JPY: USD/JPY - Drifts Above 156.00 As The Election Looms
The USD/JPY range today has been 155.70 - 156.39 in the Asia-Pac session, it is currently trading around 156.35. USD/JPY continues to grind back up as we get closer to the weekend elections. A large portion of the leveraged short Yen positions being built up heading into the elections would have been washed out thanks to the Fed/MOF rate check after the BOJ rate decision. This large move lower was more down to overextended positioning than fundamentals and as we head toward this weekend's election all the reasons for the Yen short will come back to the fore. This should see USD/JPY which has lost its immediate upward momentum remain well supported on dips as the market looks toward the 160.00 area once again. Resistance on the day should be around 156.50-157.00 and support is back towards the 155.00 area.
- “Hedge funds are reviving bets against the yen and positioning for renewed weakness as Japan heads into a pivotal election.” - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 153.25($801m), 159.50($769m). Upcoming Close Strikes : 153.00($1.59b Feb 5), 154.00($1.13b Feb 5) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 145 Points
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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BONDS: NZGBS: Bear-Steepener On First Trading day Of Year
NZGBs closed showing a bear-steepener, with benchmark yields flat to 4bps higher, as trading resumed after the extended New Year’s break.
- The NZ-US 10-year yield differential closed at +35bps. For context, the differential was dealing around flat in mid-November.
- Cash US tsys are slightly richer in today's Asia-Pac session after Friday's modest bear-steepener. Focus in the first two full weeks of the year will be on nonfarm payrolls (Friday) and CPI reports (Jan 13) for December, with those two key reports back on their original schedules having been prioritized by the BLS. Private sector reports meanwhile are highlighted by ISM manufacturing and services reports Jan 5 and 7. No scheduled Fed speakers today.
- The local data calendar is very light this week, with just Dec Cotality home value figures out later this evening. Next week we get Nov filled jobs, along with food prices as well.
- RBNZ-dated OIS pricing closed slightly softer across meetings. No tightening is priced for February, while October 2026 assigns 20bps.
Bloomberg Finance LP / MNI
CHINA: 2-Yr Bond Future Dips Below Key Tech Levels
- China's bond futures are mixed today, following a sizeable withdrawal of liquidity during the OMO this morning.
- The 10-Yr is up +0.02 to 107.845, yet remains below all major moving averages. Upside resistance is via the 20-day EMA of 108.01.
- The 2-Yr is down -0.02 to 102.422, to dip below all major moving averages. If it is able to consolidate below, it is the first break below since early December. Each time it has broken below all moving averages in recent months, it has bounced back above within 1-2 trading days.
- Cash is quiet with the 2-Yr at 1.36% and the 10-Yr at 1.85%
US TSYS: Cash Grinds Lower; TYH5 Wedged Between Key Tech Levels
US treasury futures have done nothing today with the 10-Yr up only marginally. At 112-07+ it remains wedged between the 100-day EMA as topside resistance and the downside resistance via the 200-day EMA of 112.
Cash is doing better with yields down -0.2bps to -0.9bps across the curve with the long end underperforming.
- The US 2-Yr is at 3.475% - flat today.
- The US 5-Yr is at 3.736%, down -0.9bps today.
- The US 10-yr is at 4.185%, down -0.6bps today.
- The US 30-Yr is at 4.869%, down -0.2bps.
Equity markets were key today but have seemingly brushed off the geopolitical risks, with strong rallies.
Whilst January is typically a busy month for issuance, Monday kicks off with just a US$86bn 13-week bill auction and a US$77bn 26-week bill auction.
Data wise ISM releases are the focus with the ISM Manufacturing forecast to remain in contraction and ISM Prices paid to remain elevated
