FOREX: USD/JPY Rallies, But Consolidation Phase Still in Play
Aug-08 15:02
- The greenback rose against all others on Friday - however the bounce was shallow relative to the phase of post-NFP weakness. JPY traded poorly on a phase of selling pressure through the European morning. Speculation continues to mount over the future of the LDP leadership. Speaking today, Ishiba noted he is not intending to change the cabinet lineup for now, but has vowed to stay on in his role despite party pressure to accelerate succession. Conviction in the weaker is low, however, with volumes holding below the average.
- While JPY traded weaker, USD/JPY has held inside a consolidation pattern for much of the week, holding the bulk of the NFP losses. This has allowed a previously overbought condition to unwind, and keeps the downside argument in focus. The recent break and close below 147.57, the 20-day EMA, is a concern. A clear break of this support zone would undermine the recent bull theme. A break of last week’s 150.92 high would resume the uptrend.
- Canadian jobs data came in noticeably weaker than forecast, with the country shedding over 40k jobs in July and over 50k full-time positions. The unemployment rate also ticked higher on a non-rounded basis, helping USD/CAD keep well off the mid-week lows. The 100-dma comes in as first resistance here, crossing at 1.3829.
- Headlines just ahead of the UK close showed US and Russian negotiators reportedly working on mutually-agreeable ceasefire conditions. The terms included a freezing of current battlelines and a withdrawal of troops from regions occupied by opposition forces - if realised, such an agreement would be a major boon to Putin, whose forces have proved unable to wrest control of the regions by force over the course of the past three and a half years of war.
- Risk rallied, with European equities putting in a firm bounce on the report. Rallies were limited however, as there remain significant impediments to such a deal. It is unclear whether Ukraine will be invited to participate in direct talks with Putin, and the Zelenskyy administration could immediately reject such an offer (albeit risking a backlash from a White House impatient for any form of peace to be agreed).
- The coming week's highlights include UK jobs data (seen confirming the slowdown in the UK labour market over the past few quarters), the RBA rate decision (expected to undergo a 25bps cut to 3.60%) and a potential face-to-face meeting held between the US and Russian Presidents.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Flatter, Paring Most Of Yesterday's Curve Steepening
Jul-09 14:55
The bid in U.S. Tsys, weakness in crude and move away from highs in e-minis have provided support for gilts, with futures trading to fresh session highs of 91.92, but ultimately remaining within the confines of yesterday’s range.
- Bulls will want to break yesterday’s high (91.98) before attempting to close yesterday’s opening gap lower.
- Yields 0.5-4bp lower, curve flatter.
- BoE Governor Bailey’s reiteration re: recent curve steepening factoring into the Bank’s QT adjustment decision in September underpinned an early flattening curve bias, with major spreads paring most of yesterday’s bear steepening.
- Still, a lack of fiscal headroom, coupled with tepid economic growth and downside risks to productivity continue to promote heighted odds of tax increases as soon as the Autumn, while underscoring the fiscal fragility narrative.
- GBP STIR pricing slightly more dovish on the day given action further out the curve.
- SONIA futures 0.5-2.0 firmer.
- BoE-dated OIS showing ~52.5bp of cuts through year-end, ~1bp more dovish on the day.
OPTIONS: Expiries for Jul10 NY cut 1000ET (Source DTCC)
Jul-09 14:50
- EUR/USD: $1.1650(E2.5bln), $1.1685-00(E1.5bln), $1.1710-20(E616mln), $1.1735-50(E1.5bln), $1.1800(E1.3bln)
- USD/JPY: Y143.95-15($1.0bln), Y144.70-90($1.3bln), Y146.50-55($681mln), Y147.00($832mln)
- GBP/USD: $1.3490-10(Gbp529mln), $1.3570(Gbp540mln)
- EUR/GBP: Gbp0.8595-00(E815mln)
- AUD/USD: $0.6440-55(A$954mln), $0.6500(A$599mln), $0.6415-25(A$589mln), $0.6600(A$634mln)
- NZD/USD: $0.6000(N$517mln)
- USD/CAD: C$1.3625-35($1.0bln)
US STOCKS: Early Equities Roundup: Bid But Off Highs, IT & Media Outperforming
Jul-09 14:45
- Stocks are trading firmer early Wednesday, apparently tracking a rebound in Treasuries off yesterday's June 20 lows, projected rate cuts into year end gaining slightly ahead of this afternoon's June FOMC minutes release.
- Indexes did pare gains by midmorning, likely profit taking ahead of the minutes and some amount of wariness amid Pres Trump reiterating tariff threats via social media. Currently, the DJIA trades up 69.23 points (0.16%) at 44322.34, S&P E-Minis up 16.75 points (0.27%) at 6290.25, Nasdaq up 119 points (0.6%) at 20542.14.
- Communication Services and Information Technology sectors led gainers in the first half, interactive media and entertainment shares buoyed the former with Alphabet +2.80%, Warner Bros Discovery +2.59%, Meta Platforms +2.16% and Paramount Global +0.83%.
- THe Tech sector was supported by Arista Networks +2.20%, NVIDIA +2.10% (fist company to reach $4T market cap), Broadcom +1.76%, Microsoft +1.66% and Advanced Micro Devices +1.60%.
- On the flipside, Consumer Staples and Energy sectors underperformed in the first half, The Hershey Co -3.41%, Altria Group -2.66%, Monster Beverage -1.93% and Archer-Daniels-Midland -1.15% weighed on Staples while EQT Corp -1.59%, Targa Resources -1.53%, EOG Resources -1.43% and Kinder Morgan -1.39% kept the Energy sector under wraps.
