USD/JPY Soars to Just Under 159, Risks BOJ Intervention

GBP Falls, BOE Dovish Hold; SNB Cuts Rates, CHF Slumps 

Summary:

The Dollar soared to 158.90 Japanese Yen from 158.00 yesterday, boosted by higher US bond yields. It was the sixth straight rally for the Greenback against the Japanese currency.

It was the strongest finish for the USD/JPY pair since March with the 160.17 high for the year within reach. That level prompted intervention from the Bank of Japan and Ministry of Finance. 

A popular measure of the Greenback’s strength against a basket of 6 major currencies, the Dollar Index (DXY), climbed 0.4% higher to 105.65 (105.25). 

Sterling (GBP/USD) slid to 1.2660 from 1.2716 after the Bank of England kept its Bank Rate steady at 5.25% but signaled that a rate cut is coming. 

The Swiss National Bank trimmed its Policy Rate to 1.25% from 1.50%, driving the USD/CHF pair higher to 0.8910 (0.8840). It was the second consecutive rate cut by the SNB this year.

The Euro (EUR/USD) fell to 1.0702 (1.0747), with political uncertainty in Europe continuing to weigh on the shared currency. German Producer Prices fell to 0.0% from 0.2% previously. 

Antipodean currencies dipped against the Greenback. The Australian Dollar (AUD/USD) lost 0.3% to 0.6655 (0.6675) while the Kiwi (NZD/USD) eased to 0.6120 from 0.6135 yesterday. 

Against the Asian and Emerging Market Currencies, the US Dollar finished with modest gains.  USD/CNH (Dollar-Offshore Chinese Yuan) climbed to 7.2915 from 7.2800 yesterday. The USD/SGD (Dollar-Singapore Dollar) pair rallied 0.27% to 1.3545 (1.3505). 

Global bond yields were mixed. The 10-year US Treasury rate rose to 4.26% (4.24%). Germany’s 10-year Bund yield rose to 2.43% (2.41%). The UK 10-year Gilt yield dipped to 4.05% (4.07%). 

Data released yesterday saw US Jobless Claims climb to 238K against forecasts at 235K. The US June Philly Fed Manufacturing Index fell to 1.3 from 4.5 previously, lower than forecasts at 5. 

US May Building Permits fell to 1.386 million from 1.44 million, lower than estimates at 1.45 million. The US Current Account Deficit rose to -USD237.6 billion from -USD194.80 billion. 

USD/JPY – the Dollar soared higher to 158.90 Japanese Yen, up from 158.00 yesterday. Overnight, the USD/JPY pair traded to a high at 158.93 before easing. In another roller coaster session, the overnight low recorded was 157.92.GBP/USD – The British Pound slid to 1.2660 from its 1.2716 opening. The Bank of England kept its Bank Rate steady at 5.25% but signaled that a rate cut was coming. The UK’s lower inflation, down to 2% from 2.3%, may give the BOE incentive to cut rates.EUR/USD – the shared currency fell to 1.0702 from 1.0747, weighed by the ongoing political uncertainty in Europe. France’s election risk poses headwinds for the Euro. The Euro traded to an overnight high at 1.0748 before sliding.AUD/USD – the Aussie Battler dipped against the broadly stronger US Dollar to 0.6655 against 0.6675 previously. The Australian Dollar traded to an overnight high at 0.6679, while the overnight low recorded was a 0.6647.On the Lookout:

The week ends with a busy economic data calendar and kicks off with Australia’s June Flash Manufacturing PMI (f/c 49.0 from 49.7 – ACY Finlogix), and Australia’s June Flash Services PMI (f/c 53 from 52.5 – ACY Finlogix). 

Japan follows with its May Inflation Rate (y/y f/c 2.5% from 2.5% - ACY Finlogix), Japanese May Core Inflation Rate (y/y f/c 2.6% from 2.2% - ACY Finlogix), Japan’s Jibun Bank June Flash Manufacturing PMI (f/c 50.6 from 50.4), Japanese Jibun Bank June Flash Services PMI (f/c 53.7 from 53.8 – ACY Finlogix).

The UK starts off European data with its UK May Retail Sales (m/m f/c 1.5% from -2.3% - ACY Finlogix), UK May Core Retail Sales (m/m f/c 1.3% from -2.0% - ACY Finlogix). Germany releases its June Flash Manufacturing PMI (f/c 46.8 from 46.4 – ACY Finlogix), and German June Flash Services PMI (f/c 54.4 from 54.2). 

The Eurozone releases its June Flash Manufacturing PMI (f/c 47.9 from 47.3 – ACY Finlogix), Eurozone June Flash Services PMI (f/c 53.5 from 53.2). The UK is next with its UK S&P June Manufacturing PMI (f/c 53 from 52.9 – ACY Finlogix), UK S&P June Services PMI (f/c 53.5 from 53.2 – ACY Finlogix).

The US rounds up today’s data releases with its US S&P June Flash Manufacturing PMI (f/c 51.0 from 51.3 – ACY Finlogix), and US S&P June Flash Services PMI (f/c 53.7 fromo 54.8 – ACY Finlogix). This is followed by US May Existing Home Sales (m/m f/c -0.3% from -1.9% previously – ACY Finlogix), and US Conference Board May Leading Index (f/c -0.3% from -1.9% - ACY Finlogix).

Trading Perspective:

The US Dollar advanced against its Rivals supported by higher treasury yields. Look for the wider yield differentials in favor of the Greenback to keep it bid versus its rivals. This morning, Japanese officials were already on the wires warning against “excessive moves” on the USD/JPY pair. Japan’s top currency diplomat, Masato Kanda said that Japanese authorities are ready to take action against speculative and excessively volatile moves in the currency market.

Overnight, the US Treasury found no currency manipulation from its major trading partners last year. However, the US Treasury added Japan to its foreign exchange “monitoring list.” Which is alongside China, Vietnam, Thailand, Malaysia, Singapore and Germany who are on the list. A US Treasury official said that the Bank of Japan’s recent foreign exchange interventions were not a factor. The greater concern of the US Treasury is on those who buy Dollars to weaken their currencies.  Nevertheless, we can expect a choppy trading day in the FX markets.

USD/JPY – the Dollar has immediate resistance against the Yen at 159.00 (overnight high traded was 158.93). The next resistance level can be found at 159.50 followed by 160.00. Immediate support lies at 158.50, followed by 158.20 and 157.90. The overnight low recorded was 157.95. Look for more choppy trade in this currency pair, likely between 157.80 and 159.80. The upside is still the more vulnerable side. But dips. Source: Finlogix.comGBP/USD – Sterling slid against the broadly based stronger US Dollar to close at 1.2660 (1.2716 yesterday). While the Bank of England kept rates steady, at 5.25%, it signaled a rate cut is forthcoming. Immediate support lies at 1.2630, 1.2600 and 1.2570. On the topside, immediate resistance lies at 1.2700 and 1.2730 (overnight high traded was 1.2720). Look for the Sterling to trade a likely range of 1.2630-1.2730. Trade the range.AUD/USD – the Aussie eased against the overall stronger US Dollar to 0.6655 from 0.6675 yesterday. Look for immediate support at 0.6625 followed by 0.6595. Immediate resistance can be found at 0.6685 (overnight high traded was 0.6680). The next resistance level lies at 0.6705. Look for the Aussie to trade a likely range today of 0.6630- 0.6730. Prefer to sell Aussie on strength from current levels.EUR/USD – the shared currency slid to 1.0702 from its opening of 1.0747 weighed by broad-based US Dollar strength. The Euro has immediate support at 1.0700 followed by 1.0670 and 1.0640. Immediate resistance lies at 1.0740 (overnight high traded was 1.0748). The next resistance level lies at 1.0770 and 1.0800. Look for the Euro to consolidate in a likely range today of 1.0670-1.0770. Trade the range with the preference to sell rallies.Happy Friday and trading all. A top weekend ahead. 

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