JPY: USD/JPY - Consolidates Around 158.00, As Market Preps For BOJ

The BBDXY has had a range today of 1208.88 - 1210.13 in the Asia-Pac session; it is currently trading around {BBDXY Index}. The USD continues to probe the 1210 area to start the week. The move last week had more to do with the surge higher in USD/JPY than any real USD strength as the moves elsewhere in currencies and more importantly in metals attest to. Robin Brook made an important point on Friday, take out the JPY in the USD basket and the USD is falling a lot more than is being appreciated. On the day I still have very little conviction on direction, continue to watch for resistance again around the 1210 area and above here the more important 1213-1216 area where sellers should remerge initially. Can this 1204 area continue to provide support if not a move below here would target 1198-1200.

• EUR/USD -  Asian range 1.1706-1.1723, Asia is currently trading {EURUSD Curncy}. The pair continues to consolidate just above 1.1700. On the day, support remains toward 1.1675-1700 initially, a break below here could potentially signal a deeper pullback. While this support hold though it is skewed towards testing higher
• GBP/USD - Asian range 1.3372-1.3402, Asia is currently dealing around {GBPUSD Curncy}. The pair continues to chop around the 1.3400 area and is potentially starting to show the first signs of exhaustion. On the day, I suspect more range trading with support back toward 1.3285-1.3315 and resistance 1.3450-1.3500.
• Cross asset : SPX +0.25%, Gold $4395, US 10-Year 4.166%, BBDXY 1209, Crude Oil $57.00
• Data/Events : Italy PPI, Spain Trade Balance

Fig 1: EUR/USD Spot Daily Chart

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

The NZD/USD had a range today of 0.5741-0.5771 in the Asia-Pac session, it is currently trading around {NZD Curncy}. The NZD continues to consolidate above 0.5740-0.5750 as we head into Christmas, risk ended last week strongly and back toward the highs which should allay fears going into year-end. The NZD is holding above 0.5700-0.5750 and for the most part has been left unscathed by the choppy price action seen elsewhere last week. On the day, I suspect more of the same as we head into a quiet Christmas packed week, support is back toward 0.5725-45 and resistance is around 0.5810-30.

• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5780(NZD324m). Upcoming Close Strikes : 0.5530(NZD475m Dec 23) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 36 Points

Fig 1: NZD/USD Spot Daily Chart

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

The USD/JPY range today has been 157.23 - 157.74 in the Asia-Pac session, it is currently trading around {USDJPY Curncy}. USD/JPY has drifted a little lower as a number of officials start jaw-boning about the one-sided nature of the move. The BOJ is in a tough spot, it's not great when you hike rates and your currency collapses lower. The minimal reduction in differentials is not incentivising a market that is concerned about Japan’s Fiscal policy to start buying Yen. A test of the BOJ/MOF resolve looks inevitable at the moment as the market turns its focus toward the important 160.00 area. Technically USD/JPY remains in an uptrend, while the first support back toward the 152.50-154.50 area is intact it remains a buy on dips. In today's Asian session, we might get some reversion back to the mean after such a strong move on Friday but look for buyers to reemerge on dips back toward the 15.60-90 area initially.

• "JAPAN TOP CURRENCY DIPLOMAT MIMURA: RECENTLY SEEING ONE-SIDED, RAPID MOVES, WILL TAKE APPROPRIATE ACTION AGAINST EXCESSIVE MOVES, CONCERNED ABOUT FOREX MOV " - RTRS
• MNI AU - The BoJ hiked rates by 25bps last Friday, in line with the sell-side economic consensus and market pricing. As expected, the BoJ also kept a tightening bias into 2026, as it still views policy settings as accommodative. Still, the market came away disappointed on lack of details on the timing around further rate hikes, with yen weakening and JGB yields pushing higher. Market pricing has a further 25bps hike priced by around the July meeting next year. Part of the market focus will be on whether higher USD/JPY levels bring forward market expectations for the next hike.
• Options : Close significant option expiries for NY cut, based on DTCC data: 155.00($1.25b), 156.00($870m), 157.50($1.22b). Upcoming Close Strikes : 156.00($1.32b Dec 23), 158.00($868m Dec 23)  - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 101 Points

Fig 1 : USD/JPY Spot Daily Chart

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