JPY: USD/JPY - Gaining A Foothold Above 160, Yen Bears Look For Momentum

NZGB yields have tracked lower through Tuesday trade. Benchmarks are down around 5-6bps, with fairly uniform moves across the curve. This follows the sharp move lower in UST yields on Monday, which has continued today, with a further 2-2.5bps in yield losses. Sentiment has been impacted by a WSJ story in which Trump has reportedly told his advisors that the US can exit the war with Iran without re-opening the Strait Of Hormuz. Risk appetite is better, although mostly in the US equity futures space, oil benchmarks are around flat for the session, while the USD is close to unchanged in index terms. 

• For the NZGB 2yr we are now close to 20bps off recent March highs (last near 3.53%). We are still above all key EMAs but given we started March closer to 3.10% some consolidation is arguably not surprising. The 10yr is back near 4.70%, off around 16bps from recent highs.
• On the data front, ANZ's business survey showed a deterioration in business confidence, activity and outlook in March while inflation indicators were uniformly higher. Business confidence fell to 32.5 from 59.2, lowest since July 2024, while the activity outlook was down to 39.3 from 52.6, softest since August. The uncertainty around the implications of the Iran War and the duration of elevated fuel prices have weighed on the economy at a time of a nascent recovery, which is likely to add to the MPC's sentiment to stay on hold.
• Market pricing for the RBNZ has softened a little, now under 3.00% (last near 2.95%).
• Tomorrow on the data front we have Feb building permits, then home values later on. 

• China's 10-Yr bond future is up strongly Tuesday, pushing further above all major moving averages.  
• Up +.06 today at 108.41 sees the short term momentum indicator MACD in a bullish cross - (the MACD (white) line has crossed above the Signal (red) line).  
• Equities continue to misfire, likely driving the demand for bonds as cash finally gets moving with the 10-Yr now back at 1.80% with some domestic commentary describing the war in Iran as a growth killer.
• The PBOC is expected to continue its CGB buying program (averaging CNY150–200 bn monthly) to coordinate with the massive fiscal bond issuance. This implicit QE prevents yields from spiking too far, even as the government borrows more.  Judging by the moves in the long end (30-Yr at 2.32% versus recent high of 2.39%) it appears that the PBOC purchases are focused on longer CGBs as this is where the supply is expected to come also.  

The BBDXY has had a range today of 1220.31 - 1223.93 in the Asia-Pac session; it is currently trading around 1222. The BBDXY has broken above the 1215-1217 area to extend above its recent range as risk starts to potentially turn Bearish. WTI(oil) has broken above what looked to be an artificial top around $100-$102 and extended higher, implying while the conflict drags on this has more room to move. Cracks are starting to show and the USD is breaking higher in response. Should we enter a proper Bear market and this move lower in risk begins to accelerate I suspect the USD will then break higher. On the day, I continue to be skewed toward fading dips while uncertainty remains high and risk is under pressure. First support is back toward 1216-1219 where I suspect buyers should reemerge looking for a retest of the pivotal 1230-1240 area.

• EUR/USD -  Asian range 1.1448-1.1491, Asia is currently trading 1.1470. The pair remains above its pivotal support in the 1.14-1.15 area for now but I still prefer to be fading bounces as the USD looks to be potentially breaking higher. This morning we have seen a report that Trump is looking for his off-ramp and could end the war even without control of the Straits of Hormuz. This has seen a market that has come a long way have a relief rally as it hopes for a cessation. Unfortunately we have seen this movie before and though I do not doubt Trump would love to find a way out of this mess it is much harder to achieve practically without damaging all his relationships in the GCC. So until a clear path is evident and the global flow of oil, fertilizer and helium is restored I will err on the side of caution. On the day, I would be watching to see if the EUR is able to sustain this move below 1.1500, if not look for sellers to re-emerge back toward 1.1530-1.1560 and then the 1.1650 area. Lots of Optionality in the 1.1450-1.1500 Area into month-end.   
• GBP/USD - Asian range 1.3159-1.3225, Asia is currently dealing around 1.3200. GBP has rejected the move below 1.3200 in early Asian trading. The GBP is trying to put a top potentially in place, I prefer to be skewed to fade rallies while risk continues to trade on the backfoot. On the day, the pair looks to be trying to break out its 1.3200-1.3500 range with the bears looking for a sustained move back below 1.3200 to see the move lower regather momentum.
• Data/Events: UK 4Q GDP, UK March Nationwide House Prices, France March CPI, Eurozone March CPI, Italy March CPI, US Feb. JOLTS Job Openings, US March Conference Board Consumer Confidence.

Fig 1: GBP/USD Spot Daily Chart

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