Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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JPY: Staying on intervention alert
Charu Chanana
Chief Investment Strategist
Key points:
- Event risk from NFP and thin market liquidity are key reasons to stay on another intervention alert on JPY.
- There is also no major US data next week, which could mean any resulting yen strength could be more sustainable.
- Scope for USDJPY to sub-150 levels.
JPY traders – here are four reasons to stay on intervention alert:
- Previous interventions this week occurred following major events.
- The first intervention took place after the Bank of Japan's meeting last Friday and was executed during Monday's Asia session.
- The second intervention followed the FOMC meeting and occurred late in the New York session.
- Today, another significant event is on the horizon: the release of key US NFP jobs data. This event does not necessarily have to bring a hawkish surprise for an intervention to occur, as evidenced by the intervention that followed the Fed's meeting, which was not a hawkish surprise.
- Both interventions this week occurred during periods of low liquidity, as this gives Japanese authorities more bang for their buck.
- The first intervention happened on Monday when Japan was on holiday.
- The second intervention took place late in the New York session when liquidity was very thin.
- Japan is currently observing a four-day weekend, which could affect market liquidity.
- China markets are also closed and return on Monday.
- There is no major data expected from the US next week, which could mean limited upside for yields and a more sustained strengthening of the yen. Next key data, April CPI is only due on May 15.
- BOJ officials haven’t officially confirmed the intervention, suggesting it may not be over yet.
Key levels
Support at 150.80 being tested currently. Break below will expose the 150-handle. Another round of intervention could bring USDJPY closer to 149.
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