JPY: USD/JPY - Looks Toward Top Of Range, Challenging JPY Longs
The overnight range was 146.00 - 146.98, Asia is currently trading around 146.60. USD/JPY price action is telling as it marches relentlessly higher, challenging a market positioned the wrong way. Price is now pushing towards the upper boundary of its 142.00 - 148.00 range, the pair will probably continue to take its cue from the US rates market which is also approaching some key pivot areas.
- (Bloomberg) - As the dollar recovers from an extended slump, its Japanese counterpart is falling out of favor among traders. One-week dollar-yen risk reversals -- which gauge the premium traders are willing to pay for call versus put options -- now trade at some 37 basis points in favor of Japan’s currency. That’s the least bullish level since October, and reflects growing jitters over Japan’s spending outlook ahead of the key upper house election later this month.
- (Bloomberg) - “Junko Koeda, one of the BOJ’s newest board members, signaled a possible upward revision to the central bank’s inflation view this month. Such a move would keep open the possibility of another rate hike this year.”
- “Political risk in Japan is casting a shadow over super-long JGBs. After flirting with its record high on Tuesday, the yield on 30-year bonds is set to face more upward pressure as analysts point to growing fears of fiscal deterioration. Investors now turn to a 20-year bond sale Thursday.”
- USD/JPY has lost all downside momentum for now and is back in its wider 142.00 - 148.00 range. The Market is long JPY and should the USD manage to continue to correct higher the risk is a move back to the top end of the range to further challenge the conviction of the shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: 144.50($860m).Upcoming Close Strikes : none.
- CFTC data shows Asset managers increased their JPY longs slightly +94753, while leveraged funds maintained their longs they have tried to rebuild +15798.
- Data/Event : Money Stock, Machine Tool Orders
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JPY: Underperforms Post NFP, USD/JPY Near 50-day EMA Resistance
Yen was an underperformer in the G10 space for Friday's session. It lost 0.90% versus the USD, with USD/JPY testing above 145.00. We track near 144.65/70 in early Monday dealings, down slightly for the session so far.
- Outside of the NFP beat (albeit with prior downside revisions), the focus was also on better wages data. USDJPY was volatile through the NFP release, but ultimately reached 145.09, essentially matching the initial target of the 50-day exponential moving average.
- The latest headlines/timeline on a US/China meeting likely provided an additional tailwind, feeding into the cautious optimism surrounding global trade negotiations. The SPX finished up a little over 1% on Friday.
- For USD/JPY technicals, the trend condition still remains bearish despite Friday's rebound. The 50-day EMA, near 145.20 is close by, while key resistance is seen at the May 29 high at 146.28. On the downside, attention is on the next important support at 142.12, the May 27 low. A clear break of this level would confirm a resumption of the bear leg and open 139.89, the Apr 22 low.
- Nomura stated that yen may strengthen to 136 versus the USD by end Sep. It notes: "Japanese investors pivoting out of US assets as yen yields rise — combined with implicit pressure from Washington over the exchange rate during trade talks — could push the currency about 6% higher against the dollar in the coming months" (Bloomberg).
- On the local data front today we have Q1 GDP revisions. Market forecasts are for little change (q/q growth expected at -0.2%). Also out is Apr BoP/trade balance figures and May bank lending data.
- In the option expiry space, note the following for NY cut later today: Y143.55-65($982mln), Y144.00($660mln), Y145.00($512mln).
AUD: A$ Outperforms As Payrolls Boost US$, Australia Closed Today
AUDUSD reached a low of 0.6479 on Friday following the better-than-expected US payroll data, which showed the labour market holding up in the face of elevated trade uncertainty. The US dollar had been trending higher before the release but took a step up following it and the BBDXY finished +0.3% resulting in all the G10 falling against the greenback. Aussie outperformed though, apart from CAD. AUDUSD was down 0.2% to 0.6492 and has started today slightly higher at 0.6498.
- AUDUSD had broken briefly above 65c early in the APAC session making a high of 0.6517, consistent with bullish trend signals. Initial resistance is at 0.6538, 5 June high. A clear break of key support at 0.6400, 50-day EMA, is needed to point to a short-term reversal. Initial support is at 0.6448, 20-day EMA.
- The yen underperformed on Friday driven by the US payroll data leaving AUDJPY up 0.7% to 94.04, close to the intraday high of 94.13. It is currently trading around 94.00.
- AUDNZD was also boosted by the US numbers and it rose to 1.0797 before settling at 1.0792 to be up 0.1%. It is now at 1.0788.
- AUDEUR oscillated around 0.5700 following the US jobs data making a high of 0.5703. It finished up 0.25% to 0.5698. AUDGBP was up 0.1% to 0.4800 after a peak of 0.4804.
- Equities rallied with the S&P up 1.0% and Euro stoxx +0.4%. Oil prices rose sharply with Brent +2.0% to $66.65/bbl. Copper fell 2% and iron ore is lower at around $95/t.
- Australia is closed today for the King’s Birthday holiday.
US TSYS: Re-Open Steady, Close To Important Support Post NFP Beat
US Tsy futures are little changed in the first part of Monday dealings. The September 10yr future was last 109-30, +01+, from end Friday levels. We were weighed heavily on Friday after the firmer than expected NFP print (+139k, versus +126k forecast) and upside surprise on average hourly earnings (+0.4$%m/m, versus 0.3% expected).
- For the 10yr future, we are near technical support at 109-26, the May 29 low, where a break would open key support and the bear trigger, at 109-12+, the May 22 low.
- The 10yr Tsy yield finished up above 4.50%, +11.5bps. May highs rested just above 4.60%. The US 2/10s curve didn't shift greatly, ending at +47bps.
- Fed easing expectations were pared to end 2025. Dec now has around -44bp of easing priced in, versus -54.6bp pre data.
- On the data front this week, there will be strong focus on Wednesday's CPI outcome.
