JPY: Yen Underperforms USD Pullback, Despite Firmer BoJ Hike Odds
Jan-14 22:05
USD/JPY tracked modestly higher post the Asia Pac close on Tuesday, getting to highs of 158.20. We sit a little softer now, last near 158.00, but yen still lost 0.30% for Tuesday's session, the worst performer in the G10 space. The rebound in EUR/USD was in focus, while EUR/JPY got back to 162.80/85, up 0.90%, and comfortably off recent lows near 160.00.
- For USD/JPY technicals, trend conditions are unchanged. Bulls still remain in the drivers seat, with upside focus on 158.87, the Jan 10 high. Initial firm support is 156.78, the 20-day EMA.
- The generally positive tone to global equities for Tuesday, albeit with modest aggregate moves, likely weighed on yen against key crosses. Even the troubled pound managed a small rise against the USD for Tuesday's session.
- US yields were mixed, softer at the front end, following the weaker than forecast US PPI. Back end yields held modest gains though, the 10yr near 4.79%. US-JP yield differentials have tracked sideways at the front end 2yr tenor and sit just off recent highs for the 10yr.
- On the data front today, we have Dec money stock figures first up, then Dec preliminary machine tool orders. These prints are unlikely to shift market sentiment.
- BoJ rate hike odds for next week's policy meeting are higher, last near 60%, up from recent lows around 40%. Yesterday Deputy Governor Himino noted a rate hike would be discussed at the meeting. “It is important for the BOJ to judge the timing of rate hike in an appropriate manner. But it is difficult for the bank to judge when the appropriate timing would be,” Himino said.
- Still, these shifts haven't generated much yen support at this stage.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
NZD: NZD/USD Continues To Make New Lows
Dec-15 21:55
- NZD/USD fell for the fourth straight session on Friday, trading down 0.10% to 0.5764, the pair has now fallen for 8 of the past 10 sessions, and is now the worst performing G10 currency this year following large cuts from the RBNZ, with the market currently pricing in 73% chance of another 50bps cut in Feb, while the BBDXY has risen for the past 6 sessions.
- The pair was unable to sustain earlier gains near 0.5850, as selling pressure and resistance at the 20-day SMA around 0.5890 capped upside attempts. Technical indicators, including an RSI near oversold at 34 and a bearish MACD, signal intensifying downward momentum. Immediate support lies at 0.5750, with 0.5700 as the next target, while a break above the 20-day EMA at 0.5845 is needed to shift the bearish outlook.
- NZ's PSI remains in contraction in November at 49.5, improving from October's 46.2. Key sub-indices also rose, with Activity/Sales at 48.6 (+4.2 points), New Orders at 49.8 (+1.7 points), and Supplier Deliveries at 52.2 (+4.5 points), indicating slight easing in supply pressures. However, Employment remained weak at 46.8 (+0.4 points), highlighting ongoing challenges in labor demand. Despite monthly improvements, y/y comparisons reflect overall weaker service sector activity.
- The OIS market has 43bps of cuts priced in for the Feb meeting which has held steady over the past week, and 69bps of cuts priced by April, while there is a cumulative 111bps of cuts priced in through to October 2025.
- The NZ-US 2yr swap fell again on Friday reaching -57bps, and is now testing the multi-year lows of -60bps that were made a few weeks ago, further pressuring the NZD.
- There are some large option expiries over the next few sessions: 0.5620 ($759.28m), 0.5855 ($705.63m), 0.5970 ($745.4m) for Dec 16th cut, with 0.5960 ($746m) for Dec 18th cut
- The calendar is empty for the remainder of the session, focus will turn to GDP on Thursday
JPY: Yen Underperforms Amid Higher Core Yields, Machine Orders/PMIs Out Today
Dec-15 21:49
USD/JPY mostly tracked higher post the Asia close on Friday. We track near 153.65/70 in early Monday dealings, after yen lost 0.66% for Friday's session, the worst G10 performer. We are now back to highs from late Nov. 154.86 is the 76.4% retracement of the Nov 15 - Dec 3 pullback in terms of the next potential upside target. The Dec 10 low is at 150.90 on the downside.
- Higher core yields weighed on Yen as the Friday session progressed. The 10yr Tsy yield up to 4.40%, around 25bps firmer in yield terms last week, while the yield curve steepened. This comes ahead of this week's FOMC meeting, where the Fed is expected to cut by 25bps, albeit not completely priced in.
- The outperformance for the single currency also prompted a sharp 1% rally for EURJPY, with the cross briefly reaching initial resistance at the 50-day EMA, intersecting at 161.58. We were last near 161.15/20 in early Monday dealings.
- Late on Friday headlines also crossed from Kyodo that the BoJ is considering skipping a rate hike at this week's policy meeting (outcome due on Thursday). This is generally consistent with some other media outlets, while market pricing is only priced with a 15% chance for a hike this week.
- Today, we have core machine orders out for Oct, along with preliminary PMIs for Dec. Later on the tertiary industry index prints.
AUD: AUDUSD Lower Last Week As Bearish Conditions Persist
Dec-15 21:28
Aussie underperformed most of the G10 on Friday after outperforming Thursday to be down 0.5% on the week. It fell 0.1% to 0.6362 after a high of 0.6384 as higher US yields boosted the greenback (BBDXY USD +0.1%) and softer risk appetite weighed on the A$. The pair is currently trading lower at 0.6356.
- A$’s underperformance has reinforced the bearish theme in AUDUSD with lower lows and lower highs. Initial support is at 0.6337, December 11 low, with resistance at 0.6460, 20-day EMA.
- AUDJPY rose 0.6% to 97.79 as the yen was the worst performer in the G10. It is currently around 97.67. AUDNZD was flat at 1.1037 after a high of 1.1059 and is now at 1.1040. AUDEUR trended lower to be down 0.4% to 0.6057 (currently around 0.6060), while AUDGBP rose 0.3% to 0.5042 but has started today around 0.5037.
- Equities were lacklustre with the S&P flat, Eurostoxx +0.05% and FTSE down 0.1%. Oil prices were higher with Brent up 1.3% to $74.35/bbl. Copper fell 1.2% and iron ore is around $104/t.
- Today preliminary S&P Global December PMIs print.
