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(U2) More Stable But Still Fragile

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Trend Structure Remains Bullish

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Key Support Still Exposed

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JPY Continues Downward Trajectory, CNH Weakens To Six-Month Low

FOREX
  • USDJPY continues to defy gravity and maintains this week’s extension of its current uptrend, trading to a fresh cycle high, just below the 129.00 mark. The break higher has reinforced underlying bullish technical conditions and signals potential for a continuation of the bull cycle towards 129.44, a Fibonacci projection, and the psychological 130.00 handle.
  • However, the trend condition is overbought and it should be noted that warnings from Japanese officials over the sharp depreciation have intensified.
  • Fed rhetoric has kept upward pressure on US Treasury yields and dollar indices look set to extend their winning streak to four, gradually improving on last Thursday’s impressive advance.
  • The Chinese yuan slipped to its weakest level in six months, pressured by additional concern surrounding China’s growth outlook. China’s central bank unveiled nearly two dozen measures and promises intended to boost lending and support industries that have been beaten down by recent Covid lockdowns, including a pledge to guide banks to expand loan extensions.
  • Furthermore, amid this surge in U.S. yields, there was considerable pressure on emerging market currencies, with notable downswings in both ZAR (-2.15%) and MXN (-1.12%).
  • Elsewhere in the G10 space, the Swiss Franc also came under pressure on Tuesday, with USDCHF breaking a significant horizontal resistance area, dating back to July 2020, around 0.9470. A clean break has seen the pair rise to highs of 0.9520 and consolidate these gains above the 0.95 handle. AUD was the clear outperformer with the late boost in equity indices underpinning the relative strength.
  • A relatively quiet overnight data docket on Wednesday should place the focus on Canadian CPI, with US existing home sales and the Fed’s Beige Book headlining the US calendar.

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  • USDJPY continues to defy gravity and maintains this week’s extension of its current uptrend, trading to a fresh cycle high, just below the 129.00 mark. The break higher has reinforced underlying bullish technical conditions and signals potential for a continuation of the bull cycle towards 129.44, a Fibonacci projection, and the psychological 130.00 handle.
  • However, the trend condition is overbought and it should be noted that warnings from Japanese officials over the sharp depreciation have intensified.
  • Fed rhetoric has kept upward pressure on US Treasury yields and dollar indices look set to extend their winning streak to four, gradually improving on last Thursday’s impressive advance.
  • The Chinese yuan slipped to its weakest level in six months, pressured by additional concern surrounding China’s growth outlook. China’s central bank unveiled nearly two dozen measures and promises intended to boost lending and support industries that have been beaten down by recent Covid lockdowns, including a pledge to guide banks to expand loan extensions.
  • Furthermore, amid this surge in U.S. yields, there was considerable pressure on emerging market currencies, with notable downswings in both ZAR (-2.15%) and MXN (-1.12%).
  • Elsewhere in the G10 space, the Swiss Franc also came under pressure on Tuesday, with USDCHF breaking a significant horizontal resistance area, dating back to July 2020, around 0.9470. A clean break has seen the pair rise to highs of 0.9520 and consolidate these gains above the 0.95 handle. AUD was the clear outperformer with the late boost in equity indices underpinning the relative strength.
  • A relatively quiet overnight data docket on Wednesday should place the focus on Canadian CPI, with US existing home sales and the Fed’s Beige Book headlining the US calendar.