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Writer's pictureMike Paterson

JPY supply returning as the jury remains out

Friday 26 July 2024


We're still seeing USD demand overall helped by yesterday's stronger than expected US Q2 GDP in the headline but closer examination was less than convincing as was the soggy Durable Goods data. Risk sentiment has been volatile to say the least with equities steadying a little and a surge higher in USDJPY off its extended lows producing some notable JPY supply after the week's strong appreciation


Month-end rebalancing models are indicating a weak USD-buying signal with a moderate signal on USDJPY due to the recent large JPY appreciation and yesterday's move perhaps saw the start of that but month-end flows will not be the main game in town given BOJ decision on 31st. Today's data slate brings further US PCE readings that the Fed pay particular attention to at 12.30 GMT and then Michigan Consumer Sentiment at 14.00 GMT.


While the CB, political and USD second-guessing continues 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.


US and European equity markets mostly staged a decent recovery with dip buyers prevailing and then fell back with rally sellers/proft takers still poised but heading higher again as I type. WTI has held $76.00 in yesterday's further retreat but has rallied to look at $78.50 amid the better risk tones. Gold had another down day after Wednesday's surprise rally and has fallen back through $2400 to test $2350 amid firmer risk tones and with rallies capped by more profit-taking. Dip demand should remain but profit-takers/sellers still poised.


GBPUSD:  Capping above 1.2910 yesterday with GBPJPY selling in play initially once again along with some general USD demand but held 1.2850 support helped by GBPJPY dip demand as USDJPY rallied. EURGBP: Holding 0.8400-10 but failing above 0.8440 in an extended rally with ECB/BOE rate cut conjecture in play and other cross flows. Option interest today at 0.8420. GBPJPY: Key USDJPY support below 152.00 yesterday and the sharp rally through 154.00 saw this pair similarly rise to 198.80 from 195.80 and rising again from 197.50 this morning as USDJPY heads higher again.


EURUSD: Still trading 1.0830-70 as we continue to range tightly amid variable cross and USD flows. USDJPY: Strong support below 152.00 duly held and a sharp rally through 154.00 then lots of two-way between 153.50-154.25 before another decent rally this morning to 154.40 as I type. MOF/BOJ fears will remain.


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



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