JGB TECHS: (U5) Undoes CPI Rally

RBNZ dated OIS pricing is slightly firmer across meetings ahead of today’s Q2 CPI data. 

• 16bps of easing is priced for the August meeting, with a cumulative 30bps by November 2025.

Figure 1: RBNZ Dated OIS Today vs. Prior (%)

Source: Bloomberg Finance LP / MNI 

USD/CNH tracks near 7.1790 in early Monday dealings. The pair didn't shift much in Friday's session, with recent ranges still holding. Spot USD/CNY finished up at 7.1746, while the CNY CFETS basket tracker rose for the 6th straight session on Friday, to 96.14, per BBG. 

• For USD/CNH spot, we are largely tracking sideways. We haven't tested the 50-day EMA resistance on the upside, which current rests near 7.1925.  Earlier July lows were near 7.1500, but more recently, the pair has been supported on dips sub 7.1700.
• A slight downtick in US-CH yield differentials at the end of last week likely helped curb USD/CNH upside. Still, broader yield differential trends will remain dominated by US yield shifts.
• In the equity space, the CSI 300 closed at fresh highs back to Nov last year on Friday. The China to global equity ratio is trending higher, another CNH support point.
• Prospects for a return to previous large scale stimulus measures in the housing sector remain quite low, although broader sell-side consensus put such prospects as fairly low, with China now focused more on quality rather quantity when it comes to housing sector upgrades. Local real estate stocks have no been a key driver of recent aggregate market shifts.
• Today we have the 1yr and 5yr loan prime rate decisions, no change is expected. 

The Friday night range was 148.19 - 148.89, Asia is currently trading around 148.60. USD/JPY gapped lower on its open in a surprising reaction to the ruling coalition losing its upper house majority. Printing as low as 147.80(-0.70%) in early trade it has since clawed back most of those losses to be only -0.15% down. The risk back drop still looks pretty good and this election outcome only adds to the headwinds for JPY longs, was this morning's reaction a “buy the rumour sell the fact” ? I expect there will continue to be demand on dips in the short-term, first support towards 147.00 then the important pivot area around 144/145.

• Bloomberg: “Japanese PM Shigeru Ishiba said he intends to stay on — even as NHK reported that his ruling coalition lost its upper house majority — citing his duty to address economic and security challenges.”
• “Japan’s top trade negotiator Ryosei Akazawa said he aims to visit Washington next week to continue efforts to win tariff concessions after Saturday talks with Bessent didn’t touch on the issue.” - BBG
• “Ishiba and US Treasury Secretary Scott Bessent indicated the two nations could reach a “good” trade deal while signaling the process may take more time.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 145.50($1.29b).Upcoming Close Strikes : 147.00($1.44b July 22), 147.50($1.45b July 24), 147.00($495m July 24) - 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.

Fig 1 : USD/JPY Spot Hourly Chart

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