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Market Update (1 HOUR)
Feels like the calm before the next storm day (FOMC tomorrow) .
US 10-year 4.996% as it pivots 5.00%/- EURUSD: Inside day but upside again contained by 1.1550-52 (USDJPY underperformer, trading just above 155)
- US500: On the defensive but so far holding .7575 again (see chart) for a double bttom
- XBRUSD: Regaining a bid but facing an obstacle at 110+
USDJPY 4 HOUR: Will the BoJ intervene?
With short-term momentum turning up and USDJPY testing back above 155 for the first time in over a week, will the BoJ try to resist and intervene? Given a generally firm USD tone and rising US bond yields, the BoJ might try to slow the market but it is doubtful an ambush would be effective. In this last episode before the BoJ ambush, the upside stalled below the 61.8% level so keep an eye on FIBOS in the absence of key nearby levels as well as the pivotal 155 level.
CHFJPY WEEKLY: Funding currencies
One look at this chart would strongly sugggest switching from JPY to CHF as a favored funding currency (e.g. for carry trades) is driving the cross lower.
While this has developed into a clear downtrend, it is not technicals driving the flows.
This would also explain divergence today, USDJPY down, USDCHF up.
Bessent verbal intervention sent USDJPY lower but did not make a new low.
“I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do,” Bessent said. “And you can bet against me if you want.”
How Interest Rates Affect Financial Markets and Traders
Forex Market Snapshot
Markets continue to shrug off firming oil prices (but for how long?) where Brent touching $100 per barrel is grabbing headlines.
It may be a matter of a wait-and-see ahead of key events, an expected ECB rate hike Thursday and US inflation reports over the next two days.
In the meantime the dollar is trading a touch softer but so far with limited follow through after EURUSD paused around 1.1650 and USDJPY found support again just below 153.
USDJPY 1 HOUR: Bounce off the low
As noted yesterday, the break below 155 had left a void until 152.00-07 as the next target and USDJPY made a run at it before pausing at 152.88.
The subsequent bounce has created some up short-term momentum off higher lows (2 red AT lines) that would need to get through 154.38-63-80 to shift the focus back io 155.
Otherwise it is consolidation with upside contained while below the layer of resistance and key sell stops exhausted until/unless a new low is made.
Forex Market Snapshot
The dollar is tracing mixed, up vs all but the CAD and JPY, the latter up small after USDJPY bounced after extending its low to 152.88.
The mood otherwise is risk off as firm oil prices and-higher US bond yields (curve steepening) weigh on stocks amid rising geopolitical concerns.
No key US data is due today.
USDJPY WEEKLY: Confirms a downtrend
Break of 155 confirms a weekly chart downtrend that shows a risk for 152.00-07 while it trades below 155.
In the absence of nearby support, expect 153.50 to be pivotal (i.e. above it range is to 155, below it opens the door to 152) and 154 ahead of it.
To state the obvious, 155+ would be needed to cool the risk.
Forex Market Snapshot
The dollar is starting the week on a soft note led by a USDJPY plunge through 155. Offsets are seeing lags elsewhere (e.g. EURJPY) as unwinding of short JPY crosses are again helping to drive the currency higher. There has been little or no chatter of another BoJ ambush, which in any case has turned technicals in its favor.
US is closed today in a week highlighted by the ECB decision and US inflation reports.
USDJPY found some 📈buyers near the crucial 155.00 level early on Friday, a zone previously defended by FX intervention, following a sharp two-day drop from 160.00.
The focus now shifts to the US nonfarm payrolls report due at 12:30 GMT. While traders remain laser-focused on inflation after Fed Governor Waller pushed September rate-hike odds down to 50%, a solid jobs print could still prompt policymakers to hike rates
Meanwhile, Japan’s top currency diplomat, Atsushi Mimura, reiterated that Tokyo remains on high alert to intervene against excessive yen weakness
USDJPY 🚨saw the strongest movements in yesterday’s session, with the bearish pressure🚨 lingering today. USDJPY is hovering in the🚨 157.20 area more than two big figures below Tuesday’s close.
Comments from BoJ member Takata about the BoJ not being confined to 25bps increments, dovish rhetoric from New York Fed President Williams and stronger Japanese data have most likely played a key role in the USDJPY decline, although a mini-intervention or a rate check from the Fed cannot be excluded
Forex Market Snapshot
The dollar is trading weaker led by USDJPY which has extended yesterday’s slide after breaking a 4- day pattern around 160.
Others are following with a lag,m suggesting frirmer JPY crosses where the market is having more trpuible absorbing the USD selling side *i.e. USDJPT selling) of the trade.
US yields have slipped a touch,crude oil consolidating,.
US Weekly Jobless Claims and ISM Services PMI due later.
