JPY: USD/JPY - Surges Higher With US Yields Breaking Above 148.00
The overnight range was 147.58 - 149.02, Asia is currently trading around 148.90. USD/JPY surged higher with US yields in response to the US CPI showing clear signs that tariffs are beginning to impact the core goods data. The USD/JPY relentless march higher has been pretty telling, challenging a market positioned the wrong way. This time USD/JPY has not given the JPY longs any respite and the powerful move back above 148.00 does not bode well. Dips should now be well supported in the short-term, will Asset Managers start paring back their extensive JPY longs now ? The first decent buy zone is now back towards the 147.00 area.
- (Bloomberg)- Short-dated options bets turned net bearish on the yen to the dollar on Tuesday for the first time since September of 2022 as the Japanese currency hit its lowest spot level since the aftermath of Liberation Day. The moves indicate the downdraft in the Japanese yen is set to extend.
- “Japan’s bond market is facing a potential Liz Truss moment as the risk of a ruling coalition defeat in Sunday’s election fuels concerns over fiscal policy. Yields on bonds with maturities of 20 years and beyond have risen at least 20 bps this month, part of a wave of selling in global bond markets as investors increasingly worry about government finances.” - BBG
- USD/JPY is now breaking above the highs of this year's range and implies the move could have more to play out. The Market is long JPY and should the USD continue to correct higher the risk is a move back above 150.00 to further challenge the conviction of the shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: 149.00($910m).Upcoming Close Strikes : 145.50($1.29b July 21).
- CFTC data shows Asset managers reduced their JPY longs slightly +89331, while leveraged funds have almost squared their newly built JPY longs +5224.
- Data/Event :
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGB TECHS: (M5) Rallies Off Lows
- 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: 139.08 @ 16:23 GMT Jun 13
- SUP 1: 138.54 - Low May 22
- 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 hold above recent lows, however 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.
CROSS ASSET: Early Oil Spike Pared, US Equity Futures Recover From Opening Dip
The knee jerk reaction in major asset classes has been risk off (ex weaker yen) as Monday trading resumed, with a focus on spill over from oil prices. We are away from earlier extremes though.
- For the oil benchmarks we sit off session highs. WTI got to $77.49/bbl (just short of Friday highs) but is now back under $75/bbl. Brent rose to $78.32/bbl at the open, but is now back around $75.85/bbl. Both benchmarks are still up over 2%, as Israel started targeting Iran energy facilities.
- Headlines have crossed from US President Trump, stating he continues to support Israel, noting: "TRUMP SAYS HE HOPES THERE WILL BE A DEAL BETWEEN IRAN AND ISRAEL, BUT SOMETIMES YOU HAVE TO FIGHT IT OUT - [RTRS]"
- US equity futures fell at the open but are back close to flat now (Eminis near 6027). The USD is firmer, mostly against the yen, with USD/JPY up to 144.60, +0.35% on end Friday levels. EUR and GBP are down a touch, while AUD and NZD are little changed.
- Gold couldn't sustain +$3450/oz levels earlier, but is still +0.25% versus end Friday levels. US Tsy futures are little changed.
NZD: NZD/USD - Holds Above 0.6000
The NZD had a range Friday night of 0.5995 - 0.6042, Asia is trading around 0.6015. The NZD continues to hold above its support around the 0.6000 area. The USD tried to bounce as a safe haven on Friday but really struggled to hold onto its gains falling away into the close once again.
- "NZ MAY SERVICES PSI FALLS TO 44: BNZ", (prior 48.1).
- Bloomberg - “Chinese passport holders traveling from Australia, with valid Australian work, student or family visas, will be able to visit New Zealand visa-free from November. The government is seeking to boost Chinese tourist numbers.”
- The USD’s muted reaction to the events on Friday have the market again questioning the role it has as a safe haven ?
- The NZD continues to find solid support around the 0.6000 area. The upward momentum though has stalled for now and the market will be watching if risk can continue to hold up as it did impressively on Friday night.
- While the support around 0.5850 holds in NZD/USD there should be buyers around on dips. A clear break above 0.6050/0.6100 and the move could start to accelerate.
CFTC Data showed Asset managers paring back their shorts slightly over the week, the leverage community did likewise.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
