JPY: Recent Outperformance Theme Continues

"*AUSTRALIA SEPT. WESTPAC CONSUMER CONFIDENCE FALLS 5.2% M/M
*AUSTRALIA SEPT. WESTPAC CONSUMER CONFIDENCE FALLS TO 84.4" - BBG

The USD/JPY range overnight was 154.06-155.91, Asia is currently trading around 153.65. The pair worked through the demand around the 155 area overnight and is extending lower. Sentiment seems to be changing very quickly and those initial green shoots in favour of the Yen seem to be taking hold. A perfect mix of a dovish Waller and the BOJ attempting to communicate they are open to accelerating the pace of hikes has seen the pair capitulate off its highs above 160, just as the Yen shorts were being rebuilt. We are challenging some important support in the 154-155 area. I thought we could see some demand return here initially but the pace of the move lower suggests a market caught wrong-footed and is being squeezed in what looks to be thin liquidity. A sustained break below here and the 149-152 area comes back into play but until the US CPI print has been seen I suspect that level could prove a step too far. Lets see what the USD does as attention now turns toward that data later in the week. Initial resistance on the day should now be back toward the 156.00-156.50 area where I suspect sellers would be lining up if given the opportunity.                                       

• "JAPAN JULY REAL CASH EARNINGS RISE 2.4% Y/Y; EST. +1.8%, JAPAN 2Q GDP GROWS 1.4% ON ANNUALIZED BASIS; EST. 1.8%.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 157.00($900m), 158.00($3.19b). Upcoming Close Strikes : 154.00($1.62b Sept 11), 156.00($1.43b Sept 10), 161.50($1.22b Sept 11) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 146 Points

Fig 1 : USD/JPY Spot Weekly Chart

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

The NZD/USD had a range overnight of 0.5870 - 0.5889, Asia is currently trading around 0.5885. The pair is chopping some wood just below the 0.5900 area. It remains a favourite for those looking for a short but the US Dollar’s mounting problems take precedence and CFTC data showed NZD positioning is beginning to shift. The price action has been messy recently and it seems to have broken down what looked a potentially constructive set-up, a wider 0.5800-0.6000 range now seems likely until we get a clearer picture on the USD. The upcoming Inflation data will be pivotal to this thanks to Waller’s comments last week. On the day, the pair is challenging its first resistance between 0.5870-0.5900. I suspect it will need the US Dollar to turn higher again for us to rechallenge the 0.5800 area which given the current sentiment looks a big ask. Until then it looks like the Crosses might be a better way to express NZD underperformance if that's your way.             

• MNI INTERVIEW: RBNZ's Gai Sees Gradual Return To Midpoint. It is a priority for the Reserve Bank of New Zealand to return inflation to the 2% target midpoint, but only by around mid-to-late 2027 rather than as quickly as possible and not "at all costs," Monetary Policy Committee member Prasanna Gai told MNI.  
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5810(NZD444m). Upcoming Close Strikes : 0.5675(NZD633m Sept 9), 0.5850(NZD386m Sept 9), 0.5880(NZD390m Sept 10) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 40 Points
• Data/Event: “New Zealand's manufacturing volumes rose 0.8% q/q in 2Q versus revised +3.9% in 1Q, according to Statistics New Zealand.” - BBG 

Fig 1: NZD/USD Spot Daily Chart

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