FOREX: USDJPY Holds Close to Unchanged This Week, Ueda Speech Monday
Nov-28 11:02
- Perhaps to be expected given the US Thanksgiving holiday, USDJPY has traded in a much more contained manner this week, remaining within a 1% range. Spot is currently down just 10 pips from last Friday’s close, as firmer risk sentiment has been offset by a softening dollar.
- Overall, the trend set-up in USDJPY remains bullish. The pair has recently entered overbought territory and a deeper retracement, if seen, would allow this condition to unwind. We assessed the longer-term USDJPY trend more in the MNI Tech Trend Monitor sent out earlier today: https://mni.marketnews.com/48nuO63
- Late Thursday, BOJ board member Asahi Noguchi reinforced the view that a near-term interest rate hike is in the pipeline while avoiding a clear hint that it will come in December – very much in line with recent communication from other BOJ officials. All focus turns to BOJ Governor Ueda’s speech to business leaders in Nagoya City on Monday.
- November Tokyo CPI did little to move the needle overnight. Headline rose 2.7%y/y, in line with the consensus (while the Oct outcome was also revised down to this level, from 2.8%). The job to applicant ratio ticked down further to 1.18, versus 1.20 forecast. The continued trend decline in the job-to-applicant ratio points to further upside in the unemployment rate, all else equal. This will be a watch point for the authorities, given on-going focus around positive real wage gains and the importance of this in sustainably reaching the 2% inflation target.
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US TSYS: Modestly Lower Pre-Fed, Various Levels Worth Watching
Oct-29 11:02
- Treasuries trade modestly lower overnight, more clearly back into yesterday’s range.
- It could be a confluence of factors including pre-FOMC positioning, expectations ahead of tomorrow’s Trump-Xi meeting and supply somewhat underpinning EGB yields.
- Cash yields are ~1bp higher across the curve.
- TYZ5 trades at 113-13+ (-01+) on light cumulative volumes of 210k.
- Support is seen at 113-04 (Oct 27 low) in a move that cleared the 20-day EMA, next opening 112-26 (50-day EMA). Recent weakness appears to be corrective though with a bullish structure still in place, with resistance at 113-24 (post-CPI high) before 114-02 (Oct 17 high).
- Additional levels to watch with today’s FOMC in mind:
- 2Y yield: Having fallen to its lowest level since August 2022 in mid-Oct to 3.374%, some might look to fade off the 50d MA of 3.562% (equating to 104-07) as the 2Y yield recovers (currently 3.500%).
- 10Y yield: Risks look tilted to the downside when looking over the medium term with the 50d MA providing resistance since August. The October low is 3.9342% whilst next support moves back up to circa 3.90% (23.6% retrace of the 2020/2023 range). Currently at 3.987%.
- US 5s/30s at 93.3bp now targets the August low at ~91.92, whilst 2s/10s at 48.9bps is finding some support ahead of 46.96 (Sept low).
- Data: MBA mortgage applications (0700ET), Pending home sales Sep (1000ET)
- Fed: FOMC decision (1400ET), Powell press conference (1430ET)
- FRN issuance: US Tsy $30B 2Y FRN - 91282CPG0 (1130ET)
- Bill issuance: US Tsy $69B 17-wk bills (1130ET)
- Politics: Trump in South Korea, currently at APEC leader’s working dinner, with nothing scheduled for the rest of the day. He meets China’s Xi mid-morning local time tomorrow.
EURIBOR OPTIONS: Call Fly buyer
Oct-29 11:00
ERZ5 97.9375/98.0625/98.1875c fly, bought for 2.5 in 3k.
MNI: US MBA: MARKET COMPOSITE +7.1% SA THRU OCT 24 WK
Oct-29 11:00
- MNI: US MBA: MARKET COMPOSITE +7.1% SA THRU OCT 24 WK
