JPY: USD/JPY-Looks To Challenge 160-162, Potentially Bringing Rate Hike Forward
The USD/JPY range today has been 159.01-159.43 in the Asia-Pac session, it is currently trading around 159.40. The pair had a brief dip as officials Jaw-Boning got louder but dips continue to be well supported and is now looking to challenge the all important 160-162 area. The jaw-boning by officials is probably set to intensify but personally with the USD so bid and risk struggling I think the BOJ/MOF are in a tough place, who wants to sell USD’s into a market that is looking for them. Hiroshi Inoue’s article below raises the possibility of a rate hike next week as an alternative. This is similar to the conundrum the SNB had intervening in EUR/CHF by offering an unlimited bid in EUR when the whole world was selling. So for now, I suspect they hold off until this market has calmed down and the demand for USD’s has turned lower again. Where does this leave USD/JPY and how high can it go before they are forced to come back in ? This is a tough question because you cannot discount them coming in back above 162 but for my mind I suspect it could be a lot higher than most expect given the current back drop, but it does increase the chances of them moving on rates. On the day, the first support is back toward 158.50-158.80 and then the 157.50 area.
- MNI Policy: BOJ’s Renewed Price Focus Improves Hike Conditions. The BOJ is increasingly vigilant about second-round effects from Yen weakness and crude oil prices, particularly the risk of rising inflation expectations, with conditions for a rate hike gradually falling into place and raising the possibility of a move as early as next week MNI understands.
- "JAPAN FINMIN KATAYAMA: NEED TO MITIGATE IMPACT AS MUCH AS POSSIBLE, READY TO TAKE ALL POSSIBLE MEASURES, KEEPING IN MIND THAT OIL PRICES COULD HAVE ON DAILY LIVES. IN CLOSER CONTACT WITH US AUTHORITIES ON FOREX - [RTRS]"
- Options : Close significant option expiries for NY cut, based on DTCC data: 156.00($1.01b). Upcoming Close Strikes : 156.00($1.29b March 16) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 88 Points
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JPY: USD/JPY - Continues To Drift Lower As The USD Trades Poorly Into NFP
The USD/JPY range today has been 153.51 - 154.52 in the Asia-Pac session, it is currently trading around 153.55, -0.55%. USD/JPY could not bounce at all and was back under pressure from the open and has remained so all through our session. The price action on Monday in response to the election outcome showed it was mostly priced in, and we have seen some “buy the rumour, sell the fact” play out. I thought we would see better demand back toward the 155.00 area initially but this move in US yields is causing the Yen shorts some angst. This price action does look messy but I still believe dips back toward the 149-152 will probably provide solid support again should we see it, until then it looks like we chop around albeit with a heavy tone as we await tonight's US labour data which will directly impact that move in US yields. On the day, the first resistance is back towards 154.75-155.15 and then the 155.80-156.20 area as the market pares back its USD longs and looks for another base to from from which to move higher again.
- “Deutsche Bank strategists said they’re no longer bearish on the yen after PM Sanae Takaichi’s election victory.” - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 156.50($1.16b), 156.60($550mm). Upcoming Close Strikes : 158.50($1.57b Feb 13), 159.00($1.91b Feb 13),160.00($3.06b Feb 13) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 154 Points
Fig 1 : US 10-Year Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: Richer Ahead Of US NFP, Stronger Demand Drove Hike - RBA Hauser
ACGBs (YM +3.0 & XM +6.5) are stronger.
- MNI: The Reserve Bank of Australia’s 25bp February hike to 3.85% reflected stronger global growth, looser financial conditions and firmer private demand relative to supply, Deputy Governor Andrew Hauser said.
- There has no cash US tsys dealings in today's Asia-Pac session, with Japan out on holiday.
- All focus turns to today's US employment data. Monthly payroll growth is currently expected at 70k in January for a slight acceleration from the 50k in December and 56k in November.
- Cash ACGBs are 2-5bps richer, with the 3/10 curve flatter.
- The latest ACGB April 2037 auction attracted solid demand, with the weighted average yield printing 0.68bps through prevailing mid-yields.
- Moreover, the cover ratio jumped sharply to 4.1429x from 3.4933x at the previous auction. The AOFM also plans to sell A$1000mn of the 2.50% 21 May 2030 bond on Friday.
- The bills strip has bull-flattened, with pricing flat to +3 across contracts.
- RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 15% for March to 93% by June and 146% by December 2026.
- Tomorrow, the local calendar will see Consumer Inflation Expectation data alongside the RBA’s Senate Testimony and RBA Hunter’s Speech.
Bloomberg Finance LP
AUD: AUD/USD-Extends Above 0.7100 As Hauser Says: "Will Do What's Necessary"
The AUD/USD has had a range today of 0.7067 - 0.7128 in the Asia- Pac session, it is currently trading around 0.7125. The AUD took another leg up across the board as the market reacted to Hauser saying they “will do what's necessary to return inflation to target”. The USD is again back under pressure and the move lower in yields overnight is just adding to its headwinds, the AUD remains a favourite vehicle to express a long against it. The AUD has been outperforming across the board as leveraged funds continue to add to their longs as further hikes are potentially priced in. On the day, the first support is back toward the 0.7040–0.7070 area, and then the 0.6950 area. The bulls will be looking for dips to remain supported in order to break above the pivotal 0.7100-0.7200 area. A sustained break above here targets 0.7600-0.7800 first and then 0.8000-0.8200.
- "HAUSER: WILL DO WHAT'S NECESSARY TO RETURN INFLATION TO TARGET" - BBG
- MNI BRIEF: Stronger Demand Drove Hike - RBA's Hauser. The RBA’s 25bp February hike to 3.85% reflected stronger global growth, looser financial conditions and firmer private demand relative to supply. The reason policy turned around in February is because the facts changed,” he said, referring to last week’s decision.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7010(AUD560m). Upcoming Close Strikes : 0.6800(AUD1.55b Feb 13), 0.6850(AUD933m Feb 12) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 80 Points
Fig 1: AUD/USD spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
