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JPY Volatility Raises Intervention Questions

FOREX
  • The greenback trended higher across US hours, aided by further gains to cycle highs for the belly and longer-end of the US curve. Bear steepening of US yields supported the USD Index through to resume it's medium-term uptrend off the July lows, putting USD/JPY briefly above Y150.00.
  • A sharp and abrupt fall in the pair off the highs has raised considerable suspicion of official intervention in the currency rate (a Japanese finance ministry official declined to comment on the matter), but markets may have to wait until the month-end BoJ intervention data release for any confirmation.
  • The strong recovery off the USD/JPY lows may suggest a lack of follow through from any intervention, with spot recouping close to 175 pips off the 147.43 low. This keeps the pressure turned higher for now, and markets will be looking to test if any further breaks of Y150 will be followed by an abrupt decline.
  • AUD and NZD traded poorly across the session, with the continuity in RBA policy and the openness to further hikes doing little to prop the currency. Weakness across equity markets sapped higher beta currency performance, keeping AUD/USD's downtrend intact and opening new pullback lows. 0.6170 marks next key support.
  • Focus Wednesday turns to the final composite and services PMI data from across Europe, as well as the ADP and ISM Services releases. JOLTs data cemented the strong labour market backdrop evident in Monday's ISM Manufacturing Index, potentially posing upside risks to Friday's NFP.
  • Consensus looks for Change in Nonfarm Payrolls of +170k, but the whisper number has already begun to populate higher.
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