Article / 05 July 2016 at 7:00 GMT

Morning Markets: USDJPY breaks 102.0 on safe-haven flight

Managing editor, / Saxo Bank



  • Eurozone: Retail Sales (0900 GMT) 
  • US: Factory Orders (1400 GMT)

A fresh wave of safe-haven flight Tuesday morning has USDJPY pushing below 102.0 in the runup to the European open as fears of an Italian bank bailout put markets on the backfoot.

Equities had recovered all of the post-Brexit losses last week as the prospects of a Federal Reserve rate hike dwindled, but Asian shares were on the retreat with the Nikkei and the Hang Seng both in negative territory for the day. The Shanghai Composite Index, however, was able to break above the 3,000 mark.

The strengthening yen will once again have the Bank of Japan and politicians twitching as the export-led Nikkei ended its six-day run of gains and any move that takes USDJPY ever closer to 100.0 is likely to be the line in the sand that forces intervention.

Silver's 8.6% two-day bull run hit a road block overnight for a 1.9% slide running parallel to a slide in gold. Nickel was another big faller down 2.9% bringing an abrupt halt to its 14% surge over the last five sessions. Both oil benchmarks were also slipping away from the $50/barrel mark.

We've had the post-Brexit slump and we've seen the rally. We might now be hitting a new equilibrium but with the stark absence of leadership in the UK, markets remain on edge and ready to react to the slightest shift in sentiment.

GBPUSD is still some 12% down on the 1.50 mark it hit on the night of the poll on June 23. Bank of England governor Mark Carney speaks today and may well cement his signal last week on an interest rate cut as sterling's woes continue. GBPUSD has broken 1.32 as we go to press.

Market signals

Asian session

  • Aussie retail spending rose 0.2% in May, missing economists' expectations of a 0.3% rise
  • Australia's trade balance remains in red with a $2.2 bn deficit in May (April was $1.7 bn)
  • The ANZ consumer confidence index edged down 0.9% last week
  • Nickel prices hit an eight-month high on talk of mine closures in the Philippines 
  • Shares headed lower in Tokyo as exporters were hit by stronger yen
  • The Nikkei 225 was down 0.8% at 0530 GMT
  • Chinese shares bucked the Asian slump on hopes of reform
  • The Shanghai Composite was up 0.5% at 0530 GMT
  • The RBA left rates on hold at 1.75% as it waits for 'further information' on outlook
  • There are fears that the current political limbo may affect Australia's AAA credit rating
  • The ASX200 had fallen about 1% by lunchtime, mainly due to the banks
  • The ASX200 was down 1.13% at 0530 GMT

Forex ahead

  • The US dollar edged lower against the yen; it was worth ¥102.09 at 0540 GMT
  • ISM non manufacturing, NFP data to give dollar direction
  • The Aussie dollar held onto recent gains despite election result uncertainty
  • AUD held steady after the RBA announced it would keep rates on hold
  • AUD was worth 0.7515 at 0600 GMT as direction to come from next CPI print
  • GBP unable to break free of post-Brexit malaise

From the Floor

Inflation watch. "The next CPI is the critical point for Australia", says Hardy

Oil on the ropes. "A break of $48/b in WTI could see us back to $46/b", says Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Brexit blowback has pushed back expectations for a Fed hike, perhaps into next year, and the US equity market likes the idea that rates will remain lower for longer, says James Picerno.

Exit contagion
Brexit leading lights seem to be showing the UK just how to execute a painless exit from the main stage with the minimum of fuss. Nigel Farage is the latest to go, writes Martin O'Rourke.

Ahoy there!
Sales trader James Kim puts markets through its paces for the week ahead with EURUSD, AUDUSD, USDJPY, equities and commodities all aboard the good ship Kim.

Down tools
Aussie markets were subdued before the RBA decision, writes the Saxo Capital Markets team, and fell slightly lower after the RBA's decision to leave rates on hold.

Steady as she goes
AUDUSD was unmoved, writes Max McKegg, by the decision of Australia's central bank to hold its benchmark rate steady.


UKIP leader Nigel Farage resigned Monday and the crisis of leadership
in British politics continues to keep sterling on the back foot. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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to make sure you're up to date with the latest developments.

05 July
Martin O'Rourke Martin O'Rourke
GBPUSD dipped below 1.3150 at 0754 GMT. USDJPY continues to stretch ever further below 102.0. It was at 101.75 at 0755 GMT.
05 July
Dj TinTin Dj TinTin
Morning Martin , what do you think to long on GBPUSD 3days only ??
05 July
Martin O'Rourke Martin O'Rourke
Hi Dj TinTin, John Hardy is our head of forex strategy and following John would be a great starting point for any forex-related questions . We will be very shortly putting out John's daily FX Update piece which will contain the latest analysis on GBPUSD.
05 July
Martin O'Rourke Martin O'Rourke
GBPUSD is beginning to threaten the 1.3118 intraday low of June 27 - itself a 31-year low — as it hits 1.3128 at 0849 GMT.
05 July
Martin O'Rourke Martin O'Rourke
GBPUSD broke through to a fresh low of 1.3121 for a new 31-year low late morning. It has since bounced back to 1.3132 at 1155 GMT.
05 July
Martin O'Rourke Martin O'Rourke
1.3117 the intraday low
05 July
Martin O'Rourke Martin O'Rourke
Sterling has since slipped below 1.31 and was at 1.3097 at 1236 GMT.
05 July
Martin O'Rourke Martin O'Rourke
Sterling has now breached 1.3050 and was a little above that mark at 1.3063 at 1316 GMT


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