JPY: USD/JPY - Starts The Week Around 144.00
The Friday night range was 143.48 - 144.44, Asia is currently trading around 143.85. No real direction for USD/JPY on Friday as US stocks and bonds contended with month-end rebalancing and a rise in US-China tensions.
- Bloomberg - “Scott Bessent said he’s confident the latest trade clash between Trump and Xi Jinping “will be ironed out” in a call “very soon.” He also told CBS’s Face the Nation the US “is never going to default” on its debt, while declining to say when the Treasury will run out of cash.”
- “Pete Hegseth pressed Asian partners to boost defense spending toward 5% of GDP, warning at the Shangri-La Dialogue that more urgency is needed to prepare for a potential Chinese invasion of Taiwan. Beijing protested the comments, blaming the US for instability and saying it must “never play with fire.”(BBG)
- “Japan’s top trade negotiator Ryosei Akazawa said the latest round of discussions with the Trump administration on tariffs have them on track toward a deal as early as next month, while refraining from citing specifics.”(BBG)
- The market seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risks of pullbacks increase. Resistance around the 146.00 area held perfectly last week and the JPY bulls would be quite relieved as well as vindicated by the price action. The next pivotal trigger points look to be below 140.00 on the downside and above 146.50 on the topside.
- Options : Close significant option expiries for NY cut, based on DTCC data: 144.00($670m). Upcoming Close Strikes : 140.00($1.88b June 5), 142.00($884m June 5).
- CFTC data shows Asset managers maintained their already extensive JPY longs, and leveraged funds reduced their longs that had just started to be built up.
Data/Event : Capital Spending, Jibun Mfg PMI
Fig 1 : JPY CFTC Data
Source: MNI - Market News/Bloomberg
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USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
