JPY: USD/JPY - Trying To Find Momentum Above 158.00 As BOJ Approaches

The NZD/USD had a range today of 0.5788-0.5817 in the Asia-Pac session, it is currently trading around {NZD Curncy}. The NZD built on the strength seen overnight and pushed back above 0.5800 challenging the top of its recent range. The NZD is holding above 0.5700-0.5750 and for the most part was left unscathed by the choppy price action seen elsewhere last week, as risk looks to build onto the Santa rally I suspect the NZD could probe back above 0.5830. On the day, I suspect a pullback toward 0.5765-85 should find demand as the market looks to potentially challenge the 0.5810/30 area.

• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5530(NZD475m). Upcoming Close Strikes : None - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 44 Points

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZGB yields are mixed, with the 2yr higher, +2bps to 2.72%, while the rest of the curve is weaker in yield terms (down around 1.5-1.8bps). The 10yr is back to 4.44%. The back end moves are consistent with regional/US Tsy yield trends, so far in Tuesday trade and reverses some of yesterday's solid yield gains. Local news flow has been light, with markets winding down ahead of the Christmas/NY break. 

• Broader ranges are holding for NZGBs, with some selling interest emerging when 10yr yields dip under the 4.40% region. For the 2yr we have edged up from a test of Dec lows under 2.70%. The 2/10s curve is slightly flatter at +172bps, but has been in a strong uptrend since the start of Dec.
• The 2yr swap rate (NDSO) is firmer, last around 2.76%, bouncing off 20-day EMA support (near 2.70%), in recent sessions. 

• The NZ-US 10-yr spread is relatively steady around +30bps, little changed today, but up from around flat in Oct/Nov, which fits with the respective central bank outlooks (with the Fed seen more at risk of cutting in the first part of 2026 compared to the RBNZ). 

   

The USD/JPY range today has been 155.96 - 157.08 in the Asia-Pac session, it is currently trading around {USDJPY Curncy}. USD/JPY has had another leg lower as officials continue jaw-boning about the one-sided nature of the move. The BOJ is in a tough spot, and they are going to need to do something significant to turn around the market's perception of a weak Yen. The minimal reduction in differentials is not incentivising a market that is concerned about Japan’s Fiscal policy to start buying Yen. A test of the BOJ/MOF resolve looks inevitable at the moment as the market turns its focus toward the important 160.00 area. Technically USD/JPY remains in an uptrend, while the first support back toward the 152.50-154.50 area is intact it remains a buy on dips. On the day, we have pulled back nicely, but I suspect buyers are looking to fade this move initially. First support is around 155.80-156.00 and then the more important 154.50-155.50 area.

• "KATAYAMA: DECLINE TO COMMENT ON CURRENT FX, YIELD LEVELS. THERE ARE MANY FACTORS BEHIND FX, YIELDS MOVES. SEE SOME FX MOVES NOT IN LINE WITH FUNDAMENTALS" - BBG
• "JAPAN FINMIN KATAYAMA: WILL TAKE APPROPRIATE ACTION AGAINST EXCESSIVE MOVES, JAPAN HAS A FREE HAND IN DEALING WITH EXCESSIVE MOVES IN THE YEN - [RTRS]
• Options : Close significant option expiries for NY cut, based on DTCC data: 156.00($1.32b), 158.00($968m). Upcoming Close Strikes : 155.50($486m Dec 26), 157.00($889m Dec 24), 158.00($589m Dec 24)  - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 118 Points

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P