FOREX: USD Index Sees Support Around 50-day EMA, JPY Still Outperforming
Feb-06 05:11
The USD BBDXY index has a little higher as Thursday's Asia Pac session unfolds. We were last above 1299, despite a firmer yen backdrop. USD/JPY sits back at 152.30/35, although dipped to 151.82 in earlier dealings (fresh lows back to Dec 12 last year).
- Yen was buoyed by hawkish remarks from BoJ board member Tamura, who stated rates should be at 1% in the second half of the 2025 fiscal year (so by end March 2026). Tamura, who is a known hawk, wanted to raise the rate to 0.50%, but his proposal was voted down by a majority of the board members. He added today, "...even if the policy rate is raised to 0.75%, it is far from the level that will restrict the economy as real interest rates stay at significantly negative zone”
- That Tamura is a known hawk, coupled with a broader USD rebound, has helped drag USD/JPY off its lows. US-JP yield differentials have steadied somewhat although are still down comfortably for the week. A solid debt auction also providing support to local bonds.
- Downside USD/JPY focus will rest at the low 151.00 region (151.06 76.4% retracement of the Dec 3 - Jan 10 bull leg). The RSI is getting close to oversold conditions.
- The USD has ticked higher elsewhere, without any obvious macro drivers. US yields are up a touch but gains aren't much beyond 1bps at this stage. US equity futures are higher, but only +0.20% firmer. Regional equities are mostly in the green, including China & HK bourses.
- Still, AUD and NZD still down 0.35-0.40% at this stage. AUD/USD last 0.6260/65, NZD under 0.5670. Higher USD/CNY levels may be weighing at the margin for these currencies.
- BBDXY Index support has held around the 50-day EMA in recent sessions, with the USD potentially consolidating after the recent sell-off (excluding further JPY gains).
- Later the Fed’s Jefferson, Waller and Logan speak and US January Challenger job cuts, jobless claims and Q4 productivity/ULC print. Oil markets will be focusing on Fridays’ January payroll data with consensus expecting a 170k rise in jobs. The BoE is expected to cut rates 25bp. Also German December orders, euro area December retail sales and Canada’s January PMI are released.
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JGBS: Little Changed After A Solid 10Y Auction Supports Market
Jan-07 04:42
JGB futures are in slight positive territory, +2 compared to the settlement levels.
- Outside of the previously outlined Monetary Base date, there hasn't been much by way of domestic drivers to flag.
- Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
- Cash JGBs are flat to 1bp cheaper across benchmarks beyond the 1-year but richer than pre-10-year auction levels. The benchmark 10-year yield is 0.2bps lower at 1.134% after dealing as high as 1.143% earlier.
- The 10-year JGB auction delivered solid results, with the low price beating expectations, the cover ratio nudging higher and the tail shortening. Weaker sentiment toward global long-end bonds and expectations of further near-term tightening by the BoJ didn’t appear to weigh significantly on demand.
- The swaps curve has twist-steepened, pivoting at the 10-year, with rates 1bp lower to 3bps higher.
- Tomorrow, the local calendar will see the Consumer Confidence Index alongside BoJ Rinban Operations covering 1-25-year JGBs.
FOREX: USD/JPY Off Highs On FinMin Comments, A$ & NZD Outperform
Jan-07 04:35
The USD BBDXY index sits little changed in the first part of Tuesday dealing. The index last down a touch to under 1304. We are still above intra-session lows from Monday (sub 1300), which after reports that the incoming Trump administration would scale back its tariff plans (which was later denied). Yen and CHF have underperformed, while A$ and NZD have outperformed, leaving markets with a slight risk on feel in the FX space.
- USD/JPY got to multi month highs of 158.42, but sits lower now, last near 158.00 (close to Dec 26 highs - 158.08). Comments from the Japan FinMin around excessive FX moves, prepared to act, tempered upside USD/JPY momentum. However, the remarks don't appear to represent an escalation on what has been said recently by Japan officials.
- A consolidated break above 158.00, could see 159.45 targeted (July 12 highs). Of course this would put us back in the mid 2024 intervention zone. There is also less sponsorship from US-JP yield differentials for this recent move higher in the pair, with yield differentials lower in the 2yr space and sideways for the 10yr.
- AUD/USD is up around 0.20%, last 0.6260, still sub intra-session highs from Monday ( just above 0.6300). It is a similar backdrop for NZD, up a little over 0.30% to 0.5660/65.
- Regional equities are mostly positive, except for Hong Kong/China, following US blacklisting of tech bellwethers, including Tencent. This hasn't impacted broader FX risk appetite though.
- A speech in Las Vegas from Nvidia's CEO, which focused in part on new graphics card, hasn't shifted aggregate US equity futures. We are around flat at this stage.
- US yields have ticked lower, likely leaning some pressure on the USD.
- Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.
US TSYS: Slightly Richer Ahead Of JOLTS & ISM Services Data
Jan-07 04:31
TYH5 is 108-18+, 0-01+ from NY closing levels.
- According to MNI’s technicals team, the trend condition in 10-year futures remains bearish. Recent weakness reinforces the current bear cycle - the contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108.00, a Fibonacci projection. Short-term gains are considered corrective below the 109-10+ 20-day EMA.
- Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
- Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
