FOREX
- Despite US yields rising between 7-8bps across the curve, the latest price action for USDJPY has been immune to these developments, with the pair slipping back below the 150.00 handle and largely consolidating the significant declines from late last week.
- As such, EURJPY is down 0.95% on the session, which extends the post US election pullback to as much as 5.50%. We have broken below trendline support drawn from the 2022 lows, which could signal scope more a more protracted move lower. The Sep 16 low at 155.15 represents a key support and below here, a cluster of daily lows between 154.46 and 153.27 will be targets.
- Expectations for central bank policy rate convergence is particularly weighing on cross/JPY today, with the well-known French political risks adding to the lingering concerns in Germany, both fuelling outside expectations that the ECB could cut rates by more than 25bp on December 12.
- As a reminder, the firmer-than-expected Tokyo CPI bolstered the view that the BOJ could hike rates as soon as December 19. Furthermore, late headlines from BOJ’s Ueda on further Yen weakness being a big risk prompted a couple of USDJPY tests below 149.50, an area that marks immediate support for the pair, before 149.09, the Oct 21 low.
- Risk off sentiment in the currency markets is also filtering through to the likes of AUDJPY and NZDJPY, however, given the obvious risks surrounding European politics, EURJPY is likely to remain the key focus in the sessions ahead.
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