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Video / 24 January 2018 at 8:31 GMT

From the Floor: USDJPY breaks below 110 as bonds recover — #SaxoStrats

#SaxoStrats
   • Global yields ease lower, yen continues its surge
   • Equities 'in wonderland' with PMI data in focus
   • Oil traders seeking downside protection through options
   • Gold bid despite wobbles seen in silver and copper
   • Utilities could outperform if stocks correct: Garnry

From the Floor
By Michael McKenna

The greenback continued its inability to catch a break Tuesday and overnight as GBPUSD stayed strong above the 1.40 handle, EURUSD touched new range highs around 1.2325, and USDJPY dropped through major resistance at the 110.15-20 area into the 109.90 region.

"Tuesday saw a huge US two-year bond auction with strong demand," says Saxo Bank head of forex strategy John J Hardy, who adds that the yields landscape is likely more responsible for the runaway yen than anything Bank of Japan governor Kuroda said at the central bank's recent press conference.

Saxo global sales manager Althea Spinozzi, meanwhile, reports that US 10-year yields have stabilised after last Friday's three-year highs and presently trade around 2.62%.

On the date front we have a raft of PMI releases today from France, Germany, the euro area, and the US, and Saxo equities head Peter Garnry says that these could prove crucial for equities investors.

"These releases need to hit their targets if the strength in stocks is to continue," says Garnry, with Hardy adding that data disappointments could be on the near horizon if these surveys mean-revert in accordance with historical trends.

USDJPY:
USDJPY

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Source: Saxo Bank 

If macro data (and subsequently stocks) do correct, Garnry notes that the utilities sector could be in line for comparative outperformance with E.ON, national Grid, AEP, and EDP among the names he is watching.

Saxo Bank head of commodity strategy Ole Hansen, meanwhile, points to signs that oil traders are seeking downside protection via options as a potential bellwether for the crude rally, which he believes may be starting to stall.

In gold, Hansen reports that the metal retains a bid tone despite the wobble seen Tuesday in silver and copper; HG Copper broke through support at £3.18/lb after the London Metal Exchange pointed to rising stocks at its warehouses, potentially signalling a decline in Chinese demand.

For more on crude oil, natural gas, EURUSD, and equities, watch today's Morning Call in full.

USDJPY
 JPY remains nestled at the heights versus USD. Photo: Shutterstock

Michael McKenna is head of editorial content at Saxo Bank

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