JPY: USD/JPY - Solid Demand Around 144.50 Overnight

The overnight range was 144.67 - 145.22, Asia is currently trading around 144.90. US Stocks had an impressive bounce and seemed to have looked through the US downgrade. USD/JPY though remains anchored to its lows as the USD could not bounce and has traded heavily across the board.

• Reuters reported - “Nippon Steel plans to invest $14 billion in US Steel if the Trump administration approves the merger of the companies.”
• Bloomberg - “The Bank of Japan is holding meetings with market participants to gauge their views on quantitative tightening and the pace of its pullback from the bond market.”
• “The discussions will inform the bank's decision on debt purchases at its next policy board meeting on June 16-17, amid a recent surge in super long bond yields and increased volatility.”
• “The BOJ's campaign to unwind its massive monetary easing program aims to restore the health of the debt market's functionality, with Governor Kazuo Ueda seeking to improve market functionality and reduce the bank's footprint.”
• USD/JPY continues to test its support and trade heavy towards its lows, the price action is interesting considering the bounce in stocks.
• The support around 144/145 looks important now and a break would once again bring the focus back to the pivotal 140.00 area. The price action does not look great and the market is still more comfortable selling rallies.

• Options : Closest significant option expiries for NY cut, based on DTCC data: 145.50($1.03b May 20), 145.00($789.7m May 20) , Upcoming Strikes : 145.00($2b May 23),144.00($1.37b May 23), 140.00(1.67b May 23)

  Fig 1 : USD/JPY Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 141.48/142.95 - High May 2 / High Apr 7
• PRICE: 139.32 @ 16:33 GMT May 19
• SUP 1: 138.77 - 1.0% 10-dma envelope
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs are trading just above their recent lows and for now, a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal. 

US President Trump has had a two hour conversation with Russian President Putin about the war in the Ukraine. Trump said that he believes that Putin wants peace. While he said that peace talks would begin “immediately”, it remains unclear what the next steps will be, especially as the unconditional 30-day ceasefire was not discussed between the two leaders. Trump followed the discussion by updating European leaders.

• Trump has said that the US is prepared to formulate a “memorandum on a possible future peace agreement” with the Ukraine. While Ukrainian President Zelensky wants the US to remain as one of the negotiating parties, which would also include Europe, but Trump warned there’s a red line on when he’ll walk away if there isn’t progress which he won’t reveal yet.
• Zelensky noted that this was a “defining moment”. A direct meeting with Putin was apparently discussed, according to the Kremlin.
• Putin stated after his call with Trump that their discussion had been “frank, informative and constructive” and that Russia “is ready to work with Ukraine on a memorandum”, which would define “principles of settlement and a timeline for concluding a possible peace agreement” and ceasefire, according to the BBC.
• Putin has previously demanded that Russia keep the territory it has gained during the three years of fighting as well as the rest of the provinces connected with these areas that Russia is yet to occupy. Trump didn’t state if this position had changed.
• In terms of sanctions, Trump thinks they could make the situation worse but that a time may come where they need to be extended, which Zelensky mentioned too.
• Talks took place between Ukraine and Russia in Turkey last Friday but Putin didn’t attend. A prisoner swap was agreed but not a ceasefire. The meeting was followed by intense Russian attacks on Ukraine.