MNI China Daily Summary: Wednesday, December 11

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FOREX: Volatile Swings Post US CPI, Daily Adjustments Contained

FOREX
  • The USD index tilts very marginally stronger on Wednesday, reflective of the higher front-end US yields, however, the small 0.1% move does not tell the entire story of an extremely volatile session for currencies, and namely the Japanese Yen.
  • A lot of the action came before the US data with the US election debate and BOJ comments helping USDJPY print fresh lows on the year at 140.70, with narrowing yield differentials underpinning the move.
  • Since then, a strong recovery ahead of and following the higher-than-expected US data saw USDJPY reach as high as 142.54 and subsequent volatile swings for both US yields and equities have prompted multiple 100 pip swings for the pair.
  • The late recovery for major equity benchmarks to close to unchanged levels on the session (Nasdaq has risen 1%) has assisted USDJPY back above 142.00 as we approach the APAC crossover. 140.25, the Dec 28 low from last year remains key support and resistance is not seen until 143.71, the Sep 9 high.
  • Ahead of tomorrow’s ECB, there has been similar price action for EURJPY which has yet to breach the lows seen in early August. As noted earlier, yield differentials with Japan continue to narrow and this is helping to underpin the bearish theme for the cross. Key support and the bear trigger at 154.42, the Aug 5 low.
  • Elsewhere, CHF (-0.4%) has underperformed G10 peers, although weakness for the likes of GBP, AUD, CAD and NZD has also been evident, all falling around 0.3% against the dollar.
  • As well as the ECB decision/presser, US PPI and jobless claims data will highlight Thursday’s docket.
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