USD: USDJPY highest since 2002

U.S. Tsys were softer in Asia-Pac hours but operate off of worst levels ahead of European dealing. TYM2 is -0-12 at 125-18, 0-03 off the base of the 0-21 range in play overnight, while cash Tsys run 3-6bp cheaper across the curve. The 5- to 7-Year zone has led the weakening in the space. However, the cycle highs in 10-Year yields held overnight, which allowed the wider Tsy space to form a bit of a base. Early Asia trade was dominated by optimism surrounding the Russia-Ukraine discussions, with both sides pointing to the potential for an agreement in days. Still, the conflict continues, with Russia striking a facility in the west of Ukraine, near the Polish border over the weekend. The Yavoriv International Centre for Peacekeeping and Security was the target, with Russia pointing to military shipments and foreign troops gathering there. Some Western nations also identified no sign of willingness to end the war on the part of Russian President Putin in the wake of a call between the Russian, French & German leaders. Elsewhere, worry re: the COVID situation in China & HK (with the former headlined by lockdown in Shenzhen & restrictions in Shanghai) pressured mainland and Hong Kong equities, providing some light support for core FI markets. There isn’t much of note on the domestic docket on Monday (3- & 6-month bill supply), with focus on Wednesday’s FOMC. More widely, Monday will provide the latest round of Russia-Ukraine talks (set to get underway at 08:30 London). A quick reminder that U.S. clocks rolled forward over the weekend, so adjust your schedules accordingly.

• JGB futures followed the broader swings in core global FI flows, extending on their overnight weakness early on, before finding a bit of a base, hitting the bell -15. Cash JGB trade saw some twist flattening of the curve, with the 5- to 7-Year sector leading the weakening, cheapening by a little over 1bp, while 30 & 40s have richened by around the same amount. There hasn’t really been much to move the needle when it comes to local headline flow. PM Kishida once again noted that he does not plan to hold discussions with the U.S. re: nuclear sharing matters. Elsewhere, Deputy Chief Cabinet Secretary Isozaki noted that stability in FX markets is “important,” with the government currently “watching movements” in the space as USD/JPY tagged another fresh multi-year high on Monday. Elsewhere, after hours comments from PM Kishida pointed to policies to deal with prices rises, with inflation starting to “impact the Japanese economy.”
• A lack of real idiosyncrasies (Assistant Treasurer Sukkar flagged a budget focus on households “under strain” owing to surging inflation over the weekend and continued speculation re: outgoing RBA Deputy Governor Debelle’s successor) left the Aussie bond space at the whim of broader risk appetite, meaning that YM and XM closed -2.8 & -5.7, respectively. The 7- to 10-Year zone led the way lower in cash ACGB trade.

• RES 4: 1.1280 Low Feb 14
• RES 3: 1.1232 61.8% of Feb 10 - Mar 7 sell-off and the 50-day EMA
• RES 2: 1.1129 1.0% 10-dma envelope
• RES 1: 1.1121 Low Jan 28/High Mar 10 and recent breakout level
• PRICE: 1.0913 @ 06:18 GMT Mar 14
• SUP 1: 1.0890/06 Low Mar 9 / Low Mar 7 and the bear trigger
• SUP 2: 1.0767 Low May 7 2020
• SUP 3: 1.0727 Low Apr 24, 2020
• SUP 4: 1.0654 2.50 proj of the Jan - Mar - May 2021 price swing

EURUSD remains below resistance at 1.1121 - the Jan 28 low, a recent breakout level plus the Mar 10 high. While this resistance holds, a bearish threat remains present and attention is on key near-term support at 1.0806, Mar 7 low. On the upside, bulls will look for a clear break of 1.1121 to signal scope for a stronger corrective rally that would open 1.1232, the 50-day EMA and a Fibonacci retracement. A break of 1.0806 resumes the downtrend.