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JPY Underperforms Amid Pressure In Core Fixed Income

  • With core fixed income under pressure and equities trading on the front foot, pressure on the Japanese Yen has resumed on Monday and is the notable underperformer for today’s trading session.
  • USDJPY (+0.65%) has had a solid bounce from the overnight 130.41 lows, however, the slightly more optimistic backdrop has more notably supported the crosses with CADJPY leading the way, rising 1.3% to start the week.
  • Elsewhere, EURJPY trades buoyantly and technically eyes the key short-term resistance at 143.63 where a break is required to reinstate the bullish theme. Note that moving average studies remain in a bull mode set-up - this suggests the latest pullback has been a correction. A break of 143.63 would initially open 143.98, 76.4% of the Mar 2 - 20 bear cycle.
  • USD/CNH also inched higher with the pair briefly clearing 6.8942 - the Mar 22 (and FOMC day) high. Further gains here would open more meaningful resistance at the 100- and 200-dmas of 6.9258 and 6.9326 respectively.
    • The moves follow the overnight industrial profits data, which showed January-February profits slipping 23% Y/Y - that's the third fastest pace of decline on record, after only the GFC in '08 and onset of the COVID pandemic in 2020.
    • Additionally, the previously announced RRR cut came into effect Monday, pressuring interbank rates (overnight repo rate dropped to lowest since early January). This effect was compounded by PBOC OMOs, further supporting liquidity in Asia-Pac trade.
  • Outgoing Bank of Japan Governor Kuroda is due to speak on Tuesday at the FIN/SUM 2023, in Tokyo. There may be further comments from BOE’s Bailey as well as ECB’s Lagarde, due to speak at the opening ceremony of Bank of International Settlements Innovation Hub Eurosystem Centre, in Frankfurt. US consumer confidence highlights a quiet data docket.

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