Jan 23
• SUP 1: 131.06 - 2.0% Lower Bollinger Band
• SUP 2: 130.66 - Low Jan 19
• SUP 3: 130.41 - 1.0% 10-dma envelope  

JGBs came under intense selling pressure Tuesday on the back of weak demand at a 20y JGB auction and increased scrutiny of Japan’s fiscal health. Resultantly, prices traded to new pullback and cycle lows. This affirms the firm downtrend that’s dominated prices since mid-September, and prices will need to challenge resistance before signaling any broader reversal. The Lower Bollinger Band at 131.15 has been breached, with 130.55 envelope support below.