USDJPY Chartfest

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The pre-NFP equilibrium zone 152.75/153.25 should now be the sell zone for USDJPY.

by Brent Donnelly

May 3, 2024

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As per usual, I will keep it short because it’s Friday.

NFP just came out. Perfect number for bond bulls and stock bulls and USD bears. With the market limit long USD for the past two weeks, there is room for a move here. 152 has been the huge pivot in USDJPY for the past two years and it’s trading 152.05/06 as I type this. We just cut through 152 and recaptured it.

I still think there is further downside for the USD next week but we’re oversold here so I don’t think we see much more today. If you look at where USDJPY is trading relative to its 100-hour MA, it’s quite oversold.

The cyan bottom panels show the deviation between spot and the 100-hour moving average. Any time USDJPY goes more than 2% below the 100-hour MA, it tends to be a challenging short for a bit. I think USDJPY is now a sell rallies trade as the massive CTA position will need to start to unwind. The only thing the USD longs have working in their favor is that next week is a light one for data, and the carry is still delicious with VIX at 13.8. Still, my bet is we close near the lows (152.11 is my guess) and go lower next week as the market recalibrates away from an extremely hawkish view of the Fed and US yields. That was probably the overshoot in 10s.

The pre-NFP equilibrium zone 152.75/153.25 should now be the sell zone for USDJPY.

In case you have not been monitoring it, here is the CFTC JPY position.

Calendar

It’s a super light week ahead with a resumption of the Fed cacophony and a bunch of big events in the UK. The week is backloaded as Monday to Wednesday look pretty boring.

Final Thoughts

I hope you make my podcast with Alfonso Peccatiello part of your weekend routine. Here is the link. This week we discuss how nominal growth is showing some early signs of fatigue, while economists’ expectations remain elevated and market pricing still quite hawkish.

Have a well-populated weekend.