BOJ fails to halt Yen supply

Friday 26 April 2024

The Bank of Japan duly left interest rates on hold as expected and only a small tweak in JGB policy. Cue further JPY supply sending USDJPY higher and underpinning core pairs too through the cross flows. The BOJ Governor Ueda failed to make any real statement on FX intervention, if anything hinting that it was not a major consideration atm, and we've seen further gains since to 156.70. Whether they're just keeping their powder dry to have maximum impact if/when they do step in but market refuses to run too scared meanwhile. Breaking news: USDJPY falls rapidly to 155.00 as I type but back up just as quickly to 156.32 now. Intervention unlikely but possible checking of rates by BOJ enough to create a brief shudder.

Yesterday's US GDP came in surprisingly on the soft side but QQ PCE inflation was stronger therefore providing a real problem for the Fed. Today's MM  PCE reading will be key too. Equities and bond prices fell on the news pushing yields higher underpinning the Greenback bu some reversal since. The Ukraine/Russia war and Middle East tensions still cast their own very large shadow too. Remember as always to identify your preferred risk reward levels and let the algos do their thing along with the natural and speculative flows. Don't get greedy or over-analyse. These are tight ranges and will produce regular jobbing opportunities therefore while the jury remains out.

Equities have had another retreat per my note above but rallying in late NY and steadier in Asia/early European trading as the jury remains out here too amid all the CB conjecture.  WTI has rallied to $84.00 but capped at $84.00 after holding $82.00 in the retreat and holding $83.50-60 since amid the ongoing variables. Bids: $83.50-60, $82.80-00, $82.30-50, $81.80-00, $81.30-50. Offers: $83.80-00, $84.30-50, $85.00, $85.30-50. Gold has broken back through $2335 amid the risk wobble as equities fell but capping at $2350 so far.

GBPUSD: Holding 1.2450-60 yesterday after failing at 1.2525 but another rally to post 1.2525 so far amid some general USD supply but also the GBPJPY demand again. I remain a seller while we continue to range overall and will stay poised when momentum fades. EURGBP: Capping into 0.8585 amid the GBP demand but holding 0.8565 as the BOE vs ECB conjecture continues.GBPJPY: Holding 193.50 to now post 196.10 in the extended GBP demand/JPY supply double whammy after a hold of 194.00 in this morning's rapid retreat. Sellers will remain poised in these fickle markets but still expecting dip demand too as I've been warning.

EURUSD: Support around 1.0680 again yesterday and now breaking up through 1.0730 to test 1.0750 helped by the EURJPY demand as the two-way buiness continues with ECB conjecture a driver too but cuts largely factored in. I remain a rally seller as my preferred side still but patience a virtue as we range tightly. USDJPY: Dropping back rapidly this morning from 156.72 to the pivotal 155.00 area per my opening notes and now at 156.55 helped by JPY supply returning. No Japanese FX intervention suspected given the rapid recovery but possibly the BOJ checking rates as European trading got fully into its stride.

Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk