FOREX: USD(BBDXY) - Capitulation In US Yields Suppresses Risk-Off Safe Haven Bid

The NZD/USD had a range today of 0.5701-0.5732 in the Asia-Pac session; it is currently trading around 0.5702, -0.45%. The pair has completely walked back the reprieve it got from Breman yesterday. It too has been unable to build on any strength as currencies remain subdued, even in the face of what looks a healthy risk backdrop. I suspect we might need the US Dollar to actually break higher for this pair to sustain a challenge below the 0.5700 area. Something that the price action suggests is a higher probability than I would have thought previously. I will be watching the price action of the US dollar closely. Can its divergence from Risk persist ? Look for initial resistance on the day between 0.5740-0.5770 which held overnight, a sustained push below 0.5700 could open the way for a test of the year's lows toward 0.5500-0.5600 again.. 

• “Donald Trump said US officials had a “very good” three-hour meeting with Iranian envoys, reviving fragile hopes for a deal hours after he threatened to annihilate the country in his UN speech.” - BBG
• "WITKOFF: ENGAGED IN LENGTHY TALKS WITH THE IRANIAN DELEGATION. TALKS WITH IRANIAN DELEGATION THROUGH MEDIATORS.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5685(NZD307m Sept 24), 0.5742(NZD307m Sept 24) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 39 Points

Fig 1: NZD/USD Spot Daily Chart

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

The USD/JPY range today has been 157.34-157.67 in the Asia-Pac session, it is currently trading around 157.65, +0.16%.  The pair has stalled toward 158.00 with the market wary of intervention after reports the BOJ might have conducted a rate check around that level on Friday night. All in all though last week was not great for the Yen and those potential green shoots that had just started to take root, CFTC data showed the market turning long for the first time(ouch). A dovish hike thanks to the Takaichi appointments and a BOJ that will not give a signal to the timing of the next hike, while the Fed comes out hawkish is not a recipe to encourage those buyers to add to positions. The 149-152 area has now proved to be solid support again. The market is now punishing those Yen longs and back testing the 157.00-159.00 area which technically looks important now. The BOJ was probably also reminding the market it is around as Japan enjoys a three-day holiday which could further impact liquidity.  

• “Sanae Takaichi urged the UN to remove references to Japan and Germany as “enemy states” in her maiden speech at the General Assembly.” - BBG 
• “Trump and Takaichi agreed to closely coordinate on issues related to China just days before Xi’s trip to Washington, a Japanese government spokesman said.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 152.00($733m), 156.00($1.21b), 157.00($1.23b). Upcoming Close Strikes : 155.00($2.01b Sept 25), 156.00($1.94b Sept 24), 157.50($1.52b Sept 24) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 110 Points

Fig 1 : USD/JPY Spot Daily Chart

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