USD: Viewpoint On USD Being A Safe Haven

The US Equity move higher stalled overnight and a poor ISM services report saw it trade heavy for the whole N/Y session. The market is trying to ignore the worries about growth that would make the cuts possible but the ISM services data shows these headwinds are increasing. This morning has seen US futures open a little lower, ESU5 -0.05%, NQU5 -0.25%. The Yen was sold overnight and managed to bounce off various support levels, there are still lots of headwinds for risk though and for this reason I feel you could still expect sellers on a bounce.

• EUR/JPY - Overnight range 169.82 - 170.95, Asia is trading around 170.80. This pair bounced off its support just below 170.00. Watch for any signs of topping out should risk actually start correcting lower, a move sub 169.50/170.00 could signal a deeper pullback is on the cards.
• GBP/JPY - Overnight 195.27 - 196.46, Asia trades around 196.35. The pair sliced through its support around 197.00 and has moved very quickly towards the 195.00 support. The move higher looks to have stalled for now and a sustained break below 195.00 would turn momentum lower again. A bounce back towards 197.00/197.50 should now see sellers remerge first up.
• NZD/JPY - Overnight range 86.67 - 87.11, Asia is currently dealing 87.20. The pair failed with multiple attempts to break above 89.00. A top looks to potentially be in place now and a break sub 96.50 could signal a deeper correction, expect sellers on any back towards 88.00 initially.
• CNH/JPY - Overnight range 20.4641 - 20.5608, Asia is currently trading around 20.5200. This pair broke through its 20.7000/20.8000 resistance area last week but the price action was pretty ugly as the move higher was rejected in what looks like a key day reversal. Initial support is around the 20.40 area but a sustained break back below 2.3000 would begin to turn momentum lower again.

Fig 1 : GBP/JPY Daily Chart

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

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• The PBOC issued CNY138.5bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY309bn.
• Net liquidity withdrawal CNY170.5bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.42%, from prior close of 1.44%.
• The China overnight interbank repo rate is at 1.30%, from the prior close of 1.35%.
• The China 7-day interbank repo rate is at 1.43%, from the prior close of 1.44%.