USD/JPY bounces as dollar firms ahead of FOMC minutes

USD/JPY moved higher in the Asian session today, up from 118.45 to 119.16. A modest push up in the Nikkei after four consecutive down days helped give a lift. Lower US Treasury and other offshore government bond yields continue to weigh but Japanese yields are down too with the 10s at a fresh record low of 0.265%. US Treasury 10s would have to fall below 1.90% again to have a more lasting impact. The 10s are firmer in Asia, up modestly from 1.945% to 1.952%. The JPY cross capitulation trade looks to be over too with weak longs having pared back positions considerably. And those shorting EUR/JPY and GBP/JPY afresh on shifting central bank expectations look to be catching their breath. EUR/JPY bounced from 140.58 to 141.50 and GBP/JPY from 179.16 to 180.39 before steadying. The bias remains down for these two as well as AUD/JPY which bounced from 95.59 to 96.21 with Aussie yields too at record lows. NZD/JPY was the best bid of the crosses, up from 91.77 to 92.42 with recent losses limited. The contrast with AUD looks to be working in favor of NZD.

EUR/USD opened in Asia at 1.1888. Up a bit to 1.1892 early, it was aggressively sold by US funds thereafter. Stops sub-1.1880, 1.1860 and 1.1850 were triggered in a flash for a low of 1.1842 before buyers returned. The market later drifted back up into a mostly 1.1870-80 range. Sentiment remains bearish on continuing Grexit news-views and expectations the ECB will announce full blown QE (a Dutch newspaper highlighted three options and all with bearish implications). The market will remain volatile however on upcoming event risks including EZ inflation data and FOMC minutes today and the US jobs report Friday.

GBP/USD swooned alongside EUR/USD early from 1.5154 to 1.5118 before bouncing to around 1.5140. The bias remains down however with stops eyed sub-1.5100. EUR/GBP fell back a bit early to 0.7832 before steadying. The high was 0.7848.

USD/CHF saw a bump up early from 1.0099 to 1.0138 before steadying. EUR/CHF did not move, holding between 1.2009-15 and just above the SNB’s 1.2000 line in the sand.

AUD/USD opened in Asia at 0.8085 and fell back modestly from 0.8086 to 0.8055 with the market back in bear mode after yesterday’s short squeeze up to 0.8158. Crumbling crude oil prices and record low Aussie yields helped. Weakness was reflected in AUD/NZD too with the cross holding just above a fresh all-time low yesterday of 1.0389 between 1.0393-1.0433 today. Many eye an AUD/USD break below 0.8000 soon and AUD/NZD heading towards parity.

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