FOREX: USDJPY Surges Through Key Resistance to Fresh 8-Month Highs
Oct-30 09:43
- USDJPY (+0.62%) has broken through key resistance Thursday, rallying to fresh 8-month highs of 153.89. Bank of Japan Governor Ueda did not provide a signal around the likely timing of the next rate hike, which combined with the hawkish Fed has underpinned the constructive USDJPY price action. Ueda noted that still-elevated trade policy uncertainty justified holding rates in October, while the BOJ wants to get an early read of next year's wage momentum before delivering another hike.
- The move strengthens bullish trend conditions in USDJPY, with focus now on 154.39, a Fibonacci retracement point. While press conference commentary on recent exchange rate moves was rather in line with previous rhetoric, further upward pressure in USDJPY could raise concern amongst BoJ officials - whose commentary subsequently remains key to watch for the pair.
- Elsewhere, markets view the outcome of the overnight Trump-Xi meeting rather favourably, with the key rare earths conflict appearing to be resolved for the time being. This may have underpinned some NZD outperformance on the margin, with NZDUSD standing at 0.5773, but feedthrough to wider G10 FX appears limited for now.
- Eurozone Q3 GDP is scheduled for release soon, ahead of German national-level CPI later today. Attention then turns to the ECB, firmly expected to hold its key interest rates, putting focus on Lagarde's press conference. EURUSD has recovered from the post fed lows of 1.1578, consolidating around the 1.1625 mark. Price needs to trade above 1.1728, the Oct 17 high, to reinstate a bull theme.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Bears Remain In Control Despite Recovery, BoEspeak Eyed
Sep-30 09:42
Gilts have generally looked to cues from wider core global FI markets through early Tuesday trade.
- Gilt futures little changed at ~90.85 with bulls unable to force a test of first resistance at the Sep 24 high (91.28). That leaves bears in technical control, with first support located at the Sep 26 low (90.26).
- Yields essentially flat across the curve, with 2s10s and 5s30s remaining in their steepening trend despite the recent flattening moves.
- BoE-dated OIS still prices less than 5bp of BoE easing through year-end.
- We continue to suggest that the market is underpricing the odds of a cut in Q4, but note that such a move would likely require support from Governor Bailey, as well as Deputy Governor’s Ramsden & Breeden (in addition to dovish dissenters Dhingra & Taylor).
- Ramsden maintained his position as the most dovish MPC member that did not vote for a cut in September via his speech yesterday, with Breeden set to speak today. We will also hear from BoE’s Lombardelli & Mann today.
EGBS: Off Highs, Spreads To Bunds A Little Tighter
Sep-30 09:40
Bunds have faded from early session highs after initial technical resistance in futures (128.82-84) went untested and German regional CPI data revealed upside risks to this afternoon’s national data.
- This countered early support stemming from increased U.S. government shutdown risks.
- Slightly firmer-than-expected Italian HICP was then seen, after softer inflation releases from France & Spain within the last 24 hours or so.
- Bund futures last flat at 128.60, bearish technical setup intact, initial support in the 128.29-26 zone.
- German yields are little changed to 1bp higher, curve slightly steeper, with the broader technical steepening theme intact.
- EGB spreads to Bunds are a biased tighter (little changed to ~1bp tighter on the day, Iberians outperform), aided by the German CPI data and the Span noting that it will reduce its net issuance target for the current FY by EUR5bln.
- OATs haven’t reacted to a Les Echos report suggesting that the government is mulling raising the flat tax to as much as 36% from 30%. Such a move could bring in more than EUR1bln in extra revenue, which although welcome, is relatively limited when compared to scale of the wider fiscal issues that France faces.
- Euribor futures are little changed on the day, with ECB-dated OIS steady, pricing around ~9bp of easing through June/July.
- This afternoon’s ECBspeak will come from Lagarde, Nagel & Cipollone.
EQUITY OPTIONS: Commerzbank Longer Dated Put Option
Sep-30 09:39
CBK (18/09/26) 24p, bought for 2.05 in 6.25k.
