Japan steps in to halt Yen slide

Monday 29 April 2024

It's been a busy start to the week with intervention on USDJPY by MOF/BOF as early European trading got away after the Japanese holiday. A no-show in Asia prompted traders to ramp USDJPY up through 160.00 but that was the signal seemingly and we've seen repeated intervention to ultimately send the pair down 500 pips from around 159.60.

Dip buyers will have been burnt a little by the concerted attempts but this will not be end of the story. Rallies will be sold whether there is further intervention or not but in the current scenario we can expect some USD demand generally and with steadier risk sentiment we'll also expect to see JPY supply. Meanwhile we'll need to see how the dust settles but currently USDJPY back up to 155.68 as I type.

Month-end rebalancing model shows strong USD buying against most of the majors. The signal is in contrast to the year-to-date trend and the first dollar-buying signal at month-end since last November after the 'Fed pivot', driven primarily by the ultimate end of the global equity rally. Ironically USDJPY shows a less strong buying signal as the underperformance of the Nikkei offsets the signal with some rebalancing needs for the JPY. Corporate Euro selling also a feature of the month-end flows.

German regional inflation data coming in above expectations this morning with the whole of Germany reading due at 12.00 GMT but little else on the data slate. No Fed speakers still as we wait on Wednesday's FOMC decision. 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 ralllied and steady in Asia/early European trading as the jury remains out here too amid all the CB conjecture.  WTI rallied to $84.30 on Friday but dipped since to test $82.75 in the retreat before a small bounce so far amid the ongoing variables. Gold rallied further on Friday amid the risk wobble but capping at $2350 again and holding $2320 in the retreat.

GBPUSD: Holding 1.2450-60 again on Friday but failing at 1.2550 in the bounce helped by the intervention-led GBPJPY supply. I remain a seller while we continue to range overall and will stay poised when momentum fades. EURGBP: Capping into 0.8585 amid some general EUR supply flow but holding 0.8550 so far as the ECB/BOE rate cut conjecture continues. GBPJPY: Holding 193.50-60 in the intervention-led retreats after posting the heady highs of 200.55 as USDJPY bust up through 160.00. 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 on Friday but capping at 1.0730 helped by the EURJPY and general EUR month-end supply with ECB conjecture a driver too.  I remain a rally seller as my preferred side still but patience a virtue as we range tightly. USDJPY: A lively morning per my notes above. Further intervention can not be ruled out but seems done for the moment. I still prefer the short side on a risk/reward basis but dip demand expected too.

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