KRW: Spot USD/KRW Finds Selling Interest Above 1400, Tech Equities Still Soft

The overnight range was 146.31 - 147.95, Asia is currently trading around 146.70. USD/JPY continues to frustrate the market and has given back a large portion of its recent gains, around 250 points in 2 days. The move lower in US yields is providing serious headwinds for the pair and the USD seems to be floundering in all scenarios. The CFTC data showed the market is shifting its view on the JPY, with leverage funds just starting to build JPY shorts and Asset managers actively reducing their own. We are probing the first support around 146.50 where some demand should be seen, next level is the pivotal 144.00/145.00 area.

• (Bloomberg) - “The yen carry trade's popularity is growing following Japan's election result, investors say, as the situation may compel Prime Minister Shigeru Ishiba to open the government's purse strings and the Bank of Japan to slow down interest-rate hikes.”
• Japan’s 40-year government bond auction today will be the first test of investor appetite for super-long debt following the collapse of the coalition.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($734m), 148.00($902m).Upcoming Close Strikes : 147.50($1.5b July 24), 145.00($1.15bm July 25) - BBG.
• CFTC data shows Asset managers starting to reduce JPY longs more aggressively +71610, while leveraged funds have started to build into a new short JPY position -12606.
• Data/Event : Machine Tool Orders

Fig 1 : USD/JPY Spot 120min Chart

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

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 141.48/142.95 - High May 2 / High Apr 7
• PRICE: 138.53 @ 15:44 GMT Jul 22
• SUP 1: 137.70 - Low Jul 16
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs hold above recent lows, however a bearish theme remains intact following the reversal posted off the mid-June highs. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, the first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal. 

The NZD/USD had a range overnight of 0.5941 - 0.6004, Asia is trading around 0.5995. The pair had a decent move higher in the New York session as the USD came back under pressure with US yields pushing lower. Depending what your view is this 0.6000/0.6050 area looks an attractive fade, the danger though is the USD which is looking sickly once more and should it capitulate the NZD could build momentum higher again. Price will need a sustained break back above the 0.6025/50 area to signal a potential base might be in place. 

• “US tariffs — now averaging 40% overall — threaten a heavy blow to China’s industry. Bloomberg Economics’ analysis of profit margins of China’s firms suggests only five of 33 industrial sectors — accounting for a meager 2.4% of GDP — can absorb current levies that apply to their exports.” - BBG
• Bloomberg - “China says it now allows wild seafood imports from New Zealand. Wild seafood imports from New Zealand are allowed for companies from the island country that meet the relevant Chinese food safety requirements, the General Administration of Customs says.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6010(NZD302m July 24). - BBG
• CFTC Data shows Asset Managers slightly reduced their newly built longs in NZD +8192, the Leveraged community has continued to reduce their shorts last week -6744.
• Data/Event : Bloomberg July NZ Economic Survey

Fig 1: NZD/USD Spot 120min Chart

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