FOREX: USDJPY Bounce Affirms Pullbacks are Technically Corrective
Nov-05 17:43
- Despite the impressive surge higher for US yields on Wednesday, the USD index is holding at unchanged levels on the day, as a recovery for major equity indices today offsets the most recent greenback enthusiasm. Despite this, the DXY did make fresh 5-month highs, with a firmer-than-expected ISM services PMI supportive.
- Most of the G10 currency action has been centred around the Yen once more, with USDJPY posting an impressive 140 pip range on Wednesday. Initial risk off during SPAC hours and a moderately hawkish set of BOJ minutes prompted USDJPY to extend its pullback to 152.96, however, the subsequent recovery has been very notable.
- The pair’s intraday bounce picked up pace in late European trade, printing a new daily high through the London close. A break above yesterday's 154.48 would mark a full reversal of the JPY strength tripped by Katayama's warnings on FX movements on Tuesday - and again shows that USDJPY is a key beneficiary in a higher US yields environment.
- Today's price action affirms the view that pullbacks are technically corrective in nature, and a break of 154.39/48 supports a rally toward 154.80, the Feb 12th high.
- The more stable risk sentiment has allowed AUD and NZD to outperform, rising around 0.3% against the greenback, although these advances are yet to erode the prior declines this week.
- USDCAD remains a touch higher on the day above 1.41, looking to extend its winning streak to five sessions. Importantly, the pair has held an important resistance for now, the top of the bull channel drawn from the Jul 23 low.
- Higher equities boosted EM FX significantly, with the likes of MXN, ZAR and BRL shrugging off the moves for US yields. USDMXN has now reversed over 1% from intra-day highs, helping the pair edge back below 18.60 in late trade.
- The Bank of England headlines the economic calendar on Thursday, and is potentially set to be a close call decision between a hold and a 25bp cut.
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US TSYS/OVERNIGHT REPO: ON RRP Takeup Dips, Remains Negligible
Oct-06 17:30
Overnight reverse repo takeup fell $3.6B Monday to $21.8B.
- That's up from the multi-year low $8.4B posted Thursday after quarter/month-end takeup reversed, but overall takeup effectively remains negligible.
- ON RRP + reserves were under $3T as of last Wednesday, potentially getting nearer to the Fed's "ample" threshold of reserves from the current "abundant" regime.
GBPUSD TECHS: Trading Below Resistance
Oct-06 17:30
- RES 4: 1.3789 High Jul 1 and key resistance
- RES 3: 1.3726 High Sep 17
- RES 2: 1.3661 High Sep 18
- RES 1: 1.3537 High Sep 23 and a pivot level
- PRICE: 1.3476 @ 16:27 BST Oct 6
- SUP 1: 1.3324 Low Sep 25 and the bear trigger
- SUP 2: 1.3282 Low Aug 6
- SUP 3: 1.3254 Low Aug 4
- SUP 4: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
A bear cycle in GBPUSD that began Sep 17 is intact, for now. Initial key resistance to watch is unchanged at 1.3537, the Sep 23 high and a near-term pivot level. Clearance of this hurdle would signal a potential reversal. Recent weakness resulted in a break of a trendline drawn from the Aug 1 low. Note too that 1.3333, the Sep 3 low and a key support, has been pierced. A resumption of weakness would open 1.3282 next, the Aug 6 low.
US: White House Press Conference Underway Shortly
Oct-06 17:01
White House Press Secretary Karoline Leavitt is shortly due to brief reporters at the White House. LIVESTREAM
- Comes as Senate Majority Leader John Thune (R-SD) prepared to hold a fifth vote this evening on the House-passed Continuing Resolution to fund the government through November 21. The bill is expected to fail again, and Thune has shown no sign of changing tack on his strategy to keep re-running the vote until Democrat Senators fold amid a pressure campaign led by White House Office of Management and Budget Director Russell Vought.
- Canadian Prime Minister Mark Carney will travel to Washington, DC, today ahead of a meeting with President Trump tomorrow. Expectations are low for any major trade breakthroughs.
- House Speaker Mike Johnson (R-LA) and National Economic Council Director Kevin Hassett both signalled in interviews on Sunday that federal worker layoffs are coming. Johnson said layoffs would be “a regrettable situation that the president does not want,” while Hassett said layoffs would start “if the president decides that the negotiations are absolutely going nowhere.”
- Trump-appointed US District Judge Karin Immergut yesterday blocked Trump’s latest attempt to deploy National Guard troops to Democrat-run cities. The ruling is the second blow in two days to Trump’s bid to send National Guard troops into Portland, Oregon.
- The Wall Street Journal notes, “Trump plans to federalize 300 members of the Illinois National Guard despite the objection of Gov. JB Pritzker [D-IL].”
