MYR: USDMYR Lower, Eyes Key Level as Next Test

The USD/JPY range today has been 155.30 - 155.99 in the Asia-Pac session, it is currently trading around 155.35, -0.30%. The pair saw demand into the Japanese fix but topped out toward 156.00 and quickly turned lower trading heavily thereafter for most of the session. A poor close for risk to end the week, how it starts this week will be important for cross-Yen. The market is pricing in a hike by the BOJ for this week but US yields in the long-end are still under pressure. For the time being this is keeping the JPY confined to a wider 154.50-157.00 range. Technically USD/JPY is in an uptrend, the first big support is back toward the 152.50-154.50 area. In today's Asian session, the resistance back toward the 156.00-156.30 area capped price so look for a retest of the 155.00 area at some point a break of which would then turn the focus toward 154.40. 

• MNI: BOJ Tankan: Key Sentiment Rises, Solid Capex Plans. Japanese benchmark business sentiment rose slightly from three months earlier for a third consecutive quarter, while sentiment among major non-manufacturers was unchanged. The Tankan also indicated that capital investment plans by major and smaller firms this fiscal year remain solid and above historical averages, supporting the BOJ’s view that the virtuous cycle from income to spending continues to function.
• Options : Close significant option expiries for NY cut, based on DTCC data: 156.00($907m), 156.50($1.2b). Upcoming Close Strikes : 157.00($3.95b Dec 18 ), 158.00($4.78b Dec 18 ), 159.00($6.46b Dec 18 ) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 96 Points

Fig 1 : USD/JPY Spot Daily Chart

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

The AUD/USD has had a range today of 0.6638 - 0.6655 in the Asia- Pac session, it is currently trading around 0.6645, -0.05%. The AUD continues to consolidate around the 0.6650 area. The US stock market wobbled on Friday as AI concerns came back to the fore and US yields in the long end tick back up. This saw the USD’s decline stall but it has not bounced, yet. The AUD price action remains very constructive but the way risk starts the week will have important implications for its direction. While the AUD remains above 0.6500-0.6550 I suspect dips should continue to be supported. On the day, I will be watching how risk opens the week and whether the 0.6600-0.6630 will continue to find demand. If this area does not hold it could signal a deeper pullback toward the 0.6550 area. 

• MNI AU - China Property Investment and Sales Fall Further, No End in Sight:  Following on from the release of further price decrease in new and used homes, November property Investment and Property Sales fell to lows of the year. The combined result is the worst in 5-Years. The weakness in the consumer is the challenge right now as the property sector declines continue. Finding a way of halting the slide in prices and hence investment must be key to start the process of rebuilding consumer sentiment.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6555(AUD548m), 0.6650(AUD970m), 0.6750(AUD494m) . Upcoming Close Strikes : 0.6550(AUD1.07b Dec 18 ), 0.6675(AUD8989m Dec 18 ) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 40 Points

Fig 1: AUD/USD spot Daily Chart

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

• Equities have opened weak Monday, with bond futures following that lead after a very modest OMO this morning.  
• The 10-Yr bond future is down -0.11 Monday at 107.88, taking back below the 20-day EMA of 108.01.
• The 2-Yr bond future is at 102.44, down -0.02 today.  It is wedged between the 200-day EMA of 102.49 as it's upside resistance and it's downside resistance being the 100-day EMA of 102.42.
• The cash market is quiet the CGB 10-Yr marginally higher in yield at 1.85%
• An article on BBG suggests that recent falls in the 30-Year bonds are seeing higher yields due to a structural change in appetite.  "“There’s a lack of demand for long-dated bonds,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd. “Banks which usually allocate into long-term bonds are faced with pressures on the liability side of their balance sheets and their assets are shrinking too”  “For more short-term traders, they face the uncertainty of he mutual fund rules, so they have limited interest in extending duration”  This could have implications for longer dated bond issuance by governments going forward and will require policy reform.