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Poorer Risk Sentiment Prompts Safe Haven Demand, AUDJPY Slides 1.7%

FOREX
  • Worsening risk sentiment across global markets on Tuesday prompted a flight to quality. Historical safe havens are leading the charge with the USD index rallying half a percent and the Japanese Yen also benefitting.
  • The session saw significant pressure on First Republic Bank with shares down as much as 45% at one point which filtered through to major indices. Furthermore, a strong rally for front end treasury futures, increasing bets for FED rate cuts this year, provided an additional JPY tailwind which resulted in AUDJPY registering declines of 1.7% as we approach the APAC crossover.
  • With risk-tied AUD faring only behind NOK as the worst performers in G10, it is worth noting that AUDJPY has unwound the majority of the April bounce, significantly narrowing the gap with the month’s lows around 87.60. The move comes ahead of key CPI data due overnight for both March and the first quarter.
  • Additionally, for EURJPY, after breaching the 2022 highs on Monday and reaching the highest level since late 2014 overnight at 148.62, the pair registered a 230 pip reversal with EURUSD sinking back below 1.10 heaping on the pressure. Overall, technical conditions remain bullish for the pair and today’s price action may be allowing an overbought condition to unwind. Initial firm support lies at 145.84, the 20-day EMA.
  • USD/CNH briefly matched the 200-dma to the upside at 6.9507 – a significant resistance point for the pair. A break above here would be the first since February and open scope for further gains toward mid-March highs of 6.9971. Worsening trade tensions with the US remain a key driver - particularly following weekend reports that the US requested South Korean firms do not backfill chip orders to China should US-listed firms be barred access to China.
  • As mentioned, Australian CPI highlights Wednesday’s docket. In the US, March durable goods figures will precede Thursday’s advanced Q1 GDP reading.
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