JPY: USD/JPY - Stalls Toward 157.00, Drifts Off Overnight Highs
The USD/JPY range today has been 156.56 - 156.94 in the Asia-Pac session, it is currently trading around 156.60, -0.20%. The pair has drifted lower in Asia after topping out towards 157.00. The move higher overnight was supported by the sell-off in treasuries which has seen yields move quite a bit higher as we approach the FOMC. The U.S. 10-Year yield is approaching the pivotal 4.20% area, a break of which could signal the start of a bigger move higher. The market has been pricing in the fact that the Yen move looks likely to force the BOJ into action in December. This has initially stalled the upward momentum but a hawkish cut from the FOMC tomorrow could potentially undo all that. Technically USD/JPY is in an uptrend, the first big support back toward the 153-155 area has held on very well upon first examination. On the day, look for support back toward 156.00-30, on the topside we should see some initial resistance around 157.00-30, a break above here and the next target is towards 158.00.
- Nick Timiraos on X: “Politico: Is it a litmus test that the new chair lowers interest rates immediately? Trump: Yes.”
- Jim Bianco on X: “As many as five of the 12 voting members of the Fed’s policy committee, and 10 of all 19 members, have signaled in speeches or public interviews that they didn’t see a strong case to cut.”
- "TAKAICHI: VITAL THAT FX MOVES STABLY, REFLECTING FUNDAMENTALS, WILL TAKE APPROPRIATE RESPONSE IF EXCESSIVE FX MOVES. WEAK YEN HAS BOTH MERITS AND DEMERITS FOR ECONOMY" - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 155.50($592m), 156.00($900m). Upcoming Close Strikes : 155.00($1.13b Dec 12), 156.00($2.46b Dec 11), 159.00($1.55b Dec 12) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 94 Points
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE BONDS: Cheaper With YM1 Testing Support
ACGBs (YM -5.0 & XM -5.0) are weaker with US tsys after headlines that key US Senate Democrats will advance a GOP bill to end the government shutdown. Risk appetite is firmer.
- Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +26bps.
- The bills strip has bear-steepened, with pricing -2 to -5.
- The main takeaway from RBA Deputy Governor Hauser's Q&A today was that the economy could already be close to trend growth, and therefore, supply constraints make further rate cuts difficult.
- RBA-dated OIS pricing is showing a 25bp rate cut in December at an 8% probability, with a cumulative 16bps of easing priced by mid-2026.
- Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence data.
- However, the highlight of this week's AUS calendar will be Thursday's October jobs data. The unemployment rate rose 0.2pp to 4.5% in September.
- Last month's weak employment data triggered a solid ACGB rally, but those gains were more than fully reversed after the much hotter-than-expected Q3 CPI report. YM1 is currently testing horizontal support at 96.28 (see chart).
- This week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035bond on Wednesday and A$800mn of the 1.75% 21 November 2032 bond on Friday.
Bloomberg Finance LP
JPY: Asia-Pac: USD/JPY Challenging 154.00 Again After Turnaround In Risk
The USD/JPY range today has been 153.45 - 154.03 in the Asia-Pac session, it is currently trading around 153.95, +0.35%. The pair initially gapped higher on the Asian open as reports of a potential deal on the US shutdown made the rounds; it has continued to build on these initial gains as these reports of Dems crossing the aisle have been confirmed. USD/JPY found solid demand around the 153.00 area on Friday again, this positive scenario returns the focus back toward the 154-155 area resistance area once more. A sustained break above is needed to potentially see the uptrend regain upward momentum, the focus would then turn toward the 160 area where I would start to become wary of intervention risks.
- "JAPAN PM TAKAICHI: NOT RULING OUT SALES TAX CUT AS OPTION IN FUTURE, BUT IMMEDIATE PRIORITY IS TO COMPILE PACKAGE OF STEPS TO CUSHION BLOW FROM RISING COST OF LIVING, CHANGING SALES TAX RATE WOULD TAKE TIME, SO DECISION ON WHETHER TO DO SO WOULD NEED TO TAKE INTO ACCOUNT WAGE, INFLATION LEVELS AT THE TIME - [RTRS]"
- MNI: BOJ board members largely agreed on the need to raise the policy interest rate eventually, but saw no urgency to act at the Oct 29-30 meeting, preferring to confirm sustained wage momentum and the firmness of underlying inflation, according to the summary of opinions released Monday.
- Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : none - BBG.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
GOLD: Gold Rallies On Hopes US Data Releases Will Clarify Fed Outlook
Gold has rallied 1.3% to $4054.0/oz today despite a slightly stronger US dollar, higher yields and a 0.7% rise in the S&P e-mini. It appears to be a delayed reaction to the softer-than-expected November Uni of Michigan consumer sentiment released on Friday. The move may also be in anticipation of the delayed US data printing softer following reports that a deal has been reached to end the US government shutdown impasse. Thus increasing expectations of further Fed easing.
- Gold broke above initial resistance at $4046.2, 31 October high, opening up $4161.4, 22 October high. It reached a high of $4055.50 but has mainly traded around $4040-4050.
- News from the US says that enough Democrats in the senate will vote to pass a bill to end the government shutdown which is in its sixth week.
- Fed Chair Powell said another rate cut in December is not a given and so the market has around a 60% chance of one priced in with 100% by January. Monetary easing supports non-interest bearing gold.
- The PBoC built its gold reserves in October for a twelfth consecutive month, according to Bloomberg. There was an 8% y/y fall in gold consumption in China in the year to September according to the Gold Association.
- Silver is 1.8% higher at $49.18 but has been unable to break above initial resistance at $49.456, 23 October high. It reached $49.299 earlier.
- Later the Fed’s Daly and Musalem speak as well as BoE’s Lombardelli. There are no material data releases.
