JPY: USD/JPY - Falls With The USD, Can Market Extend Before The NFP ?
The overnight range was 142.61 - 144.32, Asia is currently trading around 142.75. The USD could not hold onto any of its gains and capitulated overnight as US yields fell quite hard reacting to weaker data and the market pricing in more rate cuts. At the moment the USD seems to fall in most scenarios.
- Bloomberg - “Japan's government is preparing to sell super-long-term bonds amid concerns about demand for long-term bonds globally.”
- “Recent auctions of 20-year and 40-year bonds saw disappointing demand, and a weak result in the 30-year auction could lead to higher yields.”
- “Pimco believes Japanese government bonds are a bargain despite recent selling and volatility in global debt markets. The Firm argues that the possibility of more quantitative tightening by the BOJ could be a good thing for JGB’s, relieving pressure on the long-end of the curve.”(BBG)
- The bounce in USD/JPY did not last very long with good selling above 144.00 and aided by the USD again coming under renewed selling pressure.
- A break below 142.00 in USD/JPY and all eyes will once again turn to the pivotal 140.00 area. Will the market be able to challenge the 140.00 area without first seeing what the NFP print is ? A lower NFP and you have to think the market attempts to break lower.
- Traders will be watching the long term pivotal area around 140.00. A break would really see this move accelerate opening up a bigger move back to 125/130. See Graph below
- Sellers should be around today on any bounce back towards the 144.00 area.
- Options : Close significant option expiries for NY cut, based on DTCC data: 140.00($2b), 143.00($1.28b). Upcoming Close Strikes : 140.00($1.13b June 6), 142.00($1.56b June 6), 140.00($1.04b June 9).
Data/Event : Labor Cash Earnings, Japan Weekly Offshore Investment Flows
Fig 1 : USD/JPY Spot Monthly Chart
Source: MNI - Market News/Bloomberg
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JGB TECHS: (M5) Off Highs, But Underlying Strength Persists
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.95 - High Apr 7
- PRICE: 141.04 @ 16:20 GMT May 5
- SUP 1: 139.38 - 1.0% 10-dma envelope
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs are holding the bulk of the recent strong bullish reversal from early April, rejecting any test of fresh cycle lows for the M5 contract. This defies the bearish momentum studies drawn on the longer-term chart, clearing moving-average resistance to print 142.40 at the new upper level. To the downside, sights are on 136.57, a Fibonacci projection. 144.48 is the medium-term target on any recovery.
NZD: Consolidates On A 0.5900 Handle
The NZD had a range overnight of 0.5960 - 0.5996, Asia is opening around 0.5965. US Stocks tried higher after the better ISM data, but have struggled to hold onto their gains, the NZD as a result drifted lower most of the US session after failing back towards 0.6000.
- India floated zero tariffs on steel, auto parts and drugs on a reciprocal basis — up to a certain threshold — in recent trade talks with the US, people familiar said. Washington rejected Japan’s bid for full exemption from levies, though may lower its 14% country-specific tariff, Kyodo reported.(per BBG)
- NZ Q1 Labour data out Wednesday, MNI Economist - NZ Q1 labour market data print on Wednesday May 7 and are likely to show a pickup in the unemployment rate but a stabilisation in job shedding. The RBNZ is forecasting a 0.1pp increase in the unemployment rate to 5.2% and flat employment growth on the quarter. Higher-frequency survey and filled job data suggest that there may even be a slight quarterly increase in jobs. Private wage growth is likely to have slowed further in Q1 allowing the RBNZ to continue easing policy.
- The NZD continues to hold up well and is consolidating within a 0.5875/0.6025 range.
- The price action continues to suggest that dips will probably find demand, first support on the day is 0.5900 then 0.5800/50.
- CFTC data show Asset managers reduced their NZD shorts once more while Leveraged funds actually added a little to their current short.
- Data : NZ Unemployment Wednesday
Fig 1: NZD/USD CFTC Data
Source: MNI - Market News/Bloomberg
GOLD: Weaker USD Gives Gold a Boost
- Gold bucked recent trends to finish strongly overnight, recording gains of +2.8%.
- Gold also benefited from trade war related uncertainty as President Trump indicated that despite the chances of striking trade deals with some nations, there was nothing imminent with China.
- Gold bounced off the 20-day EMA of US$3,259.46 to reach $3,334.12 where it opens for the Asia trading day.
- Despite the sell off last week, all major moving averages remain upward sloping; a sign that the bullish momentum remains.
- The market is more balanced at present as money managers continue to reduce their bullish gold bets to the lowest its been over a year.
- Gold markets will be actively watching the FED this week as expectations for rate cuts diminish following the stronger than expected labour market.
- South African miner Gold Fields Ltd will buy Gold Road Resources Ltd for a purchase price of A$3.7bn to conclude several weeks of negotiations.
