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USD/JPY Most Technically Overbought In Six Years

FOREX
  • The USD/JPY rally drew plenty of attention Tuesday, with the pair clearing the psychological 120 handle and briefly tipping above the Y121 level. The move coincided with a sizeable move in 5Y breakevens, which increased back to highs of 3.68%. This comes despite oil moving lower and the tighter rates pricing, with an additional 193bps of hikes priced across 2022.
  • Market focus turns to the longevity of recent strength, with the USD/JPY RSI now tipped to its highest level since late-2016. The Japanese finance minister commented after the Asia-Pac market close, noting that sudden moves in currency markets aren't desirable, and stability remains important. Markets will be on watch for any strengthening of this rhetoric.
  • Elsewhere, GBP/USD underwent a sizeable intraday rally, topping the Monday high in short order and making headway north of both 1.3250 as well as key resistance at 1.3231 20-day EMA. Moves came despite the more hawkish Fed tones evident in FOMC appearances this week, with markets repricing a BoE hiking to see close to five 25bps by year-end.
  • Antipodean currencies outperformed throughout, with AUD and NZD at the top of the G10 pile, pushing AUD/USD through early March's 0.7441 and to the best levels since mid-November.
  • Focus Wednesday turns to the UK's Spring Statement (preview here: https://marketnews.com/mni-research/global-issuanc...) and inflation data, as well as US new homes sales. Speeches are due from BoE's Bailey, Fed's Powell and ECB's Visco - among others.
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