European Summary and Highlights 29 Apr
USD/JPY rose and then fell on a 2nd suspected bout of BOJ Intervention in early Europe and remained volatile through the session.
European morning session
A lively morning for USD/JPY, with suspected intervention early on to knock it lower after a brief rally from the intervention seen in late Asia. After opening in Europe around 156 following the 5 figure decline from 160 to 155 in late Asia, USD/JPY rallied to 157 before falling sharply again to a low of 154.53 on more suspected intervention, before recovering to near opening levels by the end of the morning.
Otherwise the USD was slightly firmer, making initial gains against the riskier currencies. These reversed the USD losses seen at the time of the sharp JPY rise in late Asia, and there wasn’t much net USD movement against the riskier currencies relative to the pre-BoJ intervention levels.
Newswise the German state CPI data were broadly in line with expectations, suggesting a small increase in the y/y rate to 2.3% for national CPI released later today. Spanish CPI was also close to market expectations. Swedish GDP data showed the expected 0.1% q/q Q1 decline, but the European Commission survey was somewhat weaker than expected, showing declines in the business climate index and industrial sentiment.
Asia session
USD/JPY buyers seemed to be taking advantage of the Japanese holiday and has pushed the pair two figures higher to a session high of 160.24. There were no headlines nor economic release that triggered the move. Market participants seems to read Friday's BoJ meeting lack of commitment in defending the JPY as a green light to go straight ahead. While the soft rhetoric from BoJ and Japanese officials likely pointed towards little will in intervention, in our article we have forecasted if USD/JPY rises by 1% a day continuously, it will attracts more attention towards intervention. It proves that the rally is too rapid in MoF and BoJ's eyes as we are seeing an intervention style meltdown in USD/JPY. In the past, most intervention ended by driving the pair down by roughly five big figures from peak to trough and will likely only be able to stall the previous underlying momentum until a fundamental shift. But who knows when someone gets called to work on a holiday, maybe they will be more forceful than usual as unpredictability is also a key element in the toolbox of intervention. USD/JPY slumped from session high at 160.20 to 155.28, down 1.88% for the session so far, one can expect more volatility in coming the session.
Over the weekend, China has removed home-buying restrictions for Chengdu. Chinese property sector cheered another supportive measures and should further relieve some pressure. Regional sentiment got a shot in the arm with both the Chinese and Hong Kong equity indexes in the green and up around a percent while U.S. 3 major equity indexes under performed but still have some earnest gains. AUD/USD is supported and trades 0.77% higher at 0.6569, NZD/USD is 0.67% higher at 0.5978 while USD/CAD slips 0.24% to 1.3634 as the USD is dragged lower. Else, EUR/USD up 0.36% and GBP/USD up 0.42%.