IDR: USDIDR Back Above 16,800 - Could Retest Recent Highs
- Despite strength across the board for regional currency peers, USDIDR skipped the rally and is higher today by +47. Currently near 16,827 / 16,837 USDIDR has climbed back above 16,800 giving back much of yesterday's gains. The rupiah holding onto losses of +0.27% for the day Thursday and back above the 20-day EMA of 16,810, whilst remaining neutral on most momentum indicators. Yesterday we got close to the 50-day EMA but couldn't break lower.
- Following three days of strong gains for the JCI, it is down -0.50% today on profit taking; a possible contributor to the decline in IDR.
- There is little in the calendar for Indo data and with the impending LNY holiday in China slowing everything down, the USDIDR could be vulnerable here and retest February highs of 16,877. IDR is seeing very little positive spill over from broader USD weakness.
- A key metric for the BI is USDIDR Vol which remains elevated relative to January lows, supporting the idea that February highs could be re-visited in a risk off environment. BI is likely to remain on guard against IDR weakness.
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FOREX: USD - BBDXY Treads Water Within A 1205-1215 Range
The BBDXY has had a range today of 1209.24 - 1210.61 in the Asia-Pac session; it is currently trading around {BBDXY Index}. The USD found some support around the 1208 area after the initial knee-jerk lower yesterday. This leaves the USD in the middle of its recent range without any clear direction. On the day, it looks like 1205-1215 should cover it for now, watch for any ruling from the Supreme court as well as a potential incursion into Iran to maybe shake it up a little. This lack of a trend is being reflected in the CFTC data which shows very little positioning in the USD Index to start the year.
- EUR/USD - Asian range 1.1657-1.1671, Asia is currently trading {EURUSD Curncy}. We are firmly back in the wider 1.1450-1.1850 range which dominated the last 6 months of the year and we need a catalyst to get a break and some sort of a trend going again. On the day it looks likely we tread water within a narrower 1.1615-1.1715 range as the market looks for a trigger to regain some momentum.
- GBP/USD - Asian range 1.3462-1.3479, Asia is currently dealing around {GBPUSD Curncy}. The pair had the look of potentially topping out above 1.3500 but it will need to cap this move toward the 1.3500 area. On the day, I am looking for sellers to be around back toward 1.3500 again, the bears need a break back below 1.3350/80 to signal a correction lower might be on the cards.
- Cross asset : SPX -0.15%, Gold $4595, US 10-Year 4.18%, BBDXY 1210, Crude Oil $59.75
- Data/Events : France Budget Balance YTD
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JAPAN: Takaichi To Call Snap Election - Kyodo, USD/JPY Hits Fresh Highs
Headlines have just crossed via BBG (quoting Kyodo) that Japan PM Takaichi intends to call a snap election. Rtrs notes that Takaichi intends to dissolve the lower house at the beginning of the parliamentary session scheduled to start on Jan 23rd. The snap election call was first raised as a possibility late last week (possible election dates include Feb 8 or 15, per Yomiuri). USD/JPY spiked to fresh highs of 158.91 on the news but sits back around 158.65/70 in latest dealings, still down close to 0.35% for the session.
- At this stage, if Takaichi can manage to strengthen her parliamentary position (which is possible given high popularity ratings) it is likely to leave the market biased towards higher JGB yields, stronger local equities (given her regime's pro-growth agenda) but also a weaker yen (with views around the pace of BoJ tightening a potential headwind).
- These moves have been priced to some degree though over recent sessions.
- Also, for yen, FX jawboning has picked up today, while continued yen weakness may raise BoJ imported inflation concerns.
US TSY FLOWS: BLOCK CURVE FLATTENER: SELL TUH6 / BUY UXYH6
SELL 8300 of TUH6 traded at 104-07 3/4, post-time 15:01:41 AEST (DV01 $317,407). The contract is currently trading at 104-07 3/4, 0-00 3/8 from closing levels.
BUY 3540 of UXYH6 traded at 114-23, post-time 15:01:41 AEST (DV01 $317,827). The contract is currently trading at 114-23, 0-01+ from closing levels.
