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FOREX: JPY and CHF Remain Weaker Despite Core FI Reversal

FOREX
  • Early upward pressure on core yields prompted a solid bounce for the likes of USDJPY and USDCHF, assisted by the more positive price action for major equity benchmarks. Despite the strong reversal lower for yields, both pairs remain roughly 0.5% higher on the session.
  • The Japanese yen remains consistently the most sensitive to moves in fixed income markets, and USDJPY’s near 200 pip range on Monday is evidence of this.
  • While an overall bearish technical theme remains intact for USDJPY, reinforced by last week’s move lower, today’s bounce from key support is notable and places the focus on the first resistance point of 144.23, the Sep 5 high. Above here, firm resistance is seen around the 20-day EMA, at 145.78 today, and a clear break of this average would signal scope for a stronger correction.
  • The USD index is 0.33% higher as markets, extending the index’s post-NFP recovery as markets potentially adjust positioning ahead of the important US CPI print on Wednesday, which could be pivotal for the Sep 18 FOMC meeting.
  • In similar vein, EURUSD has been grinding moderately lower on the session to 1.1050 with Thursday’s ECB meeting in close proximity.
  • For emerging markets, the recently struggling Mexican peso benefitted from the stabilisation in risk and a weaker yen. MXNJPY advanced over 1% from session lows, allowing USDMXN to reassert itself back below the 20.00 handle. The Chinese Yuan also remains softer following the lower-than-expected inflation data overnight.
  • Tuesday’s focus will be on labour market data in the UK.
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