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[MARKET ANALYSIS] G10 mixed against the USD, JPY pares back towards 157 (vs 155.70 trough) with traders on intervention watch

The G10 currencies are showing mixed performance against a flat USD, with notable attention on the JPY as it recovers towards 157 after briefly dipping to 155.70.

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[MARKET ANALYSIS] G10 mixed against the USD, JPY pares back towards 157 (vs 155.70 trough) with traders on intervention watch

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  • G10s are mixed against a relatively flat USD; the Kiwi outperforms a touch, whilst the Swiss Franc marginally lags. Ultimately, price action has been lacklustre throughout the European morning, awaiting updates on the geopolitical and trade front.
  • DXY remains within a 97.97 to 98.29 range, and well below its 100- and 200-DMA at 98.46 and 98.54, respectively. The Dollar has been moving incrementally higher throughout the European morning, alongside a bid in the energy complex. Focus has ultimately been on the geopolitical situation, whereby President Trump announced plans to guide neutral ships safely through the Strait, over the weekend. Unsurprisingly, this was met with resistance by the Iranians, with an official this morning spurring some mild risk off, after he said that the US would be attacked if they approach and enter the Strait of Hormuz. There is a lack of Tier 1 US data today (Factor Orders), so focus will be on Fed’s Williams and then President Trump, who are both scheduled for the late-afternoon. As for the rest of the week, a number of labour market reports (US JOLTS/ADP), ahead of the key NFP release on Friday.
  • EUR is essentially flat, and trades around 1.1720 within a 1.1711 to 1.1750 range; the trough is in close proximity to both its 21- and 100-DMA at 1.1711 and 1.1709, respectively. The single currency has had several Final EZ Manufacturing PMIs to digest, but they were broadly subject to only very mild revisions. Also of note was the release of the ECB’s Survey of Professional Forecasters, which saw upward revisions to near-term inflation, whilst remaining unchanged on a longer-term basis. No move on this.
  • JPY is currently incrementally firmer against the USD this morning, but did experience some volatile trade in the Asia session, amidst thin liquidity (Japan on holiday for Golden Week). A sharp dip of circa. 38 pips was seen in USD/JPY overnight, but this move mostly pared as the session progressed. Touted intervention at this time, but markets will look for confirmation. MUFG opines that whether this bout of intervention proves effective, will depend on fundamentals such as Fed-BoJ policy divergence. In its base case, analysts see two BoJ hikes this year, which would allow “a gradual move lower in USD/JPY towards the 152 levels”. USD/JPY currently trades around 156.90 (vs 155.70 trough). The potential intervention today didn’t quite lead the pair down to recent troughs of 155.48; a level not seen since late-Feb of this year.
Context

Traders are closely monitoring potential intervention amidst geopolitical tensions in the Strait of Hormuz, which could have significant implications for risk sentiment and USD/JPY movements. Watch for commentary from Fed officials and any developments that might influence the currency dynamics further.

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