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FOREX: EURJPY Sinks Below 158.00, USDCNH Approaches 7.30

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  • USD/CNH rose to a fresh four month high of 7.2956 on Monday, narrowing in on 7.30 and the 2024 highs at 7.3114. Broader USD gains are being supported by a higher US yield backdrop, while China yields continue to track lower, with the 10yr residing below 2.00% at fresh multi decade lows. In the process, the pair has risen above downtrend resistance drawn from the 2023 highs, which may have exacerbated the price action to start the week.
  • 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.
  • EURJPY is down 0.85% on the session as we approach the APAC crossover, which extends the post US election pullback to as much as 5.40%. 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.
  • For USDJPY, the pair broke lower in late trade on Monday, extending below the 149.50 lows to closely match support at 149.09, the Oct 21 low, before recovering around 70 pips.
  • Elsewhere, most other G10 majors have strengthened in line with the broader USD index adjustment, with EURUSD looking set to close back below 1.0500.  The medium-term trend direction is down. A stronger reversal lower would refocus attention on the bear trigger at 1.0335, the Nov 22 low.
  • Swiss inflation data and US JOLTS job openings highlight the data calendar on Tuesday.
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  • USD/CNH rose to a fresh four month high of 7.2956 on Monday, narrowing in on 7.30 and the 2024 highs at 7.3114. Broader USD gains are being supported by a higher US yield backdrop, while China yields continue to track lower, with the 10yr residing below 2.00% at fresh multi decade lows. In the process, the pair has risen above downtrend resistance drawn from the 2023 highs, which may have exacerbated the price action to start the week.
  • 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.
  • EURJPY is down 0.85% on the session as we approach the APAC crossover, which extends the post US election pullback to as much as 5.40%. 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.
  • For USDJPY, the pair broke lower in late trade on Monday, extending below the 149.50 lows to closely match support at 149.09, the Oct 21 low, before recovering around 70 pips.
  • Elsewhere, most other G10 majors have strengthened in line with the broader USD index adjustment, with EURUSD looking set to close back below 1.0500.  The medium-term trend direction is down. A stronger reversal lower would refocus attention on the bear trigger at 1.0335, the Nov 22 low.
  • Swiss inflation data and US JOLTS job openings highlight the data calendar on Tuesday.