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Early Yen Weakness Consolidates, NZD Underperforms

FOREX
  • Despite a US session that was void of any meaningful moves across the currency space, early weakness for the likes of the Japanese Yen and New Zealand dollar have been consolidated as we approach Tuesday’s APAC crossover.
  • USD/JPY's spot strength (+0.62%) on Monday puts the pair within range of the more sizeable option expiries rolling later this week, with over $4bln notional set to roll-off between Y145.70-00 across the Tues-Friday NY cuts. Close proximity of the more notable strikes likely aiding the pullback in 1w vols today, which is nearing the lowest levels of the year so far. However, subdued front-end vols unlikely to persist, with the BoJ decision next week (Jan23) likely to become a focal point for markets.
  • Spot moves today further undermining a recent bearish theme for USDJPY and instead highlights potential scope for a continuation of the bull cycle, opening 147.32, the Dec 7 high.
  • NZD (-0.61%) screens as the worst performer in G10, alongside JPY, and maintains the downward bias seen in 2024. NZDUSD fell just short of immediate support seen at 0.6181.
  • The tilt towards greenback strength was potentially aided by the ongoing tensions surrounding the red sea. There has been a very tight range for the likes of EURUSD with earlier lows intact at 1.0934, with the Jan11 low just below at 1.0930. USD/CAD has maintained an upward bias also, adding to recent strength and briefly putting the pair above last week's peak at 1.3443 - the YTD high.
  • UK employment data and German ZEW sentiment figures cross tomorrow morning. That will be followed by Canadian CPI for December, alongside US Empire State Manufacturing data. Bank of England Governor Bailey is due to testify on the UK economy before the Lords Economic Affairs Committee.
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