USD/JPY, EUR/USD flows: Notable breaks cemented after US blinked on USTs?

Significant couple of sessions as US-Japan confirm the joint intervention that had already been leaked out to the market on Friday with the sources reports out through US banks and by Bessent’s slightly comical ‘to do list’ note prop.

USD/JPY has potentially managed some significant near-term damage nearby if maintained, breaking the monthly uptrend since Mar25 and the 200dma. It has almost made it to circa 38% retracement at 155~ with the 50% retracement and prior lows all in the 152~ area which might be a target.

There are quite a few dimensions to this move that go beyond just ‘friendship’ that will be explored elsewhere, but bring together the recent pressure US Treasury market (that’s pressured both by Japan intervention liquidity freeing sales and by pressure for Japan institutions to shift holdings), and relative central bank positioning (the BoJ side looks greatly boosted for Sep, odds already up to around 40%, with US expectations of monetary policy alignment, already partly setup at the last meeting). That the US would consider increasing the size of the dollar repo facility for dollar liquidity, noted by Japan at the weekend, also allude to a desire to avoid abrupt burst of Japan intervention driven UST selling. 

Elsewhere, the latest local-brokered pause and deal talks take place today with Brent gapping back through last week’s lows on the more promising regional-driven backdrop. $80~ remains the key psychological support level.

The combination of recent events (that you could say are linked by the US blinking on USTs getting to critical yield highs) tending to keep the short-term market caught a little offside on the dollar, with EUR/USD nudging through the year’s downtrend and potentially opening up more upside to the 1.16~ area.