JPY: USD/JPY Surges Back To July Levels On BoJ/Fed Policy Divergence
Dec-19 22:01
USD/JPY got to highs of 157.81 in Thursday trade, before moderating a touch as the US session unfolded. We sit back near 157.40 in early Friday dealings, still off 1.65% against the USD for Thursday's session, comfortably the worst G10 performer.
- Thursday's daily gains of near 300 pips for USD/JPY was akin to the rally posted on April 26th, which was followed just the next day by official BoJ intervention to slow the decline of the JPY. That seems unlikely at this juncture given the move was been triggered by fundamentals, rather than baseless speculation, with the Fed/BoJ confluence moving markets globally, and not just contained to Japan.
- Governor Ueda stated the central bank is in no hurry to hike rates, but kept the door ajar for a Jan hike. OIS pricing per WIRP on BBG doesn't have a full 25bps hike priced into until June next year. Coupled with a steeped US Tsy curve on Thursday was another supporting factor for USD/JPY.
- Still, given USD/JPY is now back to levels last seen in July, we may see official rhetoric step up in support of the currency today and over coming sessions.
- Tech wise for USD/JPY, upside focus will be on a series of July highs (157.89, 158.86 and 159.45). The 20-day EMA is back at 152.59 on the downside.
- Today we get Nov national CPI. The market projections are for a firmer y/y pace across the headline and key core metrics.
- Option expiries of note are mostly clustered below current spot levels for NY cut later. With only Y158.00($596mln) above current levels.
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JPY: USD/JPY Dips Sub 153.50 Supported, 20-day EMA Support Intact
Nov-19 21:59
USD/JPY sits little changed in aggregate for Tuesday's session, the pair near 154.60/65 in early Wednesday trade. Intra-session lows from Tuesday trade came in at 153.29, but multiple dips in the pair sub 153.50 were supported.
- The yen benefited from risk off amid heightened geopolitical tensions through the first part of Tuesday trade. Ukraine used its latest weapon/missile approval from the US to strike a Russian military base, while Russia formally approved a further tweak to their nuclear doctrine, allowing for use of nuclear weaponry in the case of long-range missiles used to strike inside Russian territory.
- As US trade unfolded though, we saw US equity sentiment, which pared yen outperformance. EUR/JPY got to lows of 161.50, but sits back near 163.90 in latest dealings. The technical set up for this pair still looks bearish though. Eyes are on 161.01 the Oct 4 low.
- In the US yield space, we ticked down slightly for Tuesday's session, the 10yr yield sits just under 4.40%, although this is up from intra-session lows near 4.335%.
- For Japan markets today, we have Oct trade figures on tap today. Later on, Oct final machine tool orders print.
- USD/JPY technicals, initial firm support is 153.05, the 20-day EMA. A clear breach of this EMA would signal the start of a stronger corrective phase. The recent pull back appears corrective. Nov 15 highs at 156.75 remain intact.
NZD: NZD/USD Edges Higher, Milk Prices Rise
Nov-19 21:46
- NZD/USD rose 0.34% to 0.5913, with the pair bouncing right off the yearly lows. The move higher follows broad USD weakness while the a move higher in equities also helped the currency.
- Global Dairy Trade prices rose, with whole milk powder averaging $3,826 per ton, up from $3,713 previously. The weighted average price for all milk products reached $4,089 per ton, reflecting a 1.9% increase in the GDT price index
- Taking a look at technical levels, support holds at 0.5836 (Nov 18th lows), with a break here opening a move to the 2023 lows of 0.5772 (Oct 26th 2023). Initial resistance is 0.5900 (Round number) a move back above here would see a test of 0.5957 (20-day EMA).
- RBNZ dated OIS pricing firmed on Monday with 54bps of cuts priced in for November. Looking out to 2025 the market has firmed 2-5bps with 93bps of cuts priced for Feb and 1134bps by April, while further out the curve the market expects 139bps of cuts by Oct 2025.
- The US-NZ 2yr swap fell 7bp on Friday to -43bps, and we are now testing the multi-year lows of 43.5bps
- Today's expiries are 0.5675 ($350m), 0.5850 ($200m), 0.5950 ($300m), 0.6040 ($406.57m) November 20th cut, there is a large expiry for Nov 25, strike of 0.6000 ($978m).
- The local calendar is empty today.
AUD: A$ Pushes Above 0.6500, AUD/JPY Rebounds Strongly With Higher US Equities
Nov-19 21:24
AUD/USD sits up nearly 0.40% for Tuesday's session, the pair tracking near 0.6530/35 in early Wednesday trade. Broader USD sentiment was mostly softer, although commodity FX outperformed. The BBDXY index sits down around 0.15% to 1278.5 for Tuesday's session.
- A$ dips towards 0.6480 were supported post the Asia close on Tuesday. We tracked higher through US trade, amid a better US equity market backdrop. The SPX tracking around 0.40% higher for US trade, the Nasdaq up a little over 1%.
- Earlier sentiment was more risk off, amid heightened geopolitical tensions between Russia and the West. The Kremlin have formally approved a further tweak to their nuclear doctrine, allowing for use of nuclear weaponry in the case of long-range missiles used to strike inside Russian territory.
- AUD/JPY got to 99.50, but rebounded firmly through US trade, to sit above 101.00 in early Wednesday dealings.
- US yields sit slightly lower for Tuesday trade, while commodity indices hold higher, the Bloomberg aggregate index up 0.23% after Monday's 1.64% gain. The metals sub index gained 0.69%, the third straight gain for this index.
- On the data calendar today we have the Oct Westpac Leading Index out.
- From a technical standpoint, recent AUD/USD gains are considered corrective, with a broader bear cycle still in play. Initial firm resistance to watch is 0.6575, the 20-day EMA. The reversal trigger is at 0.6688, the Nov 7 high. The Nov 14 low at 0.6441 is downside support.
