AUSSIE 10-YEAR TECHS: (Z5) Returns Lower

In post-Tokyo trade, JGB futures closed higher, +9 compared to settlement levels, after US tsys finished with a modest bull-flattener as the US Gov entered shutdown day 19, no data & the Federal Reserve is in policy blackout through October 30.

• Looking ahead, UK fiscal data will be published ahead of Canada CPI on Tuesday, while markets will remain focused on Friday’s US inflation data. An early look at analyst unrounded core CPI estimates for Friday’s delayed September release sees a median estimate of 0.30% M/M, with a reasonably wide range of 0.25-0.36% M/M.
• MNI Tech: Key short-term resistance for JB1 has been defined at 137.30, the Sep 8 high. The latest sell-off, however, resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection.
• Focus will be on Takaichi's policy agenda, particularly cost-of-living relief and what that means for the fiscal outlook. Takaichi's and her advisors' viewpoints on BoJ hikes will be watched, although market pricing doesn't have a full 25bps hike priced in until March next year.
• Today, the local calendar will see Tokyo Condominiums for Sale and Machine Tool Orders data alongside 10-year CT supply.

Bloomberg Finance LP

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 136.04 @ 17:08 BST Oct 20
• SUP 1: 135.61 - Low Oct 08 
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

Prices surged last week, in sympathy with global bond markets, helping the price rally toward last week’s high. This rally proved short-lived, however, as domestic fiscal concerns continue to weigh on prices. This affirms the firm downtrend that’s dominated prices since mid-September, and prices will need to challenge resistance before signaling any broader reversal. Key short-term resistance has been defined at 137.30, the Sep 8 high. The latest sell-off, however, resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. 

USD/JPY had nearly a 100pip range for Monday's session, with sentiment impacted by the LDP/Ishin coalition (which will see Takaichi become the new PM), while hawkish rhetoric from the BoJ's Takata pulled the pair back under 151.00. We finished up Monday's session little change and track near 150.75 in early Tuesday dealings. The 20-day EMA at  150.10/15 remains intact, with renewed downside likely to bring the 50-day EMA at 148.86 into focus. Still, moving average studies remain in a bull-mode position highlighting a dominant uptrend. The bull trigger has been defined at 153.27, the Oct 10 high.  

• Yen didn't receive much support from lower US Tsy yields on Monday, although offset came from better global equities. The yen lagged the likes of NZD and AUD, although AUD/JPY and NZD/JPY remain off Monday highs. AUD/JPY is holding above 98.00, but is eyeing a test above 98.50, which we haven't been able to breach in recent sessions. For NZD/JPY resistance at the 20-day EMA (near 86.90/95) is still evident.
• USD/JPY upside should be capped given with US-JP rate differentials rest, while intervention risks may also return on any probe back into the 152/153 region for the pair.
• Focus will be on Takaichi's policy agenda, particularly cost of living relief and what that means for the fiscal outlook. Takaichi's and her advisors viewpoints on BoJ hikes will be watched, although market pricing doesn't have a full 25bps hike priced in until March next year.
• Locally we have final Sep machine tool orders out this afternoon. Note in the option expiry space for NY cut later: Y149.90-00($1.4bln).