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FOREX: USD/JPY Tests Sub 150.00 On Firmer Tokyo CPI, A$ & NZD Aided By Equities

FOREX
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Yen gains have dominated the first part of Friday G10 FX trade, post the stronger Tokyo CPI print. The yen is up around 1% and USD/JPY is probing sub 150.00 levels. The rest of the G10 is up against the USD, albeit to varying degrees. NZD and AUD are seeing some outperformance (except against yen). The BBDXY USD index was last near 1276.3, off around 0.25% and fresh lows back to Nov 12. 

  • USD/JPY last tracked near 150.00, slightly up from session lows (149.76). Note the Oct 21 low sits back at 149.09 as a potential downside target.
  • Futures volumes have spiked when we have tested sub 150.00. Also not surprisingly FX options activity has been dominated by USD/JPY. Strike levels have been set below spot and have been a mixture of USD calls and puts.
  • The Tokyo CPI comfortably beat market expectations and while this partly reflected higher utility costs, underlying momentum still looks positive across services and other sub-categories. This should give the BoJ increased confidence around sustainably achieving its 2% inflation target. Other data in terms of retail sales and IP were slightly below market expectations.
  • JGB yields are only modestly higher, but with US cash Tsy resuming and seeing modest yield losses, this has kept US-JP momentum to the downside. USD/JPY is catching up with such trends though, see the chart below.
  • NZD/USD is test resistance at its 20-day EMA, the pair last near 0.5910/15, around 0.40%. Earlier we had a strong bounce in ANZ consumer confidence for NZ.
  • AUD/USD is also firmer, but lagging NZD slightly, the pair last near 0.6515/20. Aiding sentiment for both currencies is the rebound in China/HK equities. Month end flows may be helping, while the MoF extending some tariff exemptions for the US, was another positive.
  • Looking ahead, we have German retail sales, along with French consumer spending and CPI. In Canada GDP prints. US markets will be on lighter hours due to Thanksgiving. 

Fig 1: USD/JPY Catching Up With Weaker US-JP Yield Spreads

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Yen gains have dominated the first part of Friday G10 FX trade, post the stronger Tokyo CPI print. The yen is up around 1% and USD/JPY is probing sub 150.00 levels. The rest of the G10 is up against the USD, albeit to varying degrees. NZD and AUD are seeing some outperformance (except against yen). The BBDXY USD index was last near 1276.3, off around 0.25% and fresh lows back to Nov 12. 

  • USD/JPY last tracked near 150.00, slightly up from session lows (149.76). Note the Oct 21 low sits back at 149.09 as a potential downside target.
  • Futures volumes have spiked when we have tested sub 150.00. Also not surprisingly FX options activity has been dominated by USD/JPY. Strike levels have been set below spot and have been a mixture of USD calls and puts.
  • The Tokyo CPI comfortably beat market expectations and while this partly reflected higher utility costs, underlying momentum still looks positive across services and other sub-categories. This should give the BoJ increased confidence around sustainably achieving its 2% inflation target. Other data in terms of retail sales and IP were slightly below market expectations.
  • JGB yields are only modestly higher, but with US cash Tsy resuming and seeing modest yield losses, this has kept US-JP momentum to the downside. USD/JPY is catching up with such trends though, see the chart below.
  • NZD/USD is test resistance at its 20-day EMA, the pair last near 0.5910/15, around 0.40%. Earlier we had a strong bounce in ANZ consumer confidence for NZ.
  • AUD/USD is also firmer, but lagging NZD slightly, the pair last near 0.6515/20. Aiding sentiment for both currencies is the rebound in China/HK equities. Month end flows may be helping, while the MoF extending some tariff exemptions for the US, was another positive.
  • Looking ahead, we have German retail sales, along with French consumer spending and CPI. In Canada GDP prints. US markets will be on lighter hours due to Thanksgiving. 

Fig 1: USD/JPY Catching Up With Weaker US-JP Yield Spreads

Keep reading...Show less