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USDJPY Remains 1.6% Lower Despite Post-ISM Bounce

FOREX
  • Today’s movements in currency markets have been centred around the Japanese Yen, with USDJPY posting an impressive 496 pip range to start the week. The weakness across the Asia-Pac session culminated in a 141.70 low print, a level that was not breached for the remainder of the session despite multiple tests back below 142.00 as equities remained under pressure.
  • A stronger-than-expected set of US ISM data helped stabilise risk and as such USDJPY had a solid recovery across the latter half of the session, rising briefly back to 144.89. Given the sharp moves, initial resistance is not seen until 146.66, today’s intraday high. Key support remains at 140.25, the Dec 28 ‘23 low.
  • Elsewhere, risk sensitive currencies in G10 are on the back foot, though off session lows. The likes of AUD and NZD are both down around half a percent as we approach the APAC crossover. Bucking the trend, the Euro outperforms which is likely tied to its lofty weighting within the USD index, and notably EURUSD traded above 1.10 today for the first time since January 02.
  • The overall risk off tone also weighs on GBP, with civil unrest across the UK likely adding to pessimism towards sterling. Last week’s close back above the July 1 high and notable pivot at 0.8500 marks an important development for EURGBP, cancelling the recent bearish theme and highlighting a potential short-term reversal. The cross rose as high as 0.8620, closely matching initial resistance found at the May 9 high. Above here, 0.8645 the Apr 23 high marks a key resistance for the cross.
  • A notable mention in emerging markets, where USDMXN also exhibited sharp volatility. The pair rose to a high of 20.2181 before reversing the best part of 5% across the remainder of the trading day.
  • The RBA decision headlines Tuesday’s calendar, where we do not expect a change in rates or statement guidance. US and Canadian trade balance figures headline a quiet docket in North America.
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