Forex - USD/JPY, EUR/JPY Flows: USD/JPY break to new 8 month highs looks fragile


 09:25 (GMT) 13 Jan

  [Forex Flows]

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USD/JPY, EUR/JPY Flows: USD/JPY break to new 8 month highs looks fragile (0101-QGGF-C01)

USD/JPY has broken above the 109.73 high from December and appears enthused at the prospect of the phase 1 US/China trade deal being singed on Wednesday. But the break looks more technically than fundamentally inspired, and isn't realy supported by moves in equities and bonds. While US yields are up a little this morning, and equities remain firm, our models suggest they are consistent with something nearer 109. EUR/JPY also looks on the high side relative to the bund/JGB yield spread. However, we would not be particularly confident of a quick reversal. These correlations often break down in a New Year, and for the moment this is sentiment driven. Nevertheless, without some more significant equity move it is hard, after a softish US employment report, to look for USD/JPY to advance beyond 110.

USD/JPY, EUR/JPY Flows: USD/JPY break to new 8 month highs looks fragile (0101-QGGF-C02)

Forex - AUD/USD Flows: Small step higher on trade data beat, but imports fell


 00:40 (GMT) 09 Jan

 [Forex Flows]

AUD/USD inches higher after a strong beat on trade surplus. Even though exports rose in November, imports fell and again suggesting weakness domestically. AUD/USD found support at 0.6850 on Wed and is likely to consolidate between 0.6850-0.69 today with focus on tomorrow's retail sales data as risk sentiment stabilises and likely to modestly improve as the worst-feared scenarios from the ME tension looks unlikely now following measured approaches seen on Wednesday.
January has tended to be a good month for the CNY, perhaps seasonal demand before Lunar New Year playing a key role. That should help the AUD to stabilise after a rough start to the year which might be attributed to the sharp rally in December. The key focus this month for AUD will be on the employment report due later this month.


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