JGB TECHS: (H5) Fresh Cycle Lows

In post-Tokyo trade on Friday, JGB futures closed slightly weaker, -5 compared to settlement levels, despite a strong end to last week from US tsys.

• 2- and 10-year US tsys finished 5-6bps richer after a large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus). It represented the biggest sequential drop in 22 months.
• A similarly weak "control group" figure led to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
• This week’s US data schedule is relatively light, due in part to today's Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
• Today, the local calendar will see Q4 GDP (P) and December IP (F). The market expects a 0.3% q/q reading for GDP, unchanged from Q3 last year. Business spending is expected to rebound, but consumer spending is forecast to dip.

USD/CNH tracks near 7.2600 in early Monday dealings. This is just above intra-session lows from Friday, which printed at 7.2510. CNH gained 0.17%, so still trailing USD index losses in percentage terms. Spot USD/CNY finished up at 7.2573, with onshore spot posting as stronger 0.42% gain on Friday. Still, the CNY basket index remained weaker, losing a further 0.45% to 100.06 (per BBG). This is the weakest level for the index since the first half of Dec last year.

• For USD/CNH technicals, we are currently close to the 100-day EMA. We tested sub this support level in Jan, but couldn't sustain the breaks, see the chart below. A clean break sub this level could see the 200-day EMA (near 7.2330) targeted. On the topside, the 20-day EMA is back close to 7.2900, the 50-day around 7.2860.
• CNH benefited from continued broad USD softness, with US yields down sharply post the retail sales miss, which also curbed the Atlanta Fed's GDP nowcaster. US-CH yield differentials are off, particularly at the front end, the 2yr spread back to +288bps.
• In the equity space, sentiment is still positive, with China outperforming rest of the world trends.
• We had China new loans/aggregate figures late on Friday, which printed stronger than expected. The detail suggested bond issuance from governments played a role in driving the spike. Parts of lending to the private sector still remain subdued.
• On the data front this week, we have home prices Wed, then the loan prime rates on Thursday. the 1yr MLF decision is also due. 

Fig 1: USD/CNH Versus Key EMAs 

Source: MNI - Market News/Bloomberg 

• Gold’s decline on Friday left investors scratching their heads as to why.
• Gold has, more than most asset classes, benefited from the uncertainty that abounds with tariffs being threatened by the US.
• Gold has enjoyed the ‘safe-haven’ status it is known for up almost 10% year to date on the uncertainty that the threat of tariffs create.
• Yet unexpectedly, gold declined -1.56% on Friday with market analysts scrambling to understand why.
• Weaker than expected US retail sales did little to spur gold, whilst wholesale prices were stronger, driven by higher food and energy costs.
• Gold has had positive returns every week in 2025 and was on track for a record week come Friday, before the decline.
• Opening at $2,928.21, meandered through the day, doing little before falling during the US session to end at $2,882.53 whilst still finishing ahead for the week.
• As the headlines swirl around the US President ordering an audit on the US holdings, and the consideration of selling gold, perhaps traders were happy to take profit on gold and await the next catalyst.
• With the US out today, its difficult to see a stimulus for the next move for gold but no doubt will continue to be impacted by the next tariff headline when it comes.