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AUDJPY Slides 1% Amid Equities Turnaround, MOF Warning

FOREX
  • Despite printing a new cycle high of 140.93 in early European trade, USDJPY has backtracked on Tuesday following an unscheduled tri-party meeting held between the Japanese FSA, the Ministry of Finance and the Bank of Japan.
  • Following the meeting, Japan's currency diplomat Kanda warned that the Ministry would take appropriate steps on currency markets if required, and outlined their intention to consider various options.
  • This news, combined with the waning optimism for equity markets after the US open has placed downward pressure on the pair which fell as low as 139.57 in mid-session trade. The turnaround is interesting given that price earlier arrived at the top of the bull channel drawn from the Jan 16 low which intersects at 140.81, representing a key resistance.
  • The softer tone for risk weighed on the likes of the Australian dollar, prompting AUDJPY to fall the best part of 1%.
  • Particular weakness was observed in crude futures, with near 4.5% declines across WTI and Brent pressuring the Norwegian Krone to the lowest level against the Euro since March 2020 (EURNOK high of 12.1064). Worth noting this price action comes ahead of tomorrow's Daily FX Purchases release for June - after the May figure disappointed markets by confirming NOK 1.4bln in daily purchases over the course of the month - this ran counter to expectations NOK selling could shift to NOK buying in the coming months.
  • More broadly, the USD index trades close to unchanged as we approach the APAC crossover, with the greenback unable to gather any directional momentum following Monday’s holiday thinned trade.
  • RBA Governor Lowe is due to speak overnight before the release of Australian April CPI data. Focus then shifts to Europe and preliminary reads of German regional CPI figures ahead of the June 15 ECB meeting. Canadian GDP and US Jolts data will also cross amid potential month-end dynamics.
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