JPY: Underperforms As US Yields Hold rebound, BoJ Minutes Out Today
Yen was the weakest G10 performer through Tuesday's session, losing 0.75% against the USD. This leaves USD/JPY in the 134.20/25 region at this stage. We did get as high as 134.90 in US trade, as sentiment was volatile post the US CPI print (which came in slightly above expectations for core and was a touch firmer in terms of the detail). The pair followed US yields lower into the close though.
- The US 2yr yield got close to 4.40%, but finished the session around 4.25%, still around 45bps above Tuesday intra-day lows. The US-JP 10yr swap spread rose around 25bps through Tuesday's session, now back to +290bps, which isn't too far off recent highs.
- The outright 10yr swap rate for Japan finished at 53bps, while the 10yr JGB yield spent some part of yesterday's session sub the 0.25% level (i.e. below the previous ceiling for the BoJ's YCC framework). Today, the BoJ minutes are on tap.
- Local bank shares are likely to be the other focus point, after the Topix bank index lost a further 7% yesterday. There was some stability in US financial names for Tuesday's session, so this may impart some stability today.
- From a technical standpoint, 134.22, the 50-day EMA may remain in focus. The 200-day sits at 134.10 as well. A clear break to the downside would strengthen a short-term bearish threat and exposes 131.31, a Fibonacci retracement point.
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AUD: A$ Jumps In Early Trade In Line With Yields
AUDUSD has jumped in early trading to around 0.6923 on higher Aussie yields after reaching a high of 0.6960 on Friday. Aussie was a mid-range G10 performer, outperforming the kiwi and most of Europe but underperforming CAD and the yen. The USD DXY rose 0.35% after Michigan consumer sentiment for February was better-than expected.
- AUDUSD is in an uptrend and recent moves are corrective. A break through key resistance and bull trigger at 0.7158, the February 2 high, would see the uptrend resume. Initial support is at 0.6856, the February 6 low.
- AUDNZD is down 0.1% to around 1.0959. AUDJPY is at 90.90 from 90.74. AUDEUR is 0.6477 and AUDGBP 0.5736.
- Equity markets were mixed on Friday with the Eurostoxx down 1.2% but the S&P 500 up 0.2%. VIX was down to 20.5%. WTI oil prices rose 2.2% to $79.76/bbl after Russia said it would cut output by 500kbd. LME metal prices were down 0.7% on the week after falling 2.1% on Friday. Iron ore is around $124/t.
- There are no events scheduled in Australia today. The focus of the week is likely to be RBA Governor Lowe’s parliamentary appearances on February 15 and 17 and in terms of data the employment report on February 16.
NZD: Flat Start, PSI On Tap
NZD/USD prints at $0.6305, little changed from Monday’s opening levels in a flat start to the week's trading.
- The pair was rangebound on Friday, firming through the European session before meeting resistance above $0.6334 (50-day EMA). An offer in USD/JPY, as a Nikkei report surfaced noting former BoJ board member Ueda will be nominated to the BoJ Governor, spilling over into broader pressure on the USD.
- Gains were unwound through the NY session, the U of Mich survery showed inflation expectations in the US increasing, with support coming in ahead of $0.63 to finish trading ~0.3% lower.
- Technically the pair consolidated last week. Bears first look to break February lows at $0.6270. Bulls look for a break of $0.64.
- Cross asset flows were mixed; S&P500 rose 0.2%, 10 Year Treasury Yields rose ~9bps and DXY was ~0.4% higher.
- On the wires shortly we have Jan Performance Services Index, there is no estimate, the prior read was 52.1.
USDCAD TECHS: Recent Gains Considered Corrective
- RES 4: 1.3751 High Nov 4
- RES 3: 1.3705 Dec 16 and the bull trigger
- RES 2: 1.3665 High Jan 6
- RES 1: 1.3475/3521 High Feb 6 / 19 and key short-term resistance
- PRICE: 1.3368 @ 17:04 GMT Feb 10
- SUP 1: 1.3345/3262 Low Feb 10 / 2
- SUP 2: 1.3226 Low Nov 15 and bear trigger
- SUP 3: 1.3205 61.8% retracement of the Aug 11 - Oct 13 rally
- SUP 4: 1.3131 0.764 proj of the Oct 13 - Nov 15 - Dec 16 price swing
USDCAD is consolidating and price remains above its recent low of 1.3262 on Feb 2. A bearish threat remains present and recent short-term gains are most likely a correction. A resumption of weakness and a break of 1.3262, Feb 2 low, would strengthen bearish conditions and open 1.3226, the Nov 15 low and the bear trigger. On the upside, the pair needs to clear 1.3521, the Jan 19 high, to signal a stronger reversal.
