Friday the 13th: JPY vs. JGB correlation

<p>The dollar is again trading lower this morning, due to a disappointing US retail sales report and weekly jobless claims data that was at odds with […]</p>

The dollar is again trading lower this morning, due to a disappointing US retail sales report and weekly jobless claims data that was at odds with the stronger NFP report. It was no surprise to see lower energy sales as the largest component weakness within the retail sales report, as domestic data continued to point to further improvements.

The Euro continues to trade with a better bid tone as discussions between Greece and Germany lead us to believe that a compromise is possible. The ECB has extended a further 5 billion euros in emergency loans to Greek banks, with the reasoning behind the move stemming from fears that an increase in withdrawals would leave them short of funding.

USD/JPY traded below the 118.56 level in Asia, as a 5 year JGB auction resulted in the lowest bid-to-cover ratio since April 2013 – with a drop from 4.38 in January to 3.29. The JGB yields are not normally known to have a correlation with the JPY, but an elevated yield is seen to keep investors in the local market and prevent diversification into US yields. These have been under pressure in the last few days, as US 10 year yields drop below 2%.

The University of Michigan sentiment survey is the data highlight today.



 1.1340-1.1260-1.1100  | Resistance  1.1450-1.1530-1.1680



118.30-117.25-116.80 | Resistance 119.20-120.50-122.00



 1.5330-1.5285-1.5180   | Resistance 1.5430-1.5500-1.5620

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