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FOREX: JPY Rallies Against All Others as Carry Trade Falters

FOREX
  • JPY is considerably stronger against all others, as a multitude of triggers push USD/JPY to fresh pullback lows. Currency Official Kanda reiterated opposition to one-sided currency moves, while weakness in chipmakers and semiconductors names drove global equity weakness, further bolstering the JPY's safe haven status. Nearby support in USD/JPY has been cleared, with the pace of the decline picking up on the break of Y156.83 - the 38.2% retracement of the Dec'23 - Jul'24 bull leg.
  • GBP also trades well, with GBP/USD topping the 1.30 level and touching a year-to-date high on the back of a 0.1ppts beat for UK CPI. While the release has not entirely wiped out the odds of a rate cut from the BoE in August, the chances have slimmed considerably to ~7bps as of this morning. 
  • A weaker USD backdrop pervades, with the greenback softer against all others. Desks have noted Trump's appearance in Bloomberg Businessweek posted late yesterday, within which he flagged his concern with the strong dollar exchange rate, citing weakness in both JPY and CNY as causing issues with international trade. This favours EURUSD, which has touched its highest level since March 14. A clear break of key resistance at 1.0916, Jun 4 high, had been the next key hurdle for bulls and price action confirms the bullish trend structure for the pair.
  • Focus for the duration of Wednesday trade turns to US housing starts and building permits data, to be followed by industrial and manufacturing production for June. The Fed schedule is slightly busier, with appearances from Fed's Barkin & Waller due ahead of the Beige Book release. 
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