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Forex Flash: JGB and yen volatility permeates markets – UBS

FXstreet.com (Barcelona) - JGB volatility has increased massively since the Bank of Japan announced a revamped easing program a week ago. Circuit breakers in JGB futures have been triggered on several occasions, and intra-day moves of up to 30 bp in 10y yields are no longer unheard of.

This matters because foreigners have steadily increased their holdings of JGBs and Japanese T-bills over recent years. According to Research Analyst Gareth Berry at UBS, “One of these factors, which attracted these flows in the first place was that, until very recently, the Japanese bond market boasted extremely low volatilities. The contrast with the turmoil in Eurozone bond markets was especially stark.”

There has been a lot of talk about BoJ easing possibly pushing Japanese real money offshore, but is there another channel through which yen weakness can arise? Put simply, now that rates volatility has spread to the shores of Japan, could the USD/JPY get a second wind from foreigners pulling out?

Forex Flash: Bunds target trendline resistance – RBS

Bund prices are testing the trendline and 13-day moving average, which all lie very close to the 145.46 level, being the 150% Fibonacci projection from the February-March impulse wave. According to Technical Strategist Dmytro Bondar at RBS, “This is an important point, as if the breakout is confirmed on close, it would suggest a change in market sentiment. The first support lies at 145.11, then 144.68. Below that a major support level would be 144.00. A close above the trendline would bring hopes for the bulls.”
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Forex: USD/JPY hits daily lows

The US dollar fell to a fresh daily low versus the yen at the beginning of the New York session as risk appetite tempered. USD/JPY retreated from the 99.80 area back to 99.10 and it is currently trading around 99.35/40 where it is 0.4% below its opening price.
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