ILS: Shekel Posts Gains, IDF Resumes Enforcing Ceasefire

• With such focus on the dollar and the impending US employment report this week, it is worth looking at some of the key Yen crosses and their significant chart points, especially considering that uncertainty surrounding Japanese politics and the LDP leadership remains high. Fiscal dove and well-positioned LDP contender Sanae Takaichi hinted at a review of Japan’s $550 billion investment fund that was part of its pact with the US.
• Given the proximity to tomorrow’s RBA decision, it’s worth noting that AUDJPY (shown below) remains in a strong uptrend, with the 20-day EMA acting as very strong support in recent weeks amid the firm price action for major equity indices. Additionally, an area between 97.25-45 continues to hold, while the uptrend from the April lows remains intact.
• Should we move higher, the year’s highs reside at 99.17, before the psychological 100 mark. A move back below the 50-day EMA at 96.70 would be required to alter the trend.
• Today’s EURJPY price action has taken spot back to the prior breakout level, just below the 174 handle. However, after trading to a fresh cycle high last week, a bullish theme remains prevalent. The overnight high fell just short of 175.43, the Jul 11 ‘24 high and a key medium-term resistance.
• One cross that has failed to garner much topside momentum above 200.00 is GBPJPY, and the cross has today slipped below the 20-day EMA. While noting that GBPUSD had broken some important trendline supports last week, GBPJPY might be most vulnerable to a further upward yen correction. The 50-day EMA remains key here having not meaningfully closed below this average apart from the fleeting test below in early August. The average intersects at 198.98, and the next downside target would be 195.04, the August low.

Source: Bloomberg Finance L.P. / MNI

OI data points to a mix of net short cover (TU), long setting (FV), long cover (TY, US & WN) and short setting (UXY) as the Tsy futures curve twist steepened on Friday.

• The curve-wide bias was tilted towards cover.

• On Friday, USDJPY rose to within 4 pips of the 150 mark, and it was notable that the recovery had outpaced that of the DXY, rallying 3.07% to its peak. Subsequently, the pair has retraced a solid portion of this advance, extending this morning amid US government shutdown concerns. President Trump will meet senior figures in congress at the White House in a last-ditch attempt to avert a shutdown.
• With USDJPY moving average studies highlighting a dominant uptrend, today’s pullback appears technically corrective. Sights are on 150.92, the Aug 1 high and key resistance, while pivot support remains much further out at 145.49, Sep 17 low.
• Some market participants have sighted BOJ board member Asahi Noguchi’s comments as potentially assisting the yen bid. Noguchi said the Bank's monetary policy is entering a phase requiring careful assessment, adding that Japan will eventually need a new policy perspective addressing upside risks, while also facing downside pressures from U.S. tariff policies.
• Separately, a former BOJ Executive Director told MNI that markets are watching Bank of Japan communications more closely than economic data for signals on policy moves. They added there is no reason for the BOJ to refrain from raising the policy rate while underlying CPI inflation remains below 2%.
• Japan’s government slightly tweaked its economic assessment in September, upgrading views on private consumption and capital investment for the first time in over a year, though leaving its overall judgment largely unchanged, the Cabinet Office said Monday.