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JPY & CHF Main Beneficiaries of Risk Off Sentiment

FOREX
  • JPY remains considerably stronger against all others, as a multitude of triggers push USDJPY (-1.30%) to fresh pullback lows. Considerable weakness for global equity indices, the string of recent weak data in the US and the threat of BOJ intervention continue to be primary drivers behind the USDJPY selloff.
  • Nearby support in USDJPY 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. USDJPY’s low so far on the move has been 156.10. Further out, 155.72 (Jun 12 low) will be in focus.
  • A weaker dollar backdrop pervades, with the USD index 0.4% lower on the session. 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.
  • With analysts also noting that carry trade strategies may be losing their attractiveness due to the narrowing of rate differentials, other funding currencies such as the CHF also exhibited significant strength. USDCHF sits 1% lower on the session, and price action may have been exacerbated by a break of trendline support, drawn from the December lows. Concurrently, USDCHF has also broken below the 200-day MA, which intersects at 0.8880. Spot now trades at a 4-week low around 0.8850. Below here, the June lows and strong pivot support is seen between 0.8820/27. 50-day EMA resistance moves down to 0.8980.
  • Notably, GBPUSD broke above the 1.30 level and touched a year-to-date high on the back of a moderate beat for UK CPI. Additionally, EURUSD rose to 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 Thursday turns to Australian employment data, UK labour market figures and the July ECB meeting and press conference.
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