JPY: USD/JPY Closes In On Recent Highs, Cabinet Set To Approve Extra Budget
USD/JPY sits just below Thursday session highs, last tracking near 151.35. The yen lost around 0.25% for the session, one of the better G10 performers on a relative value basis. Higher US yields boosted the pair, but some offset came from weaker US equity sentiment.
- From a technical standpoint, bulls remain in the drivers seat. 152.20, a Fibonacci projection is a topside target. before this we have recent highs just above 151.70. Key support lies at the 50-day EMA, 148.64.
- Firm US yield gains (+10-15bps across the curve), amid hawkish Powell rhetoric and a poor 30yr auction driving the move. There will be some catch up from JGB yields today, but yield US-JP momentum has stabilized, albeit with current USD/JPY levels still a little high relative to such trends.
- Locally, we just have Oct money stock figures today.
- BoJ Governor Ueda's recent appearances before local parliament has still left uncertainty over the timing around the central bank's exit from easy policy conditions (see this link).
- Late yesterday it was reported that the cabinet is set to pass a ¥13.2trln extra budget, two thirds of which will be funded extra bond issuance (see this BBG link for more details).
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AUSSIE 10-YEAR TECHS: (Z3) Medium-Term Trend Direction Cemented Lower
- RES 3: 96.160 - High Jul 20
- RES 2: 96.050 - High Sep 4 and a key resistance
- RES 1: 95.924 - High Sep 15
- PRICE: 95.540 @ 15:26 BST Oct 10
- SUP 1: 95.320 Lower 2.0% Bollinger Band
- SUP 2: 95.260 - Low Oct 04
- SUP 3: 94.565 - 1.0% 10-dma envelope
The Aussie 10yr futures broader trend direction is down, with the weakness cementing itself further through the Wednesday close. Key support and the bear trigger at 95.660, the Aug 17 low, has been breached. The break of this level reinforces a bearish theme and also confirms the breach of a major support at 95.670, the Jun 17 2022 low, marking a resumption of the medium-term downtrend. The focus is on 95.260, the October pullback low. Initial key resistance has been defined at 96.050, the Sep 4 high.
CNH: USD/CNH Steady Despite Potentially Fresh Stimulus Measures
USD/CNH found selling resistance on moves above 7.3000 post the Asia close on Tuesday. However, we didn't revisit earlier lows around 7.2700. The pair tracks near 7.2870 in early Wednesday dealings, after posting a modest 0.07% gain for Tuesday's session. USD/CNY finished up at 7.2940 on Tuesday. The CNY NEER lost ground, dipping -0.22% to 123.65.
- The late Asia Pac focus on Tuesday was a BBG sources report on the prospect of new stimulus and a wider fiscal deficit. This produced a modest blip lower in USD/CNH but little follow through, see this link for more details.
- The limited market reaction may have reflected the modest overall size of the proposed stimulus and also its focus on infrastructure. The IMF advised that China needs to do more to reinvigorate the real estate sector (see this BBG link for more details). The IMF nudged down its China GDP forecasts for this year and next.
- In the equity space, onshore sentiment ended yesterday weaker, the CSI 300 down -0.75%, the index at 3657 (fresh lows back to Nov last year). However, the Golden Dragon index surged 3.14% in US Tuesday trade, with the outlined stimulus reports above helping.
- On the data front we still await September aggregate credit/new loans figures. On Friday September CPI/trade figures are out.
US TSYS: Richer On Tuesday, Firms Off Session Lows After Bostic Fedspeak
TYZ3 deals at 107-22+, -0-00+, in line with late NY levels.
- Cash tsys finished dealing 11-15bps richer across the major benchmarks, the belly and long end lead the bid.
- Tsys firmed off session lows following Fedspeak from Atlanta Fed President Bostic who reaffirmed his view that benchmark rates are high enough to get inflation under control without dragging the economy into recession.
- Gains were pared after the latest 3-Year supply. The auction tailed with below average bid/cover and indirect take up observed.
- Minneapolis Fed President Kashkari noted he wasn’t yet convinced that the recent rise in Tsy yields would lessen the need for further rate hikes.
- The data docket in Asia is thin today, further out we have PPI and the minutes of the September FOMC meeting. Fedspeak from Gov Bowman, Gov Waller and Atlanta Fed President Bostic is also due.
