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USDJPY Firms To Fresh 20-Year Highs Above 131.50

FOREX
  • Initial greenback strength on Monday saw the USD index trade within close proximity of key support at the 50-dma, which today sits at 101.71. However, a grinding recovery throughout late European hours then led to the index surging to session highs, looking likely to post a 0.25% daily gain as we approach the APAC crossover.
  • The key victims of the US dollar advance were CHF (-0.80%) and JPY (-0.67%), while GBP (+0.41%) bucked the trend, holding on to the majority of gains made earlier in the session.
  • USDJPY extended on recent strength, rallying firmly into the London close and taking out the bull trigger at 131.35 - the May 9 high. The pair has now made fresh highs of 131.78 as of writing - the highest rate since 2002. Today's break higher confirms a resumption of the primary uptrend, narrowing the gap with initial resistance at 131.96, a Fibonacci projection. Support remains at 128.63, the 20-day EMA.
  • GBP had been the focal point for G10 FX markets to start the week, with PM Boris Johnson facing a no confidence vote. Johnson is expected to win the vote, which requires 180 of his lawmakers voting against him to be upheld. This would make the PM immune from further no confidence votes for the next 12 months - potentially removing an element of political uncertainty and explaining the supportive GBP price action ahead of the vote.
  • Lastly, commodity-tied currencies are trading well, putting CAD and NOK near the top of the G10 pile amid the Bloomberg commodity index rising 1.94% from Friday’s close, led by higher NatGas prices.
  • Tuesday’s APAC session will be headlined by the June RBA meeting. The RBA is set to hike the cash rate target for the second consecutive month, however, the key question is whether or not this move will come in a 25bp or 40bp step. Sell-side forecasts remain close, with 10 of the 24 surveyed by Bloomberg looking for a 25bp hike and 11 looking for a 40bp move. The remaining 3 look for a bolder 50bp adjustment.
  • Thursday’s ECB meeting remains in focus this week before Friday’s release of US CPI.
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