1 Minute Market Rundown – 5th January 2023

Cross Yen Move Higher and Enters the Sell Zone
FOMC Minutes as Expected
China Reopening Story Continues to Dominate

Yesterday saw a wild day for USD/JPY and cross/JPY as we saw a move from 129.90 to 132.90 in the headline pair and a near 2 percent rally in most yen crosses. The catalyst was unclear with some citing the China reopening story, others a potential 4 billion USD m/a deal. To me, whilst there could well be some truth to the above reasons the market simply got squeezed out of early positions at bad levels. Short cross yen is my favourite trade of the year and nothing from yesterday’s move has changed that, we simply have a cleaner market and have entered the sell zones for USD/JPY, CAD/JPY and EUR/JPY.

Elsewhere GBP and Euro continued to unwind the sell off from the first day of the year and markets frankly feel fair value here without fresh information. US stocks ended their losing streak as the FOMC minutes provided few shocks. One thing to note is the clear divergence between market expectations and the FED’s with regard to rate cuts. The market continues to price in cuts later this year whereas officials are ruling them out (well they were in December). With a change in personnel at the FOMC coming in February bringing a slightly more dovish tilt it will be interesting to see if there is a change of heart. My feeling is rate cuts this year are too soon, but this can change so we remain hugely data dependent.

Today has the hallmarks of a quiet day in prospect. Tier 2 employment data dominates the calendar but with NFP due tomorrow I suspect ranges will hold as we eye the first big payroll release of the year.

Crypto remains the steady well behaved child in the corner of the markets (come on BTC you are a teenager now) as overnight gains did not lead to any follow through. No change in view here for me, full wait and see mode.

Good luck as always!

Richard Usher – Head of OTC Trading


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