FOREX: USD - BBDXY Trying To Bounce Off 1180

The USD/JPY range today has been 159.45 - 159.09 in the Asia-Pac session, it is currently trading around {USDJPY Curncy}. USD/JPY popped up trading just short of 159.50 on what looked like strong USD demand into the Japanese Fix, it has spent the rest of the session drifting back to where it started. The BOJ is in a tough spot, and they are going to need to do something significant to turn around the market's perception of a weak Yen. A test of the BOJ/MOF resolve looks inevitable at the moment as the market moves its focus back toward the important 160.00 area. In today's session, first support is back toward 158.50 and then the 157.50-158.00 area as dips continue to be supported. It's almost a case of when not if we get intervention now. In my experience though they tend to come in a lot later than most expect so would not be surprised to see new highs above 162.00 before we start seeing them get involved. Until then it's tough to see what turns this ship around, looks like some decent optionality around 160.00 coming up which might see it chop some wood first.

• Robin Brooks on X: “The Yen is falling because Japan's yields are artificially low. Whenever markets think fiscal risk rises, like now with a possible election, the Yen falls. Intervention won't fix this. Instead, the gov't needs to sell assets and retire some of its debt... robinjbrooks.substack.com/p/japan-in-cri “ See Graph Below.
• "Japan is trapped in a very bad place and is the G10 country that's closest to a full-blown debt crisis. Japan's only choice is to accept higher interest rates and a debt crisis or - if it caps yields - a depreciating Yen, which is nearing its 2024 lows."
• Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 158.00($1.9b Jan 16), 160.00($4.25b Jan 16) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 89 Points

Fig 1 : Gov Debt vs 30-Year Bond Yields

Source: MNI - Market News/@robin_j_brooks

NZGBs closed showing a bear-steepener, with benchmark yields 2-5bps higher.

• NZ  filled jobs rose 0.3%m/m in Nov last year after a revised -0.1% outcome for Oct (originally reported as flat). Nov's rise was the best m/m gain since Oct 2023. The data, along with a rise in building permits, should add to the sense of improved economic momentum for NZ in 2026, suggesting an early wait and see approach for the RBNZ. Note we get Q4 2025 inflation next week on Friday.
• Swap rates closed 1–3bps higher, with further steepening in the 2s10s curve. The curve is now near its cycle high and at its steepest since 2021.
• While our Economics team’s central view remains that the RBNZ will stay on hold through 2026, market pricing has recently shifted toward expectations of tightening. Given the current degree of curve steepness, this leaves scope for a material flattening in 2026 should markets continue to price a tightening path (see chart).
• RBNZ-dated OIS pricing closed little changed across meetings. No tightening is priced for February, while October 2026 assigns 24bps.
• Tomorrow, the local calendar will be empty.
• Tomorrow, the NZ Treasury plans to sell NZ$250 Million 4.5% 2035 bond, NZ$200 Million 4.5% 2030 bond and NZ$25 Million 3.25% 2050 Linkers.

Bloomberg Finance LP

The AUD/USD has had a range today of 0.6677 - 0.6700 in the Asia- Pac session, it is currently trading around {AUDUSD Curncy}. The AUD has drifted back toward 0.6700 during our session as Asian stocks, Crypto and Metals outperform. The AUD price action has been constructive but its failure to extend higher would be a little concerning as the USD tries to mount a comeback. Technically while the AUD remains above 0.6600 dips should continue to find support. On the day, the risk is another test of the 0.6650 area which has been so supportive in recent weeks. In the short-term watch for sellers back toward the 0.6700-0.6720 area looking for a test of the 0.6650 support, a sustained move back above 0.6730 and we could see the upward momentum re-established.

• MNI AU: Job Vacancies Ease, Trend Mostly Sideways, Jobs Data Next Thursday: Today's data showed job vacancies down -0.2%q/q (ending in Nov). This follows a -2.7% decline in the prior quarter. Job vacancies remain around 30% off 2022 highs, but the trend though was only down modestly, to end Nov just under 327k. To Nov we were down 5.2%y/y. The q/q trend is relatively steady, not too far from flat for 2025. The data is unlikely to shift RBA thinking around labour market trends. Note we get Dec jobs data next Thursday (22nd of Jan).
• MNI: China To Assess Housing Stimulus On Q1 Performance. Authorities in China are expected to assess the need for substantial property market stimulus after Q1, following recent signals in high-level government reports, although local governments are likely to remain constrained by funding gaps and potential spillover effects on surrounding cities, advisors and analysts told MNI.  {NSN T8U2JA33O5C0 <GO>}
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD630m), 0.6700(AUD776m), 0.6750(AUD961m). Upcoming Close Strikes : 0.6600(AUD1.98b Jan16), 0.6640(AUD1.14b Jan16), 0.6800(AUD2.51b Jan16) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 44 Points

Fig 1: AUD/USD spot Daily Chart

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