JPY: Yen Sees Little Risk-Off Follow Through From US Auto Tariffs
USD/JPY is down slightly in the first part of Thursday trade, last near 150.50.Session lows rest at 150.29. The risk off tone in US equity futures is aiding modest yen outperformance so far today, post Trump's announcement on US auto import tariffs of 25%.
- More broadly from a technical standpoint, the primary trend direction is down for the pair and recent gains are considered corrective. Resistance to watch is 150.96, the 50-day EMA. A clear break of this EMA would signal scope for a stronger rally. For bears, a resumption of weakness would refocus sights on key support and the bear trigger at 146.54, the Mar 11 low.
- Auto tariffs are a negative for JPY from an export standpoint, but yen is receiving some support from lower US equity futures in the first part of trade today.
- US-JP yield differentials are little changed and remain steady around recent levels, the 10yr spread at +277bps.
- On the data front, we had weekly offshore investment flows data a short while ago. Offshore investors sold both local bonds and stocks.
- In the option expiry space, note the following for NY cut later: Y150.00($684mln), Y155.00($902mln).
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JAPAN DATA: Services PPI Above 3% Y/Y, But M/M Falls
The Japan services PPI edged up to 3.1%y/y in Jan. This was in line with market forecasts and compares to the revised 3.0% gain from Dec (which was originally reported as a 2.9% rise). The m/m shift was -0.5%, after a flat outcome in Dec.
- The chart below plots this services PPI, which is the white line on the chart and reading to rhs, against headline CPI (reading to the lhs, the orange line).
- The services PPI is very close to recent cycle highs and consistent with elevated headline inflation pressures, even if m/m services PPI readings have lost some momentum in recent months.
Fig 1: Japan Services PPI Versus Headline CPI Y/Y
Source: MNI - Market News/Bloomberg
MNI: JAPAN JAN SERVICES PPI +3.1% Y/Y; DEC REV +3.0%
- MNI: JAPAN JAN SERVICES PPI +3.1% Y/Y; DEC REV +3.0%
- JAPAN JAN SERVICES PPI -0.5% M/M: DEC UNREV +0.0%
JGB TECHS: (H5) Sharp Bounce Off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 139.65 @ 15:43 GMT Feb 24
- SUP 1: 138.71 - Low Feb 19
- SUP 2: 138.56 - 2.0% Lower Bollinger Band
- SUP 3: 138.03 - 1.0% 10-dma envelope
JGBs underwent a sharp bounce Friday, firming well off the recent lows as global equity markets underperformed. This price action is deemed corrective below 139.99 - with MA studies on the continuation chart still in a bear-mode setup, highlighting a clear downtrend. The 140.00 psychological handle has been cleanly broken and markets have shown through 139.38, a Fibonacci projection.
