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USD/JPY Tests Sub Friday Lows, EUR/JPY Off Recent Highs

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USD/JPY has tested below Friday lows in recent dealings, the pair last near 160.30/35 (today's lows at 160.26, versus Friday's at 160.35). Some EUR underperformance is likely aiding yen at the margins so far today. EUR/JPY sits off recent highs, last tracking near 173.60, against recent highs, which have been marked around 174.50.

  • Fresh French political uncertainty is likely to be a near term focus point for French and EU markets, given the left's legislative win and a potential hung parliament. Still, for EUR/JPY we are some distance from the 20-day EMA (close to 172.00)
  • For USD/JPY is it a similar backdrop. The 20-day EMA is back closer to 159.50. The 50-day EMA support point, which is back near 157.50, hasn't been meaningfully breached since March of this year.
  • Today's modest US yield rise isn't benefiting USD/JPY, although the broader trends in recent weeks have been for yield spreads to move lower in US-JP terms, albeit with a degree of volatility, see the chart below.
  • The outright levels still stand firmly in the USD's favor, but increased market pricing around rate cuts in H2 of this year may be chipping away at USD resilience.
  • Locally, while the headline labour earnings data were weaker than forecast, the detail still showed firmer trends, particularly on a same sample basis.

Fig 1: USD/JPY Versus US-JP Nominal Yield Differentials

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USD/JPY has tested below Friday lows in recent dealings, the pair last near 160.30/35 (today's lows at 160.26, versus Friday's at 160.35). Some EUR underperformance is likely aiding yen at the margins so far today. EUR/JPY sits off recent highs, last tracking near 173.60, against recent highs, which have been marked around 174.50.

  • Fresh French political uncertainty is likely to be a near term focus point for French and EU markets, given the left's legislative win and a potential hung parliament. Still, for EUR/JPY we are some distance from the 20-day EMA (close to 172.00)
  • For USD/JPY is it a similar backdrop. The 20-day EMA is back closer to 159.50. The 50-day EMA support point, which is back near 157.50, hasn't been meaningfully breached since March of this year.
  • Today's modest US yield rise isn't benefiting USD/JPY, although the broader trends in recent weeks have been for yield spreads to move lower in US-JP terms, albeit with a degree of volatility, see the chart below.
  • The outright levels still stand firmly in the USD's favor, but increased market pricing around rate cuts in H2 of this year may be chipping away at USD resilience.
  • Locally, while the headline labour earnings data were weaker than forecast, the detail still showed firmer trends, particularly on a same sample basis.

Fig 1: USD/JPY Versus US-JP Nominal Yield Differentials

Keep reading...Show less