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USD Cycle Highs in View as USD/JPY Prints Best Level in Decades

FOREX
  • The greenback trades uniformly higher pre-NY hours, keeping pressure on the cycle highs printed earlier this week at 109.478. USD strength tipped USD/JPY to 139.68 overnight, highest since 1998 and prompting a fresh warning from the MoF: "Watching FX with a high sense of urgency", "Sudden moves in FX aren't desirable".
  • NOK is sliding for a second session and again is the worst performing currency in G10. Both USD/NOK and EUR/NOK are now through the psychological 10.00 handle, with today marking the beginning of the Norges Bank's sized-up FX buying programme. Key levels to watch include the 100-dma in EURNOK at 10.0707 and 10.1442 in USDNOK, the 76.4% retracement of the July - August downleg.
  • USD/CNH shot lower on reports that Russia are mulling buying as much as $70bln in so-called 'friendly' currencies to stem the RUB rally this year. USD/CNH slipped through yesterday's lows in response to touch 6.8886 and narrow the gap with key support at 6.8817, the 23.6% retracement for the late August upleg.
  • Meanwhile, energy prices are sliding further, with Germany's 1-month forward electricity price near 30% off last week's highs. The EU's plan to curb power and energy prices continues to take shape, with a spokesperson this morning outlining that price caps, windfall taxes and demand reduction tools are being considered. Lower energy prices are helping support the EUR, with EUR/GBP near three-month highs.
  • Focus turns to the ISM Manufacturing report & weekly US jobless claims as well as speeches from ECB's Centeno & Fed's Bostic.

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