Headlines:
- USD/JPY extends gains to nearly 1% on the day now
- USDJPY Technical Analysis – Higher Treasury yields revive the carry trade
- Equities stay more sluggish as rising yields keeps optimism in check
- EUR/USD continues its descent to test the early August low
- ECB reportedly starting to debate whether rates need to go below neutral in latest cycle
- Germany turns to India as their next bet to reduce China reliance
- US MBA mortgage applications w.e. 18 October -6.7% vs -17.0% prior
Markets:
- USD leads, JPY lags on the day
- European equities lower; S&P 500 futures down 0.2%
- US 10-year yields up 1.4 bps to 4.219%
- Gold up 0.1% to $2,752.09
- WTI crude down 1.9% to $70.38
- Bitcoin down 1.5% to $66,491
The standout mover on the day is the Japanese yen as it stumbled lower, after an early move in Asia trading as well.
USD/JPY nudged up to near 152.00 in the handover from Asia to Europe and built on that during the session. The pair is now up over 1% to 152.80, holding near the highs. It wasn't just USD/JPY that moved as it was broad-based yen weakness that prevailed.
Higher yields during the week were a catalyst but that has now led to key technical breaks across multiple yen charts as seen here.
Besides that, the dollar kept firmer across the board as it continues to enjoy a good run in October. EUR/USD dipped lower to test its early August low, not helped by a Reuters report highlighting the potential for the ECB to cut rates quicker and by more than anticipated.
The antipodeans also struggled amid a more dour risk backdrop. Higher yields is weighing on stocks and that in turn is pushing the aussie and kiwi lower. AUD/USD is down 0.5% to 0.6650 with NZD/USD down 0.4% to 0.6020 currently.
Coming up, we have the Bank of Canada policy decision to look out for. The central bank is expected to cut rates by 50 bps to 3.75%, with market odds showing a ~91% probability of such a scenario playing out.
USD/CAD is not too fazed on the day even with oil prices falling further though. The pair is little changed, up just 0.1% to 1.3830 currently and stuck in a 16 pips range.