Strong gains in spot and cross JPY rates curbed in Asia
Yesterday's news that the US was to delay tariffs on some of the Chinese goods announced earlier this month saw a sharp reversal in risk sentiment, driving equity prices sharply higher and dragging the carry trades with them. The USTR announced that a chunk of the Chinese imports levied would see the 10% tariffs delayed until mid-December, with the bulk of items being tech-based. The White House seems to have realised the impact on consumers and eased off the combative stance which has been risk-negative in the past few weeks.
Consequently, USD/JPY rallied hard from the low 105.00's, having failed to break the strong demand seen at this level - below which lie the flash crash lows from earlier this year. The move topped out just in front of 107.00 and some 10 ticks above here, we note the highs seen from last week.
Cross JPY levels were also markedly higher, with notable gains seen in EUR/JPY, pushing a little past 119.50 before heading lower again. Even GBP/JPY got a boost as cross pushed above resistance in the 128.75 area to briefly tip the 129.00 level. AUD/JPY had the most to gain from the news and took out a couple of interim resistance levels to test up to a little shy of 73.00, but we are back testing pre 72.00 levels again.
For now, markets will remain on headline alert, as unpredictable as it is. However, it seems much of the good and bad news may now be out there, so some range trading now looks more likely in the very near term. Little in the way of US data to watch out for, so the JPY pairs will take their lead from Wall Street for the most part once again.