CNH: USD/CNH Back Sub 6.7200 But Still Above Aug Lows, Services PMI Today

The USD/JPY range overnight was 156.26-157.22, Asia is currently trading around 157.40. The pair is looking to bounce off its support back toward the 155 area. Co-ordinated intervention with the US is not something you see very often so it again adds more two-way risk to this trade and a market that was very short Yen can’t just shrug off an 800-900 point retracement without absorbing some pain. The issue is by not touching rates and there are some intimating this intervention could push the hike out further. The carry trade though having to bear some punishment in the short-term will continue to appeal to those looking to add risk and get paid for it. On the day, the strong support in the 155-157 area held at the first time of asking, through here and the 149-152 support comes back into play. Everyone will be watching to see if this support can hold and build a base from which to move higher again. Initial resistance is back toward 159-161 and I suspect we see seller re-emerge around there initially.             

• “The BOJ may skip a rate hike in September after the action, SocGen strategists said.” - BBG
• “Japan’s LDP is set to push ahead with plans to suspend the sales tax on food items, despite opposition from a former PM and other officials over how the tax cut would be funded.” - BBG
• CFTC Data up to 28/07/2026 shows Asset Managers adding back to their newly built short Yen position, -80 077(Last -77 443). The Leveraged community did the same adding to their own large core shorts, –124 575(Last -114 030).
• Options : Close significant option expiries for NY cut, based on DTCC data: 163.00($755m), 163.50($1.42b), 164.00($1.18b). Upcoming Close Strikes : 155.00($1.79b Aug 6), 162.00($2.92b Aug 6), 162.50($2.1b Aug 6) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 171 Points
• Data/Event : Monetary Base, Japan to sell 10-year bonds 

Fig 1 : JPY CFTC Data

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

Fig 2 : USD/JPY Spot Daily Chart

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

Oil prices are off their Monday lows but still down sharply after the US paused planned strikes on Iran to allow negotiations to take place. Iran’s IRIB news agency reported that Iran will only allow its route through Hormuz which if it stands by this position is going to make finding a compromise difficult. At the same time, President Trump won’t accept tolls through the waterway. While crude fell sharply on Monday, the situation in the Middle East remains fragile and highly uncertain and so energy markets are likely to remain volatile.

• WTI fell 5.4% to $80.06/bbl breaking below the 50-day EMA but off the intraday low at $78.43. This is still a correction with a clearer move below the EMA needed for a deeper retracement. Initial support is now at $77.78, 28 July low. It is currently around $80.00.
• Brent was down 4.8% to $83.70/bbl after opening at $81.55. It also broke below its 50-day EMA but needs a clearer breach to signal further declines. Initial support is at $80.67.
• Both Iranian and US officials deny there are direct talks but they appear to be taking place through mediators. Iran said it is currently only negotiating with Oman.
• According to Bloomberg, US shale producer Diamondback’s CEO Van’t Hof cautioned that elevated oil prices are likely to be the new normal given that countries have run down inventories to cover the supply shortage caused by the closure of the Strait of Hormuz and demand will remain robust to rebuild stockpiles, therefore “structurally” lifting the oil prices “floor”. 

The NZD/USD had a range overnight of 0.5860 - 0.5887, Asia is currently trading around 0.5870. The NZD has topped out above 0.5900 as the market absorbs the huge USD sales from the USD/JPY intervention, though its pullback continues to lag the rest of the market probably due to positioning. This surge at the back-end of last week would have hurt a market positioned the wrong way and I reckon we might have to do some work before it finds a clear direction again. Liquidity in the NZD can sometimes be an issue, so I will continue to watch if this bounce becomes anything more than that. I suspect we could chop around within a 0.5780-0.5920 range while it settles down.       

• WEDNESDAY - New Zealand Q2 Labour Market Report: Q2 labour market data are released 5 August and Q2 filled jobs suggest that employment may record the fourth consecutive quarter of growth but it’s still likely to be muted. This is consistent with ongoing excess capacity in NZ which is helping to limit firms’ pricing power and workers’ wage demands. Therefore Q2 wage growth is likely to remain contained.
• CFTC Data up to 28/07/2026 shows Asset Managers maintained their reduced core short positions in the NZD more meaningfully, -44 157(Last -43 615). The Leveraged community did likewise holding onto their core shorts, -30 606(Last -31 649). 
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5760(NZD307m Aug 5), 0.6100(NZD486m Aug 6) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 44 Points 

Fig 1: NZD CFTC Data

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